Struggling to save for a house deposit in today's competitive market? You're not alone.
With Australian property prices continuing to climb, the dream of homeownership feels increasingly out of reach for many first-time buyers. But there's good news - the First Home Guarantee (FHBG) is helping thousands of Australians get into their first homes sooner with deposits as low as 5%.
As mortgage brokers working with first home buyers every day, we're seeing firsthand how this government initiative is making a real difference. Let's break down how the scheme works, who's eligible, and the exciting changes that might be coming soon.
What is the First Home Guarantee?
The First Home Guarantee (formerly known as the First Home Loan Deposit Scheme) is an Australian Government initiative designed to help eligible first home buyers purchase a property sooner.
Here's the game-changer: instead of saving the traditional 20% deposit, you can purchase with as little as 5% down without paying Lenders Mortgage Insurance (LMI).
How? The government guarantees up to 15% of the property's value to your lender. This means you can avoid LMI costs (which can add thousands to your loan) while still accessing competitive mortgage rates.
How much could you save on LMI?
LMI costs vary based on your loan amount and deposit size, but the savings are substantial:
Note: LMI figures are approximate and may vary between lenders
As mortgage broker Max Epstein explains: "The FHBG is a game-changer for first home buyers. That $23,000 LMI saving on an $800,000 property could be the difference between buying now or waiting another 1-2 years to save more."
Current eligibility criteria
To qualify for the First Home Guarantee, you need to meet these requirements:
- Be an Australian citizen or permanent resident
- Be at least 18 years old
- Be a genuine first home buyer (or someone who hasn't owned property in Australia in the past 10 years)
- Plan to live in the property as an owner-occupier
- Have a taxable income under $125,000 for individuals or $200,000 for couples (as shown on your Notice of Assessment)
- Have a deposit between 5% and 20% of the property's value
- Purchase a property under the price cap for your region
Income assessment explained
Your eligibility is based on your taxable income for the previous financial year as shown on your Notice of Assessment (NOA). For the 2024-25 scheme, you'll need your 2023-24 NOA.
For joint applicants (such as a couple), your combined taxable income must be below $200,000. This applies whether you're married, in a de facto relationship, or simply buying with a friend or family member.
If you've had a significant change in income recently, it's important to discuss this with your broker, as it may affect your borrowing capacity even if you meet the scheme's eligibility requirements.
Property price caps and availability
The scheme has property price caps that vary by location to reflect different market conditions. These caps determine the maximum property value you can purchase under the guarantee.
Current price caps (2024-25)
For the 2024-25 financial year, there are 35,000 FHBG places available. These spots tend to fill quickly, so it's worth getting your application in early when new places are released.
Success rate and popularity
Housing Australia today released its annual Home Guarantee Scheme Trends and Insights Report 2023-24 covering data on the First Home Guarantee (FHBG), Family Home Guarantee (FHG) and Regional First Home Buyer Guarantee (RFHBG).
The report found that around 1 in 3 first home buyers were supported by the Scheme in 2023-24. Over the financial year, 43,800 Scheme places were taken up, helping more eligible home buyers to enter the housing market under the HGS.
How to apply for the First Home Guarantee
You can't apply directly for the First Home Guarantee - applications must go through a participating lender or their mortgage broker (that's where we come in!)
Application process timeline
The process typically takes 4-6 weeks from initial consultation to securing a place:
- Initial assessment (Week 1): Check your eligibility using the official eligibility tool and meet with a broker to assess your borrowing capacity
- Documentation preparation (Week 1-2): Collect your documentation, including your Notice of Assessment (NOA) from the ATO
- Lender pre-approval (Week 2-3): We'll help you submit your application to a participating lender
- Scheme place reservation (Week 3-4): Once pre-approved, the lender reserves your place in the scheme
- Property search (Week 4+): Find your property within the price cap for your area
- Formal approval and settlement (Week 6-12): Complete the purchase process
Remember that for scheme places reserved from July 1, 2024, you'll need your 2023-24 Notice of Assessment, so make sure you've filed your tax return.
Required documentation checklist
To streamline your application, prepare these documents:
- ✓ Proof of identity (passport, driver's license)
- ✓ Notice of Assessment (2023-24 for applications after July 1, 2024)
- ✓ Proof of deposit (bank statements showing genuine savings)
- ✓ Employment details (payslips, employment contract)
- ✓ Details of assets and liabilities
- ✓ Living expenses documentation
Eligible property types explained
Under the First Home Guarantee, you can purchase:
Existing properties
- Established houses, townhouses, or apartments
- Must be within price caps for your region
- Settlement must occur within 90 days of reserving your scheme place
House and land packages
- Combined contract for land and construction
- Total value must be within price caps
- Building must commence within 12 months
- Construction must complete within 24 months
Land and separate construction contract
- Purchase vacant land and have a separate contract to build
- Combined value must be within price caps
- Construction must commence within 12 months
- Construction must complete within 24 months
Off-the-plan apartments or townhouses
- Property must be within price caps
- Must be your first residential property purchase
- Settlement must occur within 90 days of reserving your scheme place or completion of construction
Labor's proposed expansion: 5% deposits for all first home buyers
In April 2025, the Labor government announced plans to significantly expand the scheme if re-elected. Here's what the proposed changes to the scheme could look like:
- No income caps: The $125,000 individual and $200,000 couple income limits would be removed
- No caps on places: Instead of limited spots, all first home buyers could access the scheme
- Increased property price limits: Price caps would be raised to match average house prices in each city and region (see table below)
- Implementation date: These changes would take effect from January 1, 2026
Proposed new property price caps
The proposed regional price caps show substantial increases in many areas:
This means a first home buyer in Sydney could potentially purchase a $1.5 million property with just a $75,000 deposit, while avoiding Lenders Mortgage Insurance.
