First Home Guarantee 2023: What is the first home loan deposit scheme and how does it work?
The First Home Guarantee (FHBG), formerly called the First Home Loan Deposit Scheme (FHLDS), is a government measure designed to help people enter the property market for the first time. We take a look at how it works.
Usually, to get a home loan Australian home buyers have to either save up a deposit of at least 20% of their property’s value, or take out lenders mortgage insurance, which can often cost thousands of dollars.
Under the First Home Guarantee (FHBG) scheme, the Australian Government will partially guarantee low-deposit loans, for eligible low- and middle-income earners who have saved up a deposit of as little as 5% of an eligible property’s value.
Can I buy a house with a 5% deposit?
You may be able to buy a house with a 5% deposit if you are eligible and able to obtain assistance from the government, or if you find a lender who is willing to allow you to do so, although you will most likely have to pay Lenders Mortgage Insurance (LMI) unless you are participating in a scheme like the FHBG.
Government assistance to buy a house with a 5% deposit
In April 2023, the federal government announced an expansion on the criteria for the existing Home Guarantee Scheme, which is made up of multiple targeted homebuyer support programs. Changes for the program include the eligibility inclusion of Australian permanent residents, non-first home buyers who haven’t owned a property in Australia in the past 10 years, and joint applications for friends, siblings and other family members for the First Home Guarantee scheme (formerly known as the First Home Loan Deposit scheme) and Regional First Home Buyer Guarantee. These updates have come into effect as of 1 July 2023.
There are currently 35,000 places available each year across the FHBG scheme, 5,000 places per year to 30 June 2025 under the Family Home Guarantee, and 10,000 places per year to 30 June 2025 under the Regional First Home Buyer Guarantee. with more details on that (as well as the Help to Buy scheme) expected in the coming months.
- First Home Guarantee: Offers 35,000 places to homebuyers per year, allowing them to purchase a home with a 5% deposit and no lender’s mortgage insurance. Below, we look at the eligibility criteria and other requirements for this scheme.
- The Family Home Guarantee: Allows eligible single parents or single legal guardian (such as aunts, uncles and grandparents) to purchase a home with a deposit of 2%, will also offer 5,000 places each year.
Are there risks associated with taking out a home loan with a small deposit?
Keep in mind that your deposit is just one part of the equation in working out if it’s a suitable time for you to buy. Having a bigger deposit means that you’ll have more equity in your home, which could reduce your likelihood of experiencing negative equity and mortgage stress.
There could be risks to weigh up when applying for a home loan with a low deposit, including:
- A lower deposit means you could be taking on more debt and may end up paying more in interest as a result.
- A lower amount of equity in your home from the start could make it difficult to refinance to a new home loan or switch to a new lender in the short term, particularly if house prices fall.
- A lower deposit may limit the number of lenders and loans you are eligible for, and you could miss out on some of the more competitive rates available to borrowers with a lower loan-to-value ratio (LVR).
It may be a wise idea to seek independent advice before taking on any large financial commitment.
First Home Guarantee eligibility
To be eligible for the First Home Guarantee, there are a number of eligibility requirements:
- the buyer or buyers need to meet certain criteria
- the property, which must be a ‘residential property’, has to cost less than the eligible price cap for its location, and
- the loan the buyer(s) apply for has to be from a set list of lenders and meet certain conditions.
It’s also important to note that you have to be able to reserve a place on the scheme, so if the lender does not have any more places available, or the scheme has run out of places for the year, then you may miss out on a spot.
Buyer eligibility checklist
To be eligible to participate in the scheme, prospective homebuyer(s) must meet all of the following criteria:
- Citizenship: Australian citizens or Australian permanent residents.
- Age: At least 18 years old.
- Income: As shown on the Australian Taxation Office-issued Notice of Assessment. Incomes would be assessed for the financial year preceding the one in which the loan is entered into:
- Singles must have a taxable income of $125,000 per year or less
- Joint applicants must have a combined taxable income of up to $200,000 per year. The two joint applicants can be married, in a de-facto relationships, friends, siblings or other family members.
- Deposit: Applicants must have a deposit of at least 5% – but less than 20% – of the property’s value.
