The federal government's First Home Guarantee (previously known as the First Home Loan Deposit Scheme) and the New Home Guarantee schemes both guarantee mortgages for first home buyers who have only saved a 5% deposit, effectively helping you buy sooner without paying lenders mortgage insurance premiums.
The First Home Guarantee (FHG) is offered for new and existing homes, while the New Home Guarantee is only for people building or buying new properties to live in. The schemes' eligibility criteria includes income levels and has limits on the value of the property you're buying.
In the 2022 budget, the federal government announced the scheme would expand, from 10,000 places a year to 35,000.
Need help saving a house deposit? Check out our guide
Here's a basic explanation for the First Home Guarantee and the New Home Guarantee:
This scheme will make low deposit home loans cheaper and is administered through Housing Australia, in partnership with a range of lenders.
You can take a quick quiz on Housing Australia's website to see if you're eligible for the scheme.
The scheme allows you to get a home loan sooner because you only have to save a smaller deposit. 5% deposit home loans already exist, but you need to pay LMI when borrowing more than 80% of a property's value.
With the first home loan deposit scheme you save time, because you can save a 5% deposit in a quarter of the time it would take to save 20%. You also avoid the LMI premiums, which can cost thousands of dollars (you can get LMI estimates using Finder's LMI calculator).
But there is a downside. Saving a smaller deposit and borrowing more money means paying more interest over time. Let's break it down with the example of a $400,000 property and a 5% deposit versus a 20% deposit:
In this scenario your costs are as follows:
In this scenario your costs are as follows:
If you wanted to save a 20% deposit you'd need an extra $60,000 (but no LMI). This would equal around 33 months of mortgage repayments with a 5% deposit.
But with a 20% deposit your repayments would be noticeably cheaper, at $1,349 a month. That's $253 a month less.
It's impossible to predict, but rising property prices could make the scheme more appealing. If your property rises in value while you're paying it off you're gaining equity (even while paying more interest).
And if you're still saving for that 20% deposit while prices keep rising, the amount of money you'll need to save will only continue to grow over time. You could get stuck.
| Response | |
|---|---|
| Yes | 57.72% |
| No | 42.28% |
Only Australian citizens are eligible (not permanent residents). You will need to be a first home buyer (if you own an investment property you won't be eligible) earning $125,000 ($200,000 for a couple) a year or less.
The scheme is currently only open to buyers who are:
Couples must be married or in de facto relationships. Friends or siblings cannot qualify for this scheme together.
To be eligible for the scheme you must be purchasing a property valued at or below the following thresholds:
| State/Territory/region | Price cap (FHG) | Price cap (New Home) |
|---|---|---|
| NSW - capital city | $800,000 | $950,000 |
| NSW - regional centre | $800,000 | $950,000 |
| NSW - rest of state | $600,000 | $600,000 |
| VIC - capital city | $700,000 | $850,000 |
| VIC - Geelong | $700,000 | $850,000 |
| VIC- rest of state | $500,000 | $550,000 |
| QLD - capital city | $600,000 | $650,000 |
| QLD - regional centre | $600,000 | $650,000 |
| QLD - rest of state | $450,000 | $500,000 |
| WA - capital city | $500,000 | $550,000 |
| WA - rest of state | $400,000 | $400,000 |
| SA - capital city | $500,000 | $550,000 |
| SA - rest of state | $350,000 | $400,000 |
| TAS - capital city | $500,000 | $550,000 |
| TAS - rest of state | $400,000 | $400,000 |
| ACT | $500,000 | $600,000 |
| NT | $500,000 | $550,000 |
| Jervis Bay and Norfolk Island | $550,000 | $600,000 |
| Christmas Island and Cocos Island | $400,000 | $400,000 |
*A regional centre is defined as a city with a population above 250,000, such as Newcastle, Wollongong or Geelong.
You can apply directly with any lender participating in the scheme (see the full list of lenders below). There are 35,000 places available in the 2023/24 financial year.
According to Housing Australia, the following lenders will participate in the scheme:
At the state and territory level most governments offer:
Federally, there is another government scheme called the First Home Super Saver Scheme. This scheme allows you to make extra contributions to your super and then withdraw them to use for a home loan deposit, with tax minimisation benefits for doing so.
The Regional First Home Buyer Guarantee lets low deposit borrowers buy or build in regional Australia while avoiding LMI costs.
Planning on buying your first home? Tips from the experts can help first home buyers save a deposit and get into your own home sooner than you think.
Find out what concessions are available to you under the First Home Owner Grant (FHOG) in your state with our comprehensive guide.
The First Home Super Saver Scheme explained.
Does the 5% deposit have to be by way of genuine savings – saved over a minimum 3-6month period to be acceptable to the banks (normal) or does the govt. guarantee avoiding mortgage insurance negate that requirement.
I see the great benefit in not paying a mortgage insurance premium but even saving 5% is difficult.
thanks
Steve
Hey Steve,
Thanks for your comment. I understand your position and it is indeed a challenge to reach a 5% savings for a home loan. In general, the 5% deposit requirement for the First Home Loan Deposit Scheme will genuinely need to be savings. At the same time, this would depend on the specific requirements of the lender you choose.
As a friendly reminder, carefully review the eligibility criteria of the loan before applying to increase your chances of approval. Read up on the terms and conditions and product disclosure statement and contact the bank should you need any clarifications about the policy.
Hope this helps and feel free to reach out to us again for further assistance.
Best,
Nikki
Hi,
How do I apply for this?
Hi Emily,
Thank you for getting in touch with Finder.
Please get in touch with your state revenue office to know more on this first home loan deposit scheme. Further announcement/s will be provided before its launch date which will start on the 1st of January 2020.
I hope this helps.
Thank you and have a wonderful day!
Cheers,
Jeni