What experts are saying about the proposed changes
Industry analysts have mixed opinions about the expanded scheme:
The AFR recently reported, "Most economists are cynical about the measures, saying these will simply increase demand for housing in a market where the supply of new homes is constrained because of government regulation and the high cost of construction."
The 100,000 homes initiative
Labor has also announced plans to invest $10 billion to build up to 100,000 new homes specifically for first home buyers. These properties would be:
- Reserved exclusively for first home buyers
- Built through partnerships with state developers and industry
- Available from 2027-28
- Designed to increase housing supply at affordable price points
How the program would work
The $10 billion investment would be structured as:
- $2 billion in grants to states and territories (with matching contributions required)
- $8 billion in zero-interest loans or equity investments
These funds would be used to:
- Identify suitable projects, including using vacant or underutilised government land
- Fast-track land release and planning approvals through states and territories
- Build diverse housing options from apartments to family homes
- Reserve these properties specifically for first home buyers
The South Australian RenewalSA program offers a preview of how this might work. At Prospect Corner, 41 homes were reserved at affordable prices specifically for first home buyers through the HomeSeeker SA program.
First Home Guarantee vs. standard home loans: A comparison
Is the First Home Guarantee right for you?
While the scheme offers significant benefits, it's important to consider:
Advantages
- Enter the market sooner: Purchase years earlier than saving for a 20% deposit
- Substantial savings: Avoid LMI costs of $15,000-$30,000
- Same interest rates: Access competitive rates despite the lower deposit
- Build equity earlier: Start building wealth through property ownership sooner
- Lock in your purchase: Protect against further price increases while saving
Considerations
- Higher loan amount: With a smaller deposit, you'll have a larger loan and higher repayments
- Interest costs: You'll pay more interest over the life of the loan
- Market fluctuations: Entering with less equity means less buffer if property prices fall
- Competition for places: Limited spots mean you might miss out
- Property restrictions: Must buy within price caps that might limit choices in some areas
Frequently asked questions
Can I use the First Home Guarantee with other first home buyer benefits?
Yes, in most cases you can combine the First Home Guarantee with:
- First Home Owner Grants offered by states and territories
- Stamp duty concessions or exemptions for first home buyers
- First Home Super Saver Scheme
However, eligibility criteria may differ between schemes, so it's important to check with your broker.
What happens if property prices fall after I purchase?
If property prices fall, you could find yourself in a negative equity position (owing more than the property is worth). This risk exists with any high LVR loan, but is heightened with a 5% deposit. However, if you plan to hold the property long-term, short-term fluctuations may be less concerning.
Can I use gifted funds as my 5% deposit?
Most participating lenders will accept gifted funds as part or all of your deposit, though many require a certain percentage to be genuine savings. Some lenders may also require a statutory declaration from the gift-giver stating the funds don't need to be repaid.
What if my income changes after I apply?
Once your place in the scheme is reserved, changes to your income won't affect your eligibility. However, significant income changes might impact your loan approval with the lender.
Is it better to wait and save a larger deposit?
This depends on your individual circumstances, local property market, and financial goals. Factors to consider include:
- Rate of property price growth vs. your saving capacity
- Rent payments while saving vs. mortgage payments
- Career stability and income growth projections
- Life plans that might require flexibility
What are the main reasons applications get rejected?
Common reasons for First Home Guarantee application rejection include:
- Credit issues or poor credit history
- Insufficient genuine savings history
- Employment instability or probationary periods
- Exceeding income thresholds
- Previous property ownership that doesn't meet the 10-year rule
Next steps: How we can help
As experienced mortgage brokers, we can:
- Check your eligibility for the current scheme
- Calculate your borrowing capacity and help you understand what you can afford
- Connect you with participating lenders offering competitive rates
- Guide you through the application process
- Help you understand how the potential changes might affect your plans
Free First Home Buyer Strategy Session
Book a complimentary 30-minute strategy session with our team to:
- Assess your current financial position
- Determine your eligibility for the First Home Guarantee
- Create a personalised roadmap to homeownership
Don't let the traditional 20% deposit requirement hold you back from homeownership. Book a consultation with us today to discover if the First Home Guarantee could be your pathway to purchasing your first home with a 5% deposit.
