The Australian property market just got more accessible for first-home buyers. October 1 marks a game-changing expansion to the First Home Guarantee Scheme. The government has removed all annual limits on guarantees available each financial year. What does this mean for you? You can now purchase a property with just a 5% deposit without paying costly Lenders Mortgage Insurance (LMI).

The previous system capped applications at 35,000 places annually. This major overhaul not only eliminates these restrictions but also removes income limits that previously excluded singles earning over $125,000 and couples with combined incomes above $200,000. LMI on a $1 million property with a 5% deposit typically costs around $40,000. That's a substantial saving you can now avoid entirely.

Think of the government guarantee scheme as your shortcut past the traditional 20% deposit hurdle. The scheme opens homeownership to eligible Australian citizens or permanent residents over 18 years old much sooner than conventional savings would allow. Major financial institutions, including Commonwealth Bank, National Australia Bank, and Westpac, all participate in the program, giving you multiple pathways to explore.

This guide breaks down everything you need to know about accessing low-deposit home loans through approved lenders – from eligibility requirements to application processes and the benefits you can expect.

What is the First Home Guarantee Scheme?

The First Home Guarantee (FHBG) is the Australian Government's solution to one of the biggest barriers facing first home buyers today. Rather than waiting years to save a traditional 20% deposit, this scheme creates a pathway to homeownership with just a 5% deposit upfront.



How the scheme helps first home buyers

Saving a 20% deposit in today's property market feels impossible for many Australians. The First Home Guarantee tackles this challenge head-on by allowing eligible buyers to purchase with deposits as low as 5%. Better yet, you won't pay Lenders Mortgage Insurance (LMI). A cost that typically applies when your deposit falls below 20%.

Here's a real-world example: purchasing a $900,000 property in Caloundra requires just a $46,000 deposit instead of the usual $185,00. This approach could save you up to 6 years of additional savings while avoiding roughly $40,000 in mortgage insurance costs.

The scheme previously offered 35,000 guaranteed loans annually, but recent changes have expanded access significantly. You can also combine the First Home Guarantee with other assistance programs:

• First Home Super Saver Scheme – boosts your deposit through concessionally taxed superannuation
• State and territory grants – first home owner grants and stamp duty concessions

Difference from traditional home loans

Standard home loans demand either a 20% deposit or LMI payments. The First Home Guarantee eliminates both requirements while maintaining the same level of security for lenders.

Key differences from conventional mortgages:

1. Loans must be principal and interest for the full term (construction loans may have limited interest-only periods)
2. Maximum 30-year loan terms apply
3. Properties must be owner-occupied – no investment purchases allowed
4. Extended rental periods may void the government guarantee

Important clarification: the First Home Guarantee isn't cash in your pocket or part of your deposit. It's a guarantee provided directly to your lender.

What is the government guarantee scheme?

The government guarantee scheme works as a safety net for participating lenders. Housing Australia guarantees up to 15% of your property's value to the lending institution. Essentially, the government replaces the security that would normally come from your larger deposit.

Should you default on mortgage payments and property sales don't cover outstanding debt, the government covers the guaranteed portion. This arrangement gives lenders confidence to approve smaller deposit loans without charging LMI.

The guarantee stays active until your loan balance drops below 80% of the original property value, you refinance, or your loan term concludes. You own 100% of your home immediately – the government's guarantee simply provides lender security without claiming any ownership stake.

Important consideration: smaller deposits mean larger loan amounts, resulting in higher repayments and potentially more interest over your loan's lifetime. Careful financial planning remains essential despite easier market entry.

Who is Eligible and What Has Changed

Understanding the updated eligibility criteria is essential before you approach First Home Guarantee Scheme lenders. Recent changes have made homeownership significantly more accessible across Australia.

Updated income and property caps

The complete removal of income caps represents the scheme's most significant update. Previously, singles earning above AUD 125,000 and couples with combined incomes exceeding AUD 200,000 were automatically excluded. Those restrictions no longer exist, opening the program to first-home buyers regardless of their income level.

Property price caps have also increased substantially nationwide:

• Brisbane, Sunshine Coast and Canberra: $1 million
• Sydney: $1.5 million
• Melbourne: $950,000

Regional areas have seen similar increases. Cotality data reveals that approximately 63% of nearly 5,000 homes analysed nationally now fall below the new caps, compared to just one-third under previous limits. This expansion means significantly more properties are now within reach for eligible buyers.

New rules for joint applicants

Joint applications offer flexibility for buyers who want to purchase together. The scheme accepts individual applications or joint applications with up to two applicants. Your co-applicant can be:

• A partner (married or de facto)
• A friend
• A family member

Both applicants must meet all eligibility requirements independently. This means both must be first-home buyers or not have owned property in Australia within the past 10 years. Each applicant must also be at least 18 years old and an Australian citizen or permanent resident.