- Owner-occupier(s): Loans are only eligible for the scheme if they’re for the purchase of a ‘residential property’ for owner-occupiers. The NHFIC recommends asking your lender if you’re in doubt as to whether the property you’re buying is considered residential. Applicants must intend to move into and live in the property as their principal place of residence, typically within six months after settlement. They must also continue to live in the property for as long as their loan “has a guarantee under the Scheme”.
- Repayments: Loans under the Scheme normally require scheduled repayments of the principal (as well as the interest) of the loan for the full period of the home loan contract. However, if the loan relates to the purchase of vacant land to build a house on, it may be eligible even if the terms of the loan agreement permit interest-only repayments for a specified period.
- Eligible home buyer(s): Applying applicants must be home buyers who have not owned nor part owned a property in the past 10 years anywhere in Australia.
- Exclusions: Applicants must also not have owned or held interests in body corporate and company-owned properties in the last 10 years, regardless of whether it was an investment or owner-occupied property and whether it was ever lived in.
The NHFIC has also provided more detailed information on its webpage about the First Home Guarantee, including an information guide you can download with additional criteria, relevant dates and requirements for different property types.
Don’t think you’ll qualify? There are other options that could be available to you. It could pay to compare.
Compare First Home Buyer Loans^
^ Lenders may not be on the FHBG participating lenders list (see below). Note: Keep in mind that you will typically also need to meet the lending criteria of the bank you apply to.
Property eligibility
What type of home can I buy with the First Home Guarantee?
You can only buy a property that is considered a ‘residential property’ under the scheme. The NHFIC states that the types of properties are:
- 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
How much can I spend on a home under the First Home Guarantee?
The Australian Government says that the FHBG “is only available for the purchase of a modest home” and so it has capped the price of the homes eligible under the scheme. The below caps came into effect on 1 July 2022 and have not changed for the 2023-24 financial year at the time of writing:
← Mobile users: swipe to view price caps →
State or Territory |
Capital city or regional centre |
Rest of state |
---|---|---|
NSW | $900k | $750k |
VIC | $800k | $650k |
QLD | $700k | $550k |
WA | $600k | $450k |
SA | $600k | $450k |
TAS | $600k | $450k |
ACT | $750k | |
NT | $600k | |
Jervis Bay Territory & Norfolk Island |
$550k | |
Christmas Island & Cocos (Keeling) Islands |
$400k |
Source: National Housing Finance and Investment Corporation
The scheme’s website has advised that “capital city price caps will apply to large regional centres with a population over 250,000”, namely Newcastle and Lake Macquarie, Illawarra (including Wollongong), Geelong, Gold Coast and Sunshine Coast at the time of writing. This is because “dwellings in regional centres can be significantly more expensive than other regional areas”.
Don’t think you’ll qualify? There are other options that could be available to you. It could pay to compare.
Compare First Home Buyer Loans^
^ Lenders may not be on the FHBG participating lenders list (see below). Note: Keep in mind that you will typically also need to meet the lending criteria of the bank you apply to.
Can the FHBG be combined with other government incentives?
The FHBG can be combined with other first home buyer assistance available from the federal, state or territory governments. These could include the First Home Owners Grant (FHOG), a national scheme administered locally in most states and territories, which provides financial incentives for people to build or buy brand new homes, as well as the First Home Super Saver Scheme.
Stamp or transfer duty concessions could also apply to both new and existing homes.
Learn more about FHB assistance from each state
QLD . NSW . ACT . NT . SA . TAS . VIC . WA
Loan eligibility
Participants also have loan eligibility requirements to meet. For example, you must have less than a 20% deposit (based on the value of the property you’re buying), and whatever deposit you do have has to be ‘genuine savings’, which you may have to prove. Also, the loans have to be principal-and-interest loans, not interest-only. The loans can only also come from a list of approved lenders.
What lenders can give loans under the First Home Guarantee?
