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First Home Guarantee: 5% deposit, no LMI

The First Home Guarantee (FHG) is a federal scheme that allows eligible first home buyers to purchase a home with a 5% deposit without paying Lenders Mortgage Insurance. The government guarantees the remaining 15% of LVR, making the loan effectively an 80% LVR from the lender’s perspective. The scheme is heavily used - 35,000 places per year - and has a specific set of qualifying criteria.

The core rules

  • 5% minimum deposit in “genuine savings” held for at least 3 months
  • Income caps: $125,000 for singles, $200,000 for couples (applicants combined)
  • Property price caps: state-specific, updated annually (Sydney & regional NSW ~$900k, Melbourne ~$800k, Brisbane ~$700k, Perth ~$600k, Hobart ~$600k, Canberra ~$750k, Adelaide ~$600k, Darwin ~$600k; regional areas have lower caps)
  • First home buyer status: you nor your spouse have owned residential property in Australia previously
  • Owner-occupier intent: you must move in within 12 months and occupy for at least 12 months
  • Citizenship or PR: you must be an Australian citizen, with extension in 2022 to permanent residents

How it actually works at settlement

You apply through one of the 32 participating lenders (all big four plus most second-tier). The lender assesses you normally for an 80% LVR loan. The government guarantee covers the 15% LVR gap that would otherwise require LMI.

From your side, you save:

  • LMI premium that would have been $15k-$35k on a 95% LVR loan
  • Potential requirement for a higher deposit

The lender is legally required to offer you rates and terms equivalent to their 80% LVR product - so you benefit from the lower rate as well as avoiding LMI.

The 35,000 places and how they release

Places are released in two tranches: 27,000 per financial year under the standard FHG + 10,000 under the Regional First Home Buyer Guarantee (a separate scheme with the same mechanics but restricted to regional property purchases).

Applications are processed first-come first-served at the participating lender. In recent years, places have filled by Feb-May of the financial year; from June onwards, the scheme is typically full until the next 1 July.

Layering

FHG stacks with:

  • State-level stamp duty concessions
  • FHOG (if buying new build)
  • First Home Super Saver Scheme withdrawals

But: FHG does not stack with the Family Home Guarantee (which is a different scheme for single parents) or with LMI waivers offered by some lenders to specific professions.

Where people get tripped

Timing: lenders often reserve places on formal loan approval, not on pre-approval. Holding pre-approval doesn’t guarantee a place.

Property eligibility: the price cap is inclusive of the property, not your loan amount. