What is the Home Guarantee Scheme?

The Home Guarantee Scheme is a federal government initiative that has helped hundreds of thousands of home buyers get into their own homes.

The scheme is administered by Housing Australia and works in conjunction with more than 30 participating home lenders. It sees the federal government acting as a guarantor for a portion of a loan taken out by eligible buyers who don't have the 20% deposit typically required to secure a home loan.

The scheme helped more than 150,000 Australians enter the property market in the four years following its 2020 inception.

In the 12 months to March 2024, more than one in three first-time home buyers leant on the Home Guarantee Scheme in order to purchase their first dwelling.

There are three types of federal government guarantees administered under the Home Guarantee Scheme:

• The First Home Buyer Guarantee (FHBG)

• The Regional First Home Buyer Guarantee (RFHBG)

• The Family Home Guarantee (FHG)

Let's check the details of each.

First Home Buyer Guarantee: What you need to know

The First Home Buyer Guarantee helps eligible first home buyers to secure a home loan with a deposit as small as 5%, without needing to pay Lenders' Mortgage Insurance (LMI).

LMI is an insurance product that borrowers are generally required to take out on behalf of their lender if their deposit is less than 20% of their property's value. It can add considerably to the cost of taking out a loan - sometimes costing tens of thousands of dollars.

In practical terms, the First Home Buyer Guarantee means you can borrow up to 95% of a home's value, with the federal government providing your lender a guarantee for up to 15% of the sale amount.

That means that, if you default on your loan, the government could step in and minimise your lender's loss, thereby reducing the risk you might represent (at least on paper).

The First Home Buyer Guarantee offers 35,000 places for eligible Australians each financial year.

Are you eligible for the First Home Buyer Guarantee?

Here's the list of eligibility criteria applicants hoping to be supported by the First Home Buyer Guarantee must meet:

• All applicants must be first home buyers or must not have owned property in Australia for at least 10 years prior

• Individual applicants must have earned less than $125,000 in the prior financial year and joint applicants must have earned under $200,000 in the previous financial year

• All applicants must be at least 18 years old

• All applicants must be Australian citizens or permanent residents

• Applicants must be intending to live in the property

• Applicants must have a deposit of between 5% to 20% of the property's value

• The property must be an acceptable property type and within property price thresholds

Nowadays, any two people buying a first home together can jointly apply for the scheme.

Before 1 July 2023, joint applicants were limited to married or de-facto couples. Currently, siblings, friends, and other family members can be joint applicants.

First Home Buyer Guarantee eligible properties

The guarantee can be used to buy Australian residential properties only, with acceptable property types including:

• 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

Be aware, under all guarantees, there may be timeframes and different criteria that apply to different property types.

This requirement mainly affects land purchases with building contracts. Building work may need to begin within a certain deadline for a property to qualify. Your lender or mortgage broker will be able to advise you of the particulars according to your individual circumstances.

There are also price caps on the value of properties covered under the scheme, as below:

State	Capital city or regional centre	Rest of state or territory
New South Wales	$900,000	$750,000
Victoria	$800,000	$650,000
Queensland	$700,000	$550,000
Western Australia	$600,000	$450,000
South Australia	$600,000	$450,000
Tasmania	$600,000	$450,000
Australian Capital Territory		$750,000
Northern Territory regional		$600,000
Jervis Bay Territory & Norfolk Island		$550,000
Christmas Island & Cocos (Keeling) Islands		$400,000

Newcastle and Lake Macquarie, Illawarra, Geelong, the Gold Coast, and the Sunshine Coast are classed as regional centres.

Price caps are determined according to the financial year in which you make a reservation for the scheme through your lender.

Don't forget, places in all three schemes are capped each financial year so, in some cases, you might need to put your name on a waiting list with a participating lender. If this happens, Housing Australia advises applicants to check with other participating lenders to secure a place. Scheme availability changes on a regular basis across all lenders.

How to apply for the First Home Buyer Guarantee

Applications for the First Home Buyer Guarantee can only be made through a participating lender or their authorised representative (e.g. a mortgage broker) at the time you're applying for your home loan.

