Saving a 20% deposit is one of the biggest challenges for first home buyers in Australia. With property prices continuing to rise, many people feel locked out of the market while they try to save a large deposit.
The Australian Government introduced the First Home Guarantee to help eligible buyers purchase a home with just a 5% deposit, without paying costly Lenders Mortgage Insurance (LMI).
The program is part of the broader Home Guarantee Scheme, administered by Housing Australia.
Here’s how the scheme works and why it could help you buy your first home sooner.
What Is the First Home Guarantee Scheme?
The First Home Guarantee allows eligible first home buyers to purchase a property with a deposit as low as 5%.
Normally, lenders require a 20% deposit to avoid LMI. Under this scheme, the government guarantees up to 15% of the property value, allowing buyers to secure a home loan with a smaller deposit.
Importantly:
This means buyers can access a mortgage with a lower deposit and avoid paying LMI, which can often cost tens of thousands of dollars.
Example: Buying a $1,000,000 Property
| Scenario | Deposit | Loan | LMI |
| Traditional purchase | $200,000 | $800,000 | No |
| First Home Guarantee | $50,000 | $950,000 | No |
With the scheme, a buyer could potentially purchase the same property with $150,000 less upfront savings.
This is why many first home buyers are able to enter the market years earlier.
Do You Need to Repay the Government?
No! The government’s contribution is a guarantee, not a loan.
You only repay your mortgage to the bank, just like a normal home loan.
The guarantee only comes into effect if the borrower defaults and the lender suffers a loss.
Key Benefits of the First Home Guarantee Scheme
Purchase your first home with just 5% deposit instead of the traditional 20%.
LMI can cost $20,000–$40,000 or more depending on the property price.
Instead of waiting years to save a large deposit, buyers may purchase earlier.
The scheme allows buyers to use their maximum borrowing capacity without needing a large deposit.
Important Considerations
While the scheme offers major benefits, buyers should also understand:
Speaking with a mortgage broker can help ensure the loan structure suits your financial situation.
Who Is Eligible?
Eligibility typically includes:
Need some help with your home loan application? Contact our team at 168 Finance today, email your scenario to us at info@168finance.com.au.
