The First Home Guarantee (FHBG) is a federal government program designed to support eligible first home buyers get into the property market sooner.

The guarantee was launched on 1 January 2020 and since that time has helped thousands of Australians secure home loans.

Let's check what's involved.

What is the First Home Guarantee?

The First Home Guarantee offers eligible first home buyers the ability to buy a home with a deposit as low as 5% without the need to pay Lenders' Mortgage Insurance (LMI). LMI is generally levied when deposit amounts are less than 20% and can add thousands of dollars to the cost of taking out a home loan.

Essentially, this means the government provides the lender with a guarantee of up to 15% of the property's value.

The FHBG exists alongside two other guarantees, the Regional First Home Buyer Guarantee and the Family Home Guarantee, with all three administered by Housing Australia under the Home Guarantee Scheme.

Since its launch, First Home Guarantee has been limited by an annual cap on participants (35,000 places for the 2024-25 financial year). Eligibility is also restricted to first home buyers earning under $125,000 for individuals and $200,000 for joint applicants while properties purchased have to fall under price caps set according to location.

How is the First Home Guarantee changing from 2025?

The Labor government promised better access to the scheme as part of its 2025 federal election campaign. The flagged changes include no caps on participation or income levels, meaning the scheme will be open to all first home buyers.

Property price caps will also be lifted although there's been no details on the changes.

As at mid-June 2025, there has been no announcement on when the promised changes will take effect, but many expect it will be by 1 July 2025.

How does the First Home Guarantee scheme work?

Essentially, the government acts as a guarantor for your home loan which must be taken out with a participating lender. There is a wide range of both major banks and non-major lenders that you can choose from according to which loan product will best suit your circumstances and objectives.

Here's a list of participating lenders, correct at the time of writing:

Home Guarantee Scheme Participating Lenders

To take part in the scheme, you must have at least a 5% deposit and the government guarantee will be for a maximum amount of 15% of your property value. But the guarantee is not a cash payment, nor does it go towards your home loan deposit.

Rather it is a legal arrangement between Housing Australia and your lender for the government to pay up to a certain amount should you ever default under the terms of your home loan and your lender must sell the property to recoup its debt.

As such, applications for the Home Guarantee Scheme can only be made through your lender (or a mortgage broker if you choose to use one).

The good news is the scheme can also be used in conjunction with other state and territory first homeowner grants and stamp duty concessions. Combined, these schemes can take a considerable chunk from the cost of getting into your first home.

After verifying your eligibility, the process will generally be handled by your lender who'll submit your application to Housing Australia. Of course, you'll need to supply all the relevant documentation beforehand.

As of 2024-25, there are a few benchmarks for eligibility.

First Home Guarantee eligibility

To qualify for the First Home Guarantee as at 2024-25, applicants must be:

  • applying as an individual or two joint applicants (Note: Any two people buying a home together can jointly apply for the scheme. Prior to 1 July 2024, those jointly applying had to be married or in a de-facto relationship.)

  • an Australian citizen(s) or permanent resident(s) at the time they enter the loan

  • at least 18 years of age

  • earning up to $125,000 for individuals or up to $200,000 for joint applicants as shown on the Notice of Assessment (issued by the Australian Taxation Office)

  •  intending to be owner-occupiers of the purchased property

  •  first home buyers or previous homeowners who haven't owned or had an interest in a property in Australia (this includes owning land only) in the past 10 years

First Home Guarantee eligible properties

Under the FHBG, a property must be considered a residential property to be eligible. Types of homes 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

First Home Guarantee price caps

For first home buyers using the scheme in 2024-25, there are specific price caps on the property you can purchase. These will depend on which state or territory you're purchasing in and whether your property is in a metropolitan, regional, or other area.

The table below shows how much you can spend on a first home to be eligible to receive the FHBG as at 2024-25. (To determine the property price cap for a particular suburb or location that you are looking at, you can use the NHFIC suburb postcode search engine.)

Area

Property Price Cap

New South Wales - capital city and regional centre

$900,000

New South Wales - rest of state

$750,000

Victoria - capital city and regional centre

$800,000

Victoria - rest of state

$650,000

Queensland - capital city and regional centre

$700,000

Queensland - rest of state

$550,000

Western Australia - capital city

$600,000

Western Australia - rest of state

$450,000

South Australia - capital city

$600,000

South Australia - rest of state

$450,000

Tasmania - capital city

$600,000

Tasmania - rest of state

$450,000

Australian Capital Territory - all areas

$750,000

Northern Territory - all areas

$600,000

Jervis Bay Territory and Norfolk Island

$550,000

Christmas Island and Cocos (Keeling) Islands

$400,000

FHBG deposit requirements

Home buyers applying for the FHBG need to have between 5% and 20% of the value of an eligible property saved as a deposit. The minimum deposit required for the FHBG is 5% but some participating lenders may require a higher percentage based on individual financial circumstances.

Home buyers will also need to check with their lender on whether their deposit is required to be made up of genuine savings under their lending criteria and participation in the FHBG. 

Home buyers should also confirm with their lender whether any cash grants received under other federal, state, or territory schemes or programs can be considered as part of their genuine savings.

To be eligible for the FHBG, the contract of sale and (if applicable) eligible building contract may have specific dates for when they can be signed by the home buyer. There are no exceptions to these required dates. 

Before taking up the scheme, first home buyers should discuss their individual financial circumstances with a participating lender or seek independent advice as to the implications of taking out a low deposit home loan.

Pros and cons of the First Home Guarantee

Pros

Avoid paying LMI

To avoid paying LMI, you typically need to have a 20% deposit. If your deposit is less than that, LMI generally applies.

See also: Which lenders offer low or no-cost LMI?

In practical terms, avoiding LMI can save tens of thousands of dollars. For example, according to Savings.com.au's LMI Calculator, a first home buyer purchasing a $700,000 property with a 5% deposit could be up for more than $36,000 in LMI.

A key drawcard of the FHBG is that you avoid paying LMI and can put this towards paying for your property instead.

Purchase sooner

Research shows saving for a 20% deposit can take longer than a decade in some Australian locations. Buying a home with a deposit of just 5% can mean you are able to get into the property market sooner rather than watching home prices increase faster than your deposit savings balance.

See also: How to save up for a house deposit

Cons

Higher interest costs

There's no getting round it - a smaller deposit means you will need to borrow more to purchase your first home. This may see you paying more in interest than if you had waited until you had saved for a 20% deposit (but this can depend on many variables).

Property price falls

If property prices fall, you could find yourself in a situation of owing more than what the property is worth. But this only becomes a problem if you have to sell it. Generally, if you are able to hold onto your property over the medium to longer term, you should be able to ride out any downturns in the property market.

First published on October 2022

Image by RDNE Stock Project via Pexels



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