First Home Guarantee Scheme

The First Home Guarantee is an Australian Government initiative administered by Housing Australia as part of the broader Home Guarantee Scheme. The FHBG is specifically aimed at making it easier for eligible first home buyers to buy a property. It does this by helping them to avoid paying lenders mortgage insurance (LMI), even with a saved deposit as small as 5%.

The FHBG can be used by eligible first home buyers to help buy a number of different property types, including new homes, existing homes, townhouses, apartments and land packages. However, it’s for owner-occupied residential properties only – investment properties cannot be purchased using the FHBG.

If you successfully apply for the FHBG, the federal government will guarantee up to 15% of your proposed home loan amount. As successful applicants are required to have a saved deposit of at least 5%, the government guarantee ensures that FHBG recipients will have 20% of their home loan secured.

With 20% of their home loan secured via the FHBG, successful applicants won’t have to pay LMI, making their home loan repayments and their overall home loan costs lower.

There are limits on the purchase price of the property you’re looking to buy via the FHG, varying by state/territory. For first home buyers living in a state and not the ACT or the Northern Territory, there will also be different price caps for buying in a capital city or regional area versus buying elsewhere in the state.

Some regions may be excluded, instead being eligible for the Regional First Home Buyer Guarantee (RFHBG).

The property price caps for the FHG are as follows:

* The applicable regional centres are Newcastle and Lake Macquarie, Illawarra, Geelong, Gold Coast and Sunshine Coast.

Whether single or joint applicants, borrowers must be:

• Australian citizens or Australian permanent residents
• 18 years of age or older
• Be looking to purchase a home with a value under the relevant property price caps for their state and area
• Earning up to $120,000 as an individual or a combined $200,000 as joint applicants
• Applying through an authorised lender or a mortgage broker working as a representative of an authorised lender
• First home buyers, or previous house owners who haven’t owned or had an interest in property or vacant land in Australia in the last 10 years.

Eligible single parents or legal guardians with dependent children may instead want to apply for the Family Home Guarantee (FHG) if they’ve owned property in Australia in the last 10 years.

Note that for the purposes of assessing your sole or joint income, the lender will look at your most recent Notice of Assessment (NOA) from the Australian Taxation Office (ATO), showing your taxable income for the relevant financial year.

To apply for the First Home Guarantee, you’ll need to first be applying for a home loan with one of the federal government’s nominated participating lenders. The chosen lenders are:

• Australian Military Bank
• Australian Mutual Bank
• Auswide Bank
• Bank Australia
• Bankfirst
• bankSA
• BankWAW
• Bank of Heritage Isle
• Bank of Melbourne
• Bank of us
• Bendigo Bank
• Beyond Bank
• Border Bank
• Commonwealth Bank
• Community First Bank
• 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 Bank
• MyState Bank
• NAB
• Newcastle Permanent
• People’s Choice
• Police Bank
• QBANK
• Queensland Country Bank
• Regional Australia Bank
• St.George
• Teachers Mutual Bank
• The Mutual Bank
• UniBank
• Unity Bank
• Westpac.

You also have the option of applying through a mortgage broker acting as a representative of one of the approved lenders listed above.

The lender will largely handle the FHBG application for you as part of your regular application – you’ll just need to let them know up front that you’re wanting to apply.

Keep in mind that whichever lender you’re applying with, you’ll still need to meet their regular lending criteria – FHBG or not. The lender will conduct the same assessment of your finances either way, the only difference being the portion of your home loan that’s guaranteed.

A guarantor is someone (usually an immediate family member) who offers up some of the equity they’ve built up in their property as additional security against your home loan. While this can function in a similar way to the FHBG and help you avoid paying LMI by boosting your saved deposit, there are some risks.

If you default on your home loan repayments, your guarantor will have to make them on your behalf. This in turn could push them into mortgage stress, or even force them to sell their property. With this in mind, you’ll generally want to discuss the idea at length with your potential guarantor, to make sure you both understand the risks involved.

Have you considered downsizing your expectations? Looking at some slightly cheaper properties in your area could be a good idea if you’re having trouble being approved for a home loan. After all, even if the size of your deposit doesn’t change, it’ll be larger relative to a smaller loan size.

You could also try looking at properties in different postcodes, which may still offer what you’re looking for in a property at a lower cost.

At the end of the day, if you don’t have a guarantor and even the less ideal properties around are still beyond your means, you may decide simply to ‘knuckle down’ and save up a larger home loan deposit. This may be time-consuming and could require some prolonged lifestyle adjustments on your part, but it could be your most reliable bet.