Buying your first home is an exciting milestone, but it can also be overwhelming, especially when navigating through various financial options and government schemes.

One such initiative designed to make the dream of homeownership more accessible is the First Home Guarantee (FHBG), formerly known as the First Home Loan Deposit Scheme. This guide will help you understand what the FHBG is, how it works, and how you can benefit from it as a first-time homebuyer.

What is the First Home Guarantee?

The First Home Guarantee is an Australian government initiative aimed at helping first home buyers purchase a home sooner by reducing the financial burden of saving for a large deposit. Under this scheme, eligible first home buyers can purchase a property with a deposit as low as 5% without the need to pay for Lenders Mortgage Insurance (LMI). LMI is typically required by lenders when a borrower has a deposit of less than 20%, and it can add a significant cost to the home-buying process.

Brendon Cowan at Finance Broker Melbourne is here to help.

How Does the First Home Guarantee Work?

The FHBG works by allowing the Australian Government to guarantee up to 15% of the property’s value, bridging the gap between the deposit you’ve saved (minimum 5%) and the standard 20% deposit required by most lenders to avoid LMI. This guarantee reduces the risk for the lender, enabling them to provide loans to first home buyers with smaller deposits without charging for LMI.

Eligibility Criteria

To qualify for the First Home Guarantee, you must meet several eligibility criteria:

1. First Home Buyer: You must either be a first-time buyer or previous homeowner who hasn’t owned or had an interest in a residential property in Australia (including owning land) in the past 10 years.
2. Income Limits: As of the 2023-24 financial year, the income threshold is $125,000 for single applicants and $200,000 for couples combined. These limits are based on your taxable income for the previous financial year.
3. Property Price Caps: The property you intend to purchase must fall within the price caps set by the scheme, which vary depending on the location. For example, the cap might be higher in major cities and lower in regional areas.
4. Australian Citizen: You must be an Australian citizen or permanent resident at the time you enter the loan
5. Minimum Deposit: You need to have saved a minimum deposit of 5% of the property’s value.

Benefits of the First Home Guarantee

1. Reduced Financial Pressure: With the ability to buy a home with as little as a 5% deposit, the FHBG significantly reduces the time and financial pressure required to save for a large deposit.
2. No Lenders Mortgage Insurance: Avoiding LMI can save you thousands of dollars, making homeownership more affordable and achievable.
3. Faster Entry into the Market: With a lower deposit requirement, you can enter the property market sooner, potentially benefiting from property value appreciation over time.

How to Apply

1. Check Your Eligibility: Ensure you meet all the criteria for the FHBG.
2. Choose a Participating Lender: The scheme operates through a panel of participating lenders, including major banks and smaller financial institutions.
3. Apply for a Home Loan: Submit your home loan application through one of the participating lenders, mentioning your interest in the First Home Guarantee.
4. Complete the Purchase: Once approved, you can proceed with purchasing your property.

Book a FREE consultation with Brendon Cowan at Finance Broker Melbourne today.

More Information

• Fact Sheet
• Information Guide
• Housing Australia Website
• Price Caps / Post Code Search Tool
• Eligibility Tool