These are the residential mortgage lenders participating in the First Home Guarantee Scheme, according to the NHFIC:
- Australian Military Bank
- Australian Mutual Bank
- Auswide Bank
- Bank Australia
- Bank First
- Bank of Heritage Isle
- Bank of Us
- bcu
- Bendigo Bank
- Beyond Bank Australia
- Border Bank
- Commonwealth Bank
- Community First Credit Union
- Credit Union SA
- Defence Bank
- Firefighters Mutual Bank
- G&C Mutual Bank
- Gateway Bank
- Great Southern Bank
- Health Professionals Bank
- Indigenous Business Australia
- Illawarra Credit Union
- IMB Ltd (trading as IMB bank)
- Mortgageport
- MyStateBank
- NAB
- Newcastle Permanent Building Society
- P&N Bank
- People’s Choice
- Police Bank
- QBANK
- Queensland Country Bank
- Regional Australia Bank
- Teachers Mutual Bank
- The Mutual Bank
- UniBank
- Unity Bank Limited
- WAW
It could be a wise idea to seek professional financial advice.
How do I apply for the First Home Guarantee?
Step 1: Check
- Are you eligible to apply? Check the criteria above and consider your personal circumstances.
Step 2: Research
- Where do you want to live? What type of property do you want to live in?
- How much of a deposit will you need?
- How much can you afford in repayments?
- Which lenders (or their brokers) do you want to approach?
Step 3: Reserve
- Contact your chosen lender(s) or their broker(s).
- Tell them you’d like to be considered for the scheme, and what you’d like to buy.
- The lender or broker will reserve a scheme place for you (if one is available).
- It could be a wise idea to start looking for a home to buy or build as soon as possible after your scheme place is reserved.
Step 4: Apply
- You typically have 14 days to obtain conditional approval for a loan (also known as pre-approval) from a lender participating in the scheme. This will determine how much you can borrow and therefore how much you can spend on a home.
- You do not have to go through the lender that reserved your spot (although you can only borrow through one that’s on the list of approved lenders for the scheme).
Step 5: Buy
- You then have 90 days after you receive conditional approval to find, negotiate for and sign a contract on a property.
- In some cases, extensions to this timeframe may be granted due to COVID-19. Talk to your lender.
- Ensure the home is priced at or below the property price threshold for its location.
Step 6: Settle
- When you sign a contract to buy your chosen house, you then have up to 30 days for the settlement period – to allow time for the bank to finalise the loan, and for the usual legal processes that allow a house contract to settle.
Step 7: Move in
- Existing home: Move in within six months of settlement of your home loan.
- House and Land Package: Start building your home within 12 months and finish building your home within 24 months of the settlement date for your home loan, and you must move into the property within six months of an occupancy certificate being issued.
- Separate contracts for land purchase and home construction: Enter into an eligible building contract within six months, start building your home within 12 months, and finish building your home within 24 months of the settlement date for your home loan, and you must move in within six months of an occupancy certificate being issued.
- Off-the-plan purchase: You must have signed the contract of sale before the settlement date for your home loan, and you must move into the property within six months of the occupancy certificate being issued.
What happens if I am not able to meet the contract conditions of the scheme, such as the move-in date?
It is important to note that in most cases, scheme applicants must be living in their home six months after their loan settles (or a certificate of occupancy is issued). If this does not happen, the NHFIC states that the home loan would no longer be covered by the scheme. This could mean your lender may require you to pay fees and charges, and/or take out LMI.
Source: First Home Loan Deposit Scheme information booklet, NHFIC website
Compare Home Loans (First home buyer with a variable rate) with Canstar
If you’re currently considering a home loan, the comparison table below displays some of the variable rate home loans on our database with links to lenders’ websites that are available for first home buyers. This table is sorted by Star Rating (highest to lowest), followed by comparison rate (lowest-highest). Products shown are principal and interest home loans available for a loan amount of $500,000 in NSW with an LVR of 80% of the property value and that offer an offset account. Consider the Target Market Determination (TMD) before making a purchase decision. Contact the product issuer directly for a copy of the TMD. Use Canstar’s home loans comparison selector to view a wider range of home loan products. Canstar may earn a fee for referrals.