The scheme previously restricted joint applications to married or de facto partners only. With unlimited places now available following the removal of annual caps, these expanded joint application rules provide more opportunities for buyers to enter the market together.

Owner-occupier and deposit requirements

Investment properties remain excluded from the scheme. Once you secure your home loan through participating first home guarantee banks, you must:

• Move into the property within 6 months of settlement (or after receiving an occupancy certificate for new builds)
• Continue residing there while your loan remains supported by the scheme

The minimum deposit requirement stays at 5% of the property's value. Here's what this means in practice:

• Sunshine Coast or Brisbane property worth $1 Million: minimum deposit of $50,000
• Sydney property worth $1.5 million: minimum deposit of $75,000
• Melbourne property worth $950,000: minimum deposit of $47,500

The scheme also requires you to contribute as much of your available savings as possible toward the deposit, based on your lender's policies and financial assessment.

One crucial limitation: if you've already saved 20% or more of the property's value after covering other purchase costs like stamp duty and legal fees, your home loan won't qualify for the scheme. This ensures the program assists buyers who genuinely need help overcoming the deposit barrier.

Which Banks Offer the First Home Guarantee

The Australian Government works with select financial institutions to deliver the First Home Guarantee scheme through authorised lending partners. Knowing which banks participate saves you time and helps streamline your application process.

List of major participating lenders

Three of Australia's "Big Four" banks currently offer the First Home Guarantee scheme:

• Commonwealth Bank of Australia
• National Australia Bank (NAB)
• Westpac

Beyond these major institutions, numerous smaller lenders across Australia provide access to the scheme:

• Australian Military Bank
• Auswide Bank
• Bank Australia
• Beyond Bank Australia
• Indigenous Business Australia
• MyState Bank
• People's Choice Credit Union
• Police Bank
• Teachers Mutual Bank
• Health Professionals Bank
• UniBank
• Regional Australia Bank
• QBank

This network ensures you have multiple options regardless of your location or existing banking relationships.

How to check if your bank is approved

Verifying your preferred financial institution's participation is simple. Most participating lenders maintain dedicated information pages about the First Home Guarantee.

Quick verification steps:

1. Check the Housing Australia website (www.housingaustralia.gov.au) for the official, current list of participating lenders
2. Contact your bank directly to confirm their participation
3. Speak with a mortgage broker who works across multiple lenders

Ready to find out which lenders can help with your First Home Guarantee application? Reach out to Synergy Mortgage Brokers for professional home loan services and expert advice on participating lenders.

Do all banks offer the scheme?

Not every financial institution participates in the First Home Guarantee scheme. The government has authorised approximately 30 lenders nationwide to deliver the program.

Housing Australia administers the scheme exclusively through these participating lenders. They won't accept direct applications from the public or maintain waiting lists for FHBG places. You must work with an approved institution to access the guarantee.

These participating lenders handle the entire process: assessing your eligibility, guiding you through loan options, submitting your application, and notifying you of approval status. Each maintains its own assessment criteria alongside the scheme's eligibility requirements.

Since only specific banks offer the scheme, understanding your options upfront makes your home-buying journey more efficient.

How to Apply Through an Approved Lender

Housing Australia doesn't accept direct applications from the public – you must work through approved lending institutions. Once you've confirmed your eligibility and identified participating lenders, here's your pathway to securing a place in the scheme.

Steps to apply with a participating bank

The application process follows a clear structure when working with First Home Guarantee Scheme lenders:

1. Check eligibility - Use the Eligibility Tool on Housing Australia's website to quickly assess if you qualify
2. Contact a participating lender - Reach out to an approved bank from the official list on Housing Australia's website
3. Reserve your guaranteed place - The lender will assess your eligibility and apply to Housing Australia, holding your place for 14 days while you complete your application
4. Complete your application - Work with your lender to provide all required documentation within the 14-day window
5. Receive pre-approval - After submission, you'll have 90 days to find a property and sign a contract of sale[201]
6. Complete purchase - Once you've found your home, your lender will manage final approvals and settlement

Need help navigating the First Home Guarantee application process? Contact Synergy Mortgage Brokers for professional home loan services and personalised guidance through every step.

Documents you'll need

Prepare these essential documents before approaching lenders for low-deposit home loans through the government guarantee scheme:

• Proof of citizenship or permanent residency
• Completed and signed the application form, including the privacy declaration
• Signed Home Buyer Declaration (Statutory Declaration)
• Evidence of your 5% deposit as genuine savings
• Verification of income and expenses (payslips, etc.)
• Evidence of funds to complete the transaction

Using a mortgage broker vs a direct application

You have two pathways for submitting your application to first-home guarantee banks: directly with a participating lender or through a mortgage broker.