The paperwork will generally be handled by your lender as part of your home loan application, but you'll have to provide any relevant documents.

First up, they'll likely check your eligibility for the scheme. You'll need to provide proof of citizenship or permanent residency as well as a relevant Notice of Assessment from the Australian Taxation Office from the previous financial year to prove you're not over the income threshold.

You'll also have to provide proof you haven't owned or held an interest in a property in Australia in the past ten years.

If you meet the eligibility requirements for the scheme, your lender will submit your application to Housing Australia on your behalf.

Other requirements

To receive the First Home Buyer Guarantee, you'll need to move into the property within six months of purchasing your home and continue to live in the property for as long as your home loan has a guarantee under the scheme.

Ins and outs of the Regional First Home Buyer Guarantee

The Regional First Home Buyer Guarantee aims to support eligible regional home buyers, offering 10,000 places each financial year. It works in a similar fashion to the First Home Buyers Guarantee, allowing prospective home buyers to secure a home loan with a deposit as low as 5%.

In practical terms, the Regional First Home Buyer Guarantee means you can borrow up to 95% of a home's value without paying for LMI, with the federal government providing a guarantee up to 15% of the amount.

Be aware, however, some participating lenders may require a higher percentage deposit based on individual financial circumstances.

The scheme covers the same property types and has the same participating lenders as the First Home Buyer Guarantee (as outlined above).

However, its property caps differ slightly, as outlined below:

State or territory	Regional centre	All other regional areas
New South Wales	$900,000	$750,000
Victoria	$800,000	$650,000
Queensland	$700,000	$550,000
Western Australia		$450,000
South Australia		$450,000
Tasmania		$450,000
Australian Capital Territory		excluded
Northern Territory regional		$600,000
Jervis Bay Territory & Norfolk Island		$550,000
Christmas Island and Cocos (Keeling) Islands		$400,000

Newcastle and Lake Macquarie, Illawarra, Geelong, the Gold Coast, and the Sunshine Coast are classed as regional centres.

Importantly, buyers looking to enter the market in any of the greater capital city areas or the entirety of the ACT cannot use the Regional First Home Buyer Guarantee.

What is a regional area?

For the purposes of the scheme, a regional area is defined as being outside the capital city of each state and the Northern Territory. The whole of the ACT is excluded from the Regional First Home Buyers Guarantee scheme.

However, the guarantee does include other Australian territories, including Norfolk Island, Jervis Bay, Christmas Island, and Cocos (Keeling) Islands.

These regional areas are determined by official Australian Bureau of Statistics area categories. To check if a property is eligible for the scheme, Housing Australia provides a regional checker tool.

How to apply for the Regional Home Buyer Guarantee

Just as for the First Home Buyer Guarantee, you'll need to do this through your participating lender (as outlined above).

Family Home Guarantee: A guide

The Family Home Guarantee is designed to support eligible single parents or eligible single legal guardians of at least one dependent to buy a home.

It provides 5,000 places each financial year, regardless of whether the applicant is a first home buyer or a previous homeowner. However, an applicant can't intend to own a separate property to the one they're intending to buy with the guarantee's help.

This means you can sell another property before purchasing under the scheme or buy out a former partner in a previously shared property.

The Family Home Guarantee will allow a person to buy a home with an even smaller deposit than the other schemes, allowing eligible applicants to purchase a home with as little as 2% deposit.

The eligibility criteria are largely the same as for the other schemes, except home buyers can only apply as an individual, earn no more than $125,000 a year, and must be an eligible single parent or eligible single legal guardian.

What makes a single parent or legal guardian eligible?

To be eligible to use the Family Home Guarantee, applicants must:

• Be single A person is considered single if they don't have a spouse or a de facto partner. If you're separated but not divorced, you won't be considered single and will need a divorce certificate to proceed.

• Have at least one dependent You must be the natural or adoptive parent or legal guardian of a 'dependent child' or a person receiving a disability support pension who lives with them, as defined in the Social Security Act. Guardians of foster children are not eligible.