Canstar is an information provider and in giving you product information Canstar is not making any suggestion or recommendation about a particular product. If you decide to apply for a home loan, you will deal directly with a financial institution, not with Canstar. Rates and product information should be confirmed with the relevant financial institution. Home Loans in the table include only products that are available for somebody borrowing 80% of the total loan amount. For product information, read our detailed disclosure, important notes and additional information. *Read the comparison rate warning. The results do not include all providers and may not compare all the features available to you.
Home Loan products displayed above that are not “Sponsored or Promoted” are sorted as referenced in the introductory text followed by Star Rating, then lowest Comparison Rate, then alphabetically by company. Canstar may receive a fee for referral of leads from these products.
When you click on the button marked “Enquire” (or similar) Canstar will direct your enquiry to a third party mortgage broker. If you decide to find out more or apply for a home loan, you can provide your details to the broker. You will liaise directly with the broker and not with Canstar. When you click on a button marked “More details” (or similar), Canstar will direct your enquiry to the product provider. Canstar may earn a fee for referral of leads from the comparison table above. See How We Get Paid for further information.
^ Lenders may not be on the FHBG/FHBG participating lenders list. Note: Keep in mind that you will also need to meet the lending criteria of the bank you apply to.
First Home Loan Deposit Scheme FAQs
Will all first home buyers get help from the FHBG?
Not all first home buyers will be able to access the First Home Guarantee scheme. Places are limited by the government to a set number per year and once that allocation is exhausted, the scheme closes to new applicants. Anyone applying for the scheme also has to meet strict criteria, which include price caps on the homes they can buy or build, depending on their location, and income restrictions. Only a select range of lenders are able to offer places in the scheme, too.
Will first home buyers using the scheme pay the same interest rate as everyone else?
The National Housing Finance and Investment Corporation (NHFIC) – the government body administering the scheme – states that participating lenders in the FHBG will not charge eligible customers higher interest rates than equivalent customers outside the scheme. However, it’s worth keeping in mind that taking out a home loan with a lower deposit would mean paying interest on a larger sum, potentially making it more expensive as a result.
What types of homes can I buy under the FHBG?
While the First Home Owner’s Grant scheme typically only applies to new or newly built homes, under the FHBG an eligible first home buyer could also purchase the following types of property, according to the NHFIC:
- An existing house, townhouse or apartment
- A house and land package
- Land together with a separate contract to build a home
- An off-the-plan apartment or townhouse
- An ‘eligible building contract’ where you have a contract with a licensed or registered builder to build you a home within a set timeframe.
It’s worth noting there are price limits that apply to homes under the FHBG, which differ from region to region, and a list of eligibility requirements, too.
Property tips: Other things to consider when buying a home
Buying a home is the biggest investment that many Australians will make. We’ve rounded up some helpful information:
Getting ready to buy:
- How do you check your credit score?
- Who is offering the highest interest savings accounts?
- Highest term deposit rates on our database right now
- 5 tips for negotiating the price of a house
- Where can homeowners and renters find Outstanding Value home and contents insurance?
- Electricity price rises & changes (brought to you by Canstar Blue)
- What are the best internet deals in Australia? (brought to you by Canstar Blue)
Buying a property:
Cover image source: simona pilolla 2/Shutterstock.com
Additional updates by Karen Yang.
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This article was reviewed by our Content Lead Ellie McLachlan and Content Producer Karen Yang before it was updated, as part of our fact-checking process.
A journalist for more than two decades, Amanda Horswill has reported on a galaxy of subjects, including property, lifestyle, hyper-local news, data journalism, the Arts and careers.
She’s served as the Editor of Brisbane News, Deputy Features Editor for The Sunday Mail, Deputy Editor – Digital at Quest Community News, and a host of other senior positions at News Corp, prior to joining Australia’s biggest financial comparison website, Canstar.
Amanda is fascinated with the ever-changing world of finance. A passionate believer in the motto “knowledge is power”, she strives to translate the news into practical information that will help readers make informed decisions about their future. While at Canstar, her work has been regularly referenced by publishers such as the Sydney Morning Herald , The Age, The New Daily and Yahoo Finance.
Amanda holds a Bachelor of Arts (Journalism, Media Studies and Production, and Public Relations) and a Graduate Certificate in Editing and Publishing, from the University of Southern Queensland.
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