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The First Home Guarantee Scheme is designed to help eligible first home buyers own their first property sooner.
It does this by making it possible for a buyer to purchase a home with a deposit as low as 5% without the need to pay for Lenders Mortgage Insurance. It was introduced by the federal government in 2019 and it is administered by the National Housing Finance and Investment Corporation (NHFIC). While property prices are dropping across our capital cities, housing remains largely unaffordable for many younger people.
It used to be called the First Home Loan Deposit Scheme (which many people still refer to it as) but was renamed in the 2022 federal budget. The number of places available in each financial year was also increased from 10,000 to 35,000. The new name incorporates all the different schemes available to first home buyers, rather than having different names for what was essentially the same support scheme.
In a pre-Budget announcement, the Government has also revealed that the First Home Guarantee Scheme will expand its definition of a couple to allow family members or two friends living together to access to scheme. For July 1, “any two eligible individuals” can apply for the First Home Guarantee Scheme, in a move designed to address the housing crisis in Australia.
“We know friends and family members are already teaming up to secure their own place to call home,” Labor Minister for Housing, Julie Collins, said.
“Our actions will allow them to access vital assistance, just as couples have been able to previously.”
The new rules also apply to the Regional First Home Guarantee, and will also be available to previous home buyers who have not owned a property in the past decade.
The Government has also announced changes to the Family Home Guarantee—not to be confused with the First Home Guarantee—which allows single parents to purchase a property with as little as 2% deposit. Under these changes, the guarantee will become available to eligible borrowers who are single legal guardians of children, such as aunts, uncles and grandparents—not just parents. All three schemes have been expanded to include permanent residents, as well as Australian citizens.
How Does the Scheme Work?
The First Home Guarantee Scheme enables eligible first home buyers to purchase a home within a certain price with a deposit of as little as 5%. The National Housing Finance and Investment Corporation (NHFIC) guarantees up to 15% of the value of the property that is financed by a participating lender. Usually, without a deposit of 20% of the property value, mortgage insurance must be taken out and it is a significant added expense.
“The good thing about the First Home Guarantee is that eligible borrowers can use it in conjunction with other government programs, like the First Home Super Saver Scheme or state and territory first homeowner grants and stamp duty concessions,” says Dr Diaswati Mardiasmo, National Research Manager at PRD Nationwide.
“That said, it is important to note that the guarantee is not a cash payment or a deposit for your home loan.”
Eligibility Requirements
A number of requirements must be met to take advantage of the scheme.
Price Limits
The value of the residential property must not exceed the price caps that have been set by the government in your state or regional area. In New South Wales, where property is most expensive, the cap is set at $900,000. In more affordable states such as Tasmania, the maximum price is $450,000.
“The price caps serve as your ceiling—the maximum price you can go for,” says Mardiasmo. “It doesn’t mean you have to go up to the maximum. If you are able to find a property that is lower, then this will serve well in terms of the amount of debt taken.”
Mardiasmo also notes that the caps represent the total value of the property. Buyers who are purchasing a house-and-land package need to be especially mindful of this, as they risk having their application rejected if the price of both is over the maximum limit.
“Sometimes buyers can be caught out with variations in construction contracts if they are purchasing land and then having a separate contract to build a home,” says Mardiasmo. “They could also be caught out if they are buying a house-and-land package, in which the total cost can vary, depending on your choice of inclusions.”
Buyers of these types of properties will need to sign a fixed-price building contract.
Along with the First Home Guarantee, there is also a Regional First Home Buyer Guarantee and a Family Home Guarantee for single parents with at least one dependent child. You can read more about the price limits via this table.
Property Types
There is also some flexibility in terms of the type of property being purchased–however it is essential that the property in question is a residential one. In other words, the applicants will become the owner-occupiers. Investment properties are excluded from the scheme.
Eligible residential properties include:
- an existing house, townhouse or apartment
- a house and land package
- land and a separate contract to build a home
- an off-the-plan apartment or townhouse
Relationship Status
Both singles and couples can benefit from the scheme. Single applicants with a taxable income of up to $125,000 per annum for the previous financial year are eligible, whereas the total income for a couple is $200,000 per annum.
Previously only couples were eligible for the First Home Guarantee if they are married or in a de-facto relationship with each other. However, from July 1, other people buying together, including siblings or friends, will be eligible.
The scheme was also expanded in the October budget to provide support specifically for single parents. There are now 10,000 Family Home Guarantees available for eligible single parents with at least one dependent child who have a deposit of as little as 2%. From July 1, this definition of single parent, will be expanded to include legal guardians, including aunts, uncles and grand-parents.
Loan Requirements
Loans under the First Home Guarantee require scheduled repayments of the principal and interest of the loan for the full period of the agreement.
There are limited exceptions for interest-only loans, which mainly relate to construction lending.
Wage Thresholds
A single person is eligible if they earn $125,000 per year or less, as is a couple who earns a combined $200,000. This must be shown on the Notice of Assessment issued by the Australian Taxation Office.
Deposit Size
To be eligible for the scheme, the minimum deposit size is 5% of the total price of the property. A single parent with children can have a deposit of 2%. The maximum deposit size allowed is 20%.
How to Apply
Additional eligibility criteria include:
- The applicant must be an Australian citizen or permanent resident
- At least 18 years of age
Participating lenders
NHFIC has authorised a panel of 32 participating lenders to offer the scheme. The major bank lenders are the Commonwealth Bank and NAB, while some of the non-major lenders include Auswide Bank, Australian Military Bank, Bank Australia, Police Bank, Regional Australia Bank abd Indigenous Business Australia.
New Home Guarantee
The scheme was temporarily expanded during the COVID-induced recession of 2020 and 2021 to include new homes. It worked in the same way, but, as the name suggested, it was limited to buyers of new homes only. It has since been wound-up.
Things to Consider Before you Apply…
A mortgage is a long-term commitment. Are you in a position to make regular repayments for many years, or do you plan on changing your work patterns?
Don’t take on the maximum mortgage size available without thinking about how that level of debt could impact you. Mortgage stress is affecting an increasing number of Australians as a result of interest rate rises. Almost a million Australians are now suffering mortgage stress.
“The program allows for people to subscribe into higher debt levels during a time where house price growth is quite inflated due to a lack of supply,” says Mardiasmo.
“A way to mitigate the risks is to ask yourself: should I be considering a property right now? Just because you can get a mortgage with as little as a 2-5% deposit, it does not mean you should.”
Frequently Asked Questions (FAQs)
How many places are available in the First Home Guarantee?
The First Home Guarantee Scheme offers 35,000 places per year to eligible applicants. There are also 10,000 places per year under the Regional First Home Buyer Guarantee—up until June 30, 2025—and 5,000 places per year under the Family Home Guarantee.
What deposit do I need for the First Home Guarantee?
A minimum deposit of 5% and a maximum deposit of 20%. A single parent or single legal guardian may apply for the family home guarantee scheme with a deposit of 2%.
What is the income test for the First Home Guarantee?
As part of the First Home Guarantee, a couple may earn a combined total of $200,000 per year and a single person may earn up to $125,000.
Is the new home guarantee still available?
No. It stopped being available from 1 July 2022.