Here's an interesting fact: although brokers handle more than three-quarters of all mortgages in Australia, they're currently the least popular channel for scheme applications. Only 28% of prospective first home buyers indicated they would use a broker for their application, while 36% planned to apply directly or visit a bank branch.

A mortgage broker can also maximise your borrowing capacity by matching your unique personal and financial circumstances with the lender that has the most suitable policies for your situation.

Direct application with a participating lender might better suit those who already have an established banking relationship or prefer dealing with one institution throughout the process.

Benefits and Considerations Before You Apply

The First Home Guarantee offers significant financial advantages, but understanding the full picture helps you make an informed decision about your property purchase.

Avoiding LMI and saving on interest

Skip the highest upfront cost of buying with a small deposit. For a property worth $1 million with a 5% deposit, you could avoid an upfront LMI premium of roughly $52,000. A great savings for Brisbane buyers. The savings extend beyond the initial premium – because LMI typically gets added to your loan balance, you'll also save on the interest you'd otherwise pay on that premium over your loan's lifetime.

Want to understand if the First Home Guarantee is right for your situation? Speak with Synergy Mortgage Brokers for professional home loan services and expert advice tailored to your circumstances.

Risks of low-deposit home loans for first-home buyers

Smaller deposits create larger loan amounts, which brings specific considerations. Borrowing 95% instead of 80% results in higher monthly repayments and potentially more interest paid throughout your loan term. Property price declines could also put you at risk of negative equity – owing more than your home's current value.

Lenders maintain strict assessment criteria regardless of the government guarantee. You'll need to demonstrate your capacity to manage these larger repayments before approval.

What happens if you move out or refinance

The government guarantee applies only while you live in the property as your primary residence. Converting your home to a rental property typically ends the guarantee, potentially triggering additional costs or LMI charges.

Refinancing options remain available, but with conditions. You can switch to another participating lender while keeping the guarantee, provided you maintain the same loan amount and term. However, refinancing with non-participating lenders will terminate the guarantee.

Conclusion

The First Home Guarantee Scheme opens doors that were previously closed to many Australian first-home buyers. The recent removal of annual caps and income restrictions means you no longer need to wait in line or worry about earning too much to qualify.

Here's what makes this scheme worth considering: you can enter the property market years earlier than traditional saving would allow, while avoiding the substantial cost of Lenders Mortgage Insurance. The expanded property price caps across Australian cities and regions mean that more homes are now within your reach.

Should you apply? That depends on your financial situation and long-term plans. Remember that borrowing 95% of a property's value means higher monthly repayments. You'll also need to live in the property as your primary residence to maintain the guarantee.

The application process is straightforward – choose from participating lenders, including Commonwealth Bank, NAB, and Westpac, or work with smaller institutions like Teachers Mutual Bank and Beyond Bank Australia. Whether you apply directly or through a mortgage broker, ensure you understand the requirements before starting.

The First Home Guarantee Scheme essentially fast-tracks your path to homeownership. Rather than spending years accumulating a 20% deposit, you can take action now with proper planning and the right lender partnership.

FAQs

Which banks participate in the First Home Guarantee Scheme?

Major participating lenders include Commonwealth Bank, National Australia Bank (NAB), and Westpac. Additionally, numerous smaller lenders such as Australian Military Bank, Beyond Bank Australia, and Teachers Mutual Bank offer the scheme. You can check the official list on the Housing Australia website or contact your preferred bank directly to confirm their participation.

How much deposit is required for the First Home Guarantee Scheme?

You need a minimum deposit of 5% of the property's value to be eligible for the scheme. For example, if you're purchasing a $500,000 property, you would need at least a $25,000 deposit. However, the exact amount may vary depending on your financial situation and the lender's assessment.

What happens if I move out of my property purchased under the scheme?

The government guarantee remains valid only while the property serves as your primary residence. If you convert it to a rental property, the guarantee typically ends, which may trigger additional costs or even Lenders Mortgage Insurance (LMI) charges. It's important to consider this before changing your living arrangements.

Can I use the First Home Guarantee Scheme alongside other government assistance programs?

Yes, you can use the First Home Guarantee Scheme in conjunction with other government assistance programs. This includes the First Home Super Saver Scheme, which helps boost your deposit through the concessionally taxed superannuation system, as well as state and territory first home owner grants and stamp duty concessions.

What are the main benefits of using the First Home Guarantee Scheme?

The primary benefit is the ability to purchase a home with just a 5% deposit without paying Lenders Mortgage Insurance (LMI). This can save you tens of thousands of dollars upfront and significantly reduce the time needed to enter the property market. Additionally, the scheme has recently removed income caps and increased property price thresholds, making it accessible to more first-time buyers across various income brackets and locations.