• Show you're legally responsible for the dependant A buyer must be solely or jointly responsible for the day-to-day care, welfare, and development of the dependent and have the dependent in their care.

Other eligibility requirements

The same property types and the property caps apply as for the First Home Buyers Guarantee (as outlined above).

Be aware, some participating lenders may require a higher percentage of deposit based on individual financial circumstances and their own lending policies.

Housing Australia strongly recommends seeking independent financial and legal advice about whether a particular home loan or property you intend purchasing under the scheme suits your personal circumstances and objectives.

What if I'm eligible for more than one guarantee?

You can only apply for support under one guarantee within the Home Guarantee Scheme, and each has slightly different criteria.

Your lender or mortgage broker can help you identify which will be the best fit for your purposes and individual circumstances.

Housing Australia also provides a comprehensive list of Frequently Asked Questions about each scheme on its website.

Home Guarantee Scheme: Pros and cons

Pros

• You can avoid paying Lenders' Mortgage Insurance

• You can become a home owner much faster You'll be able to enter the market much sooner as you won't need to save the 20% deposit generally required by home lenders. This can be a particular advantage in a rapidly rising property market.

• Wider choice of properties Many state and territory First Home Owner Grant schemes apply only to newly built homes. The federal government's Home Guarantee Scheme applies to a variety of properties.

Cons

• You will pay more in interest After securing your home loan, you'll essentially be paying interest on a 95% loan (or 98% for a Family Home Guarantee) over the life of your loan. This means you will be paying much more in interest than a traditional home loan with a 20% deposit. However, you'll need to weigh this up with how much you might end up paying in rent to save a larger deposit.

• You might take on a bigger loan If you use the Home Guarantee Scheme to borrow more than you otherwise might, you could find yourself at a greater risk of experiencing financial hardship. Larger loans generally come with more sizeable risks. A hike in interest rates can mean a bigger jump in repayments. It can also expose you to the risk of negative equity, where a drop in the market can see the amount you borrow worth more than the value of your property.

• You are restricted to participating lenders Because there are a limited number of financial institutions involved in the scheme, you may not be able to access the most competitive interest rates on the market.

If you're looking for a competitive home loan, the table below has some of the lowest interest rates on the market.

Can I use the Home Guarantee Scheme alongside other first home owner grants?

Yes, you can generally access the federal Home Guarantee Scheme in conjunction with other state and territory initiatives designed to help eligible home buyers. These might include first home owner grants and stamp duty exemptions or concessions, depending on where you live or plan to buy.

Again, your lender or mortgage broker will be able to advise you on your eligibility and how to best take advantage of what's on offer.

Bear in mind though, eligibility criteria for the federal government's Home Guarantee Scheme may not always be the same as for other state or territory programs, so you'll need to check particular requirements.

Here's a guide to some state government programs:

• First Home Buyers Grant NSW

• NSW shared equity scheme

• First Home Owners Grant Victoria

• First Home Owners Grant Queensland

• First Home Owners Grant WA

• First Home Owners Grant SA

• First Home Owners Grant Tasmania

Which lenders participate in the Home Guarantee Scheme?

As at June 2024, there are 33 lenders in the Home Guarantee Scheme. They are as follows:

Major bank lenders

• Commonwealth Bank

• National Australia Bank

• Westpac

Major bank affiliates

• Bank SA

• Bank of Melbourne

• St George

Non-major lenders

• Bendigo Bank

• Great Southern Bank

• MyState Bank

• Newcastle Permanent

• IMB Bank

• P&N Bank

• People's Choice

• Auswide Bank

• Beyond Bank

• Teachers Mutual Bank

• Credit Union SA

• Defence Bank

• QBank

• Police Bank

• Queensland Country Bank

• Regional Australia Bank

• Bank of Us

• Firefighters Mutual Bank

• G&C Mutual Bank

• Indigenous Business Australia

• UniBank

• Australian Military Bank

• Australian Mutual Bank

• Border Bank

• Community First Bank

• Health Professionals Bank

• Illawarra Credit Union

• Mortgageport

• Unity Bank

• BankWAW

• The Mutual Bank

• Gateway Bank

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