First home guarantee scheme: how does it work?

Title: First Home Guarantee Scheme: how does it work?
Short description: You may be eligible to purchase your first home with as little as 5% deposit via the First Home Guarantee Scheme. Here’s how it works.
Topics: mlc:Topics/news-and-updates
Time to read/watch: 6 min
Effective date: 2024-11-18 00:00
Feature Image: /content/dam/mlc/insights/images/Articles/2024/first-home-guarantee-scheme-know-how/first-home-guarantee-scheme-know-how.jpg
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First Home Guarantee Scheme: financial support for first home buyers

The First Home Guarantee Scheme is an Australian Government initiative to support eligible first home buyers to buy a home sooner. Under the First Home Guarantee Scheme, the Government will provide a limited loan guarantee of up to 15% of the home value. This may enable you to buy your first home with a deposit of only 5%¹ and no lenders’ mortgage insurance (LMI) will be payable.

In 2024/25, 35,000 home loans are available under the First Home Guarantee Scheme.

Key points of the First Home Guarantee Scheme

You’ll need to earn less than the income limit and meet other eligibility conditions.
The purchase price will be capped, depending on the property’s location.
You need to move into the home as your main residence within certain timeframes.

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Who may be eligible for the First Home Guarantee Scheme?

To be eligible for the First Home Guarantee Scheme, you must:

be an individual or two joint applicants
be an Australian citizen or Australian permanent resident aged 18 years or older
earn a taxable income of less than $125,000 pa (for individuals) or $200,000 pa (for joint applicants combined),
based on the last financial year
be a first home buyer or not have owned Australian real property (including land) in the last 10 years
intend to be an owner-occupier of the purchased property, and
be purchasing a home (both newly built and established properties qualify under this scheme).

For more information about the types of properties that may be eligible and important timeframes, see housingaustralia.gov.au.

What types of homes can I buy with the First Home Guarantee Scheme?

Under the scheme, you’re able to purchase an eligible residential property which includes:

an existing freestanding house, townhouse or apartment
a house and land package
land and a separate contract to construct a home, or
off-the-plan townhouse or apartment.

Certain requirements apply depending on the type of property and contract you’re entering into.

What are the property price caps for the First Home Guarantee Scheme?

Caps apply to the purchase price to ensure participation is spread fairly across the country. The capital city price caps will apply to large regional centres with a population over 250,000, namely the Gold Coast, Newcastle and Lake Macquarie, the Sunshine Coast, Illawarra (Wollongong) and Geelong.

	Price caps for 2024/25
State/territory	Capital city and regional centres	Rest of state
NSW	$900,000	$750,000
VIC	$800,000	$650,000
QLD	$700,000	$550,000
WA	$600,000	$450,00
SA	$600,000	$450,000
TAS	$600,000	$450,000
ACT	$750,000
NT	$600,000
Jervis Bay Territory and Norfolk Island	$550,000
Christmas Island and Cocos (Keeling) Islands	$400,000

What’s the downside of the First Home Guarantee Scheme?

While the First Home Guarantee Scheme may help you buy your first home sooner, you need to keep in mind that a smaller deposit means a bigger loan. And a bigger loan means bigger loan repayments, as well as higher total interest payments over the life of the loan. It may be the case that the additional interest payable outweighs the LMI savings. To find out whether the First Home Guarantee Scheme is right for you, you may want to speak to a financial adviser.

Also, if you move out of your home for an extended period of time and rent your home out, the loan may no longer be guaranteed by the Government. You may need to pay additional fees and charges, as well as LMI, depending on factors such as the value of your home and your outstanding debt at that point.

Which lenders are participating and how do I apply?

Applications can be made directly via one of the approved lenders or their authorised representative (such as a mortgage broker). Housing Australia has authorised a specific panel of participating lenders to offer the Home Guarantee Scheme to home buyers.

What lending rules apply to the First Home Guarantee Scheme?

You’ll need to meet your lender’s normal credit criteria to ensure you can service a loan of up to 95% and provide evidence you’ve saved the 5% deposit. Loans must be principal and interest (not interest only) and terms can be up to 30 years.

What other assistance programs are available?

The First Home Guarantee scheme complements (but doesn’t directly interact with) other Government assistance programs. These may include the:

First Home Super Saver Scheme, where you could save for the deposit on your first home in the concessionally taxed superannuation system
First Home Owner Grant, which offsets the effect of Goods and Services Tax on buying or building a home, and
State and Territory based stamp duty concessions.

What next?

To find out more about the First Home Guarantee and ways to fund the purchase of your first home, we recommend you seek financial advice. You can also find out more at housingaustralia.gov.au.

¹Individual lenders may require a larger deposit, based upon lending criteria and your personal circumstances.

The information in this article is current as at November 2024 and may be subject to change.

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Important information and disclaimer

This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. NULIS is part of the Insignia Financial group of companies comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (‘Insignia Financial Group’). This information may constitute general advice. The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions based on this information. It is recommended that you consider the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you make any decisions about your superannuation. You can obtain the latest copy of the PDS (or other disclosure documents) and TMD by calling us on 132 652 or by searching for the applicable product at mlc.com.au. You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. Opinions constitute our judgement at the time of issue. The case study examples (if any) provided in this article have been included for illustrative purposes only and should not be relied upon for decision making. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the Insignia Financial Group accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication.