To help home buyers get into the market sooner, both the federal and state/territory governments have introduced a raft of schemes and incentives. One of those is the First Home Guarantee, a nationwide program designed to support buyers who have smaller deposits. Here’s how it works, and how you might be able to take advantage of it.

What is the First Home Guarantee?

The First Home Guarantee, or the First Home Buyers Guarantee – referred to as the FHBG for brevity’s sake – is an initiative run by Housing Australia and the Australian Government.

The scheme is targeted towards first-home buyers and those who haven’t owned property in several years. Its purpose is to help eligible buyers secure a home, even if they’ve only got a home deposit as low as 5%. Typically, someone with a loan of less than 20% would have to either take out Lenders Mortgage Insurance (LMI) or have their loan guaranteed by a guarantor, like a family member. Under the FHBG, however, Housing Australia guarantees the home loan, removing the need for (and cost of) LMI.

Bear in mind that while Housing Australia will guarantee up to 15% of the home’s value, they’re not actually providing any money towards a deposit to help home buyers get to their 20% goal. The guarantee acts as a form of security for the lender if the borrower defaults, the same way a guarantor or LMI does.

In the 2024-25 financial year, there are 35,000 FHBG spots available. But when you apply, you’ll need to provide your Notice of Assessment from the previous financial year (so 2023-24) to your chosen lender to guarantee your eligibility. (Applying can be complex, but we’re going through the basic steps shortly!)

It’s worth mentioning here that Housing Australia also administers the Regional First Home Buyer Guarantee, which is similar to the FHBG and has much the same criteria. The difference is that homes must be purchased in regional or rural areas, there are an additional 10,000 places allocated to the RFHBG, and independent price caps apply.

Then there’s the Family Home Guarantee aimed at single parents and legal guardians. There are 5,000 spots in this scheme, and price caps are the same as the FHBG. However, there’s a separate set of eligibility criteria and eligible participants only need to have 2% saved.

Who’s eligible?

Now, the scheme does come with some fairly stringent criteria. Here are the requirements you’ll need to meet:

• You can apply either as an individual or as two joint applicants. This doesn't have to be a partner – the scheme is also open to friends and family members applying together
• You have to be an Australian citizen or permanent resident when your loan kicks off
• You have to be 18+
• You can earn up to $125,000 if you’re applying solo or up to $200,000 combined if you’re applying as joint applicants. This amount is shown on your Notice of Assessment
• You must intend to live in the property
• You have to be a first-home buyer or a previous homeowner who hasn’t owned real property in Australia in the last 10 years, including land

There’s a handy Eligibility Tool on the Housing Australia website, which can give you an idea of your suitability for the scheme.

What size deposit do I need?

To be eligible, you’ll need to have anywhere from 5-20% saved for a deposit . However, the minimum amount of 5% can vary between lenders, as some may require a higher deposit depending on your financial circumstances, such as if your income is on the lower end.

Different lenders also have their own lending criteria. For instance, some like to see evidence of genuine savings , i.e., you’ve accumulated them yourself over a period of months. Others are fine with the money simply sitting in your account. They may not mind whether you saved it, received it as a gift, or got a cash grant from another government scheme, like a first home buyers grant.

Your best bet is to browse the list of Participating Lenders , reach out to several lenders, gauge their lending criteria and chat to them about your circumstances.

What kinds of properties can I buy?

The FHBG initiative also has somewhat strict rules about the type of property you buy and its value.

First up, the property has to be residential. The types of properties that qualify for the scheme include:

• Existing houses, townhouses or apartments
• House and land packages
• Land and a contract to build a home
• Off-the-plan apartments or townhouses

Price caps depend on which state or territory you’re in. The price cap you’re subject to also hinges on whether you’re planning to buy in a major city/regional centre, or somewhere further out.

The Housing Australia website has the full list of price caps, but to give you an idea, properties must be a maximum of:

• NSW: $900,000 in Sydney, Newcastle and Lake Macquarie, and the Illawarra; $750,000 anywhere else in the state
• Vic: $800,000 in Melbourne and Geelong, $650,000 across the rest of the state
• ACT: $750,000
• QLD: $700,000 in Brisbane, the Gold Coast and the Sunshine Coast; $550,000 everywhere else
• SA: $600,000 in Adelaide, $450,000 elsewhere
• WA: $600,000 in Perth, $450,000 in regional and rural areas
• Tas: $600,000 in Hobart, $450,000 across Tasmania
• NT: $600,000

As far as RFHBG price caps go, refer to the prices for regional centres or other parts of your state/territory, depending on where you’re buying.

How can I apply?

So, how can you apply for a spot in the FHBG? Here are the basic steps.

