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.
Here's a basic explanation for the First Home Guarantee and the New Home Guarantee:
If you've saved 5% of the purchase price of your property the government can guarantee the remaining 15% of the deposit.
35,000 places are now available per year under the scheme.
Property. For both schemes you must be buying or building a home to live in. For the New Home Guarantee you need to be buying a brand-new property or building one.
You need to borrow the remaining 95%, but you can avoid LMI.
Your mortgage needs to be an owner-occupied loan with principal-and-interest repayments.
Eligible first home buyers can't be earning more than $125,000 a year ($200,000 combined for couples).
The value of eligible homes under the scheme varies by state and city/region (see property value caps below). These caps differ for each 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:
Property cost = $400,000
Deposit = $20,000 (5%)
Loan amount = $380,000
Interest rate = 3.00% over 30 years
In this scenario your costs are as follows:
LMI = $12,711
Monthly repayments = $1,602
Property cost = $400,000
Deposit = $80,000 (20%)
Loan amount = $320,000
Interest rate = 3.00% over 30 years
In this scenario your costs are as follows:
LMI = $0
Monthly repayments = $1,349
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.
But what if property values rise fast?
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.
Finder survey: Did Australians use any government grants or schemes to take out their first home loan?
Response
Yes
57.72%
No
42.28%
Source: Finder survey by Pure Profile of 1112 Australians, December 2023
Who is eligible for the schemes?
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:
Buying newly-constructed dwellings
Buying off-the-plan dwellings
Buying house and land packages
Buying land (with a separate contract to build a new home on that land)
Couples must be married or in de facto relationships. Friends or siblings cannot qualify for this scheme together.
Property value caps
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.
How do I apply for the First Home Guarantee?
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.
Which lenders are taking part in the scheme?
According to Housing Australia, the following lenders will participate in the scheme:
Compare loans from lenders participating in the scheme
The loans in the table below are all for home buyers and are offered by lenders who are taking part in the first home loan deposit scheme. You can compare loans in the table below, submit enquiries with lender and brokers and learn more about specific products.
If a product has a "More info" button then it isn't available via Finder. However, you can contact the lender directly via their own website for more information.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
Are there other government schemes to help me buyers?
At the state and territory level most governments offer:
First home owner grants. This is a grant of money that can be used towards your purchase and is often reserved for first home buyers purchasing newly built properties.
Stamp duty concessions. Many governments waive or discount stamp duty for first home buyers, removing one of the bigger property costs.
Family Home Guarantee. Under the Family Home Guarantee, eligible single parents can buy homes with 2% deposits and avoid LMI costs while borrowing the remaining 98%.
The Regional Home Guarantee lets you buy or build a new home in regional Australia with a 5% deposit while avoiding LMI costs.
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.
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Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification.
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
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.
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.
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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