1. Assess your financial situation: This is a crucial part of the process. Your financial situation determines how much you can afford to spend on housing – in this instance, your home loan repayments. Review your income, expenses and debts. Calculate your borrowing power to see how much you could borrow for your first home. Determine how much you’ve accumulated for your deposit and your resulting loan-to-value ratio. Be prepared for the possibility of fluctuating interest rates, too
2. Check your eligibility: This goes without saying. Make sure you tick all of Housing Australia’s boxes to be eligible for the FHBG scheme
3. Find a Participating Lender: FHBG applications can only be made through Participating Lenders, which you can view here . You’ll likely find that lenders have different interest rates, features (like offset accounts), lending criteria and conditions. Compare offerings between lenders to find the one that suits your circumstances
4. Reach out to a lender: Once you’ve picked a lender, reach out to them directly to kickstart the application process. They’ll assess your eligibility and let you know exactly what information and documents you need to support your application
5. Provide the required documentation: You’ll need a list of documents to apply. Your Notice of Assessment from a previous financial year is one, which you can get from the ATO via your MyGov account. You'll likely also need to provide proof of employment, various identification documents, financial statements, and a few other bits and pieces
6. Submit your application: Once you’ve got everything in order, you’ll apply for a Home Guarantee Scheme-backed loan from your chosen lender. They'll then reserve a spot in the Scheme on your behalf, which lasts for 14 days. Over that time, you’ll need to get home loan pre-approval from your lender. If the 14 day-period lapses and you haven’t secured pre-approval, you’ll need to re-apply
7. Wait for the outcome: Your chosen lender will then let you know if your application is successful. The time this takes can vary between lenders, as each one has its own time frame
8. Buy your home (hooray!): If you manage to nab a spot in the FHBG scheme, you have 90 days to either enter into a contract of sale or sign a building contract. You’ll then have to let your lender know, and they’ll notify Housing Australia on your behalf. After that, your loan settlement officially kicks off and you can move into your very first home! (Just note you have to move in within six months of settling your home loan.)

How can I make the most of the FHBG?

While the FHBG can be beneficial in its own right, there are several ways you could maximise your spot in the scheme.

As you move through this list, bear in mind that we’re not making specific recommendations. These are simply some ways the FHBG could be utilised in tandem with other strategies. Always consider your own financial circumstances before making a decision and, if you think you might need individualised advice, reach out to a financial adviser.

Using the First Home Super Saver scheme

The First Home Super Saver (FHSS) scheme is a government-run initiative whereby you can make voluntary contributions to your super then withdraw them to put towards your first home.

Under the scheme, you can make concessional (before-tax) contributions or non-concessional (after-tax). At the moment, you can contribute up to $15,000 per financial year and withdraw up to $50,000 in total.

If you make concessional contributions, contributions are taxed at 15% and could be used to lower your taxable income for the financial year you make them. By making a concessional contribution, you may be able to reduce your taxable income and possibly bring it down to the amount required to qualify for the FHBG.

Remember that if you contribute in the current financial year, you won't be able to use your reduced income until the next financial year. This is because Housing Australia looks at your income from the financial year prior.

Opening an offset account

Some home loan providers let you open an offset account, which is a transaction account connected to your home loan. You can use it much like any other kind of transaction account – that is, making deposits and withdrawing from it whenever you need.

The difference, though, is that it can help you reduce the amount of interest you pay on your home loan. Say there’s $100,000 sitting in your offset account and you have a home loan of $950,000. Instead of paying interest on the full $950,000, you’d only pay it on $850,000. And the higher your offset account balance and the longer the money stays in there, the less interest you’re likely to pay.

In relation to the FHBG, you could set up an offset account and deposit the amount you save on LMI into it. You could even combine it with the FHSS and an offset account, and use your $50,000 withdrawal to offset your home loan.

Capital gains tax exemption

Capital gains tax (CGT) is a tax you pay on an asset when you sell it for a profit , including property. You don’t have to pay CGT on your primary residence (i.e. your home) unless you’re renting part of it out. In this instance, you might have your exemption reduced.

However, it’s worth mentioning that there’s a CGT six-year rule. Under the rule, you can rent out your home and still consider it your primary residence for CGT purposes for up to six years. During that time, no other property can be your primary residence.

Say you buy your home using the FHBG and live in it for a few years. Then, you need to move for work and choose to lease it. After five or so years, you decide to sell your property. Under the six-year rule, you can avoid CGT on any capital gain, as long as you don’t treat any other property as your primary residence.

The final word

The FHBG could certainly be beneficial if you're looking to buy your first home and meet all the requirements. But it may not suit everyone's circumstances. And regardless of whether you go through the home-buying process alone or take up a spot in the scheme, buying your first home is a major financial commitment. If you ever need guidance navigating the process, don’t hesitate to reach out to a licensed financial adviser or mortgage broker.

Happy home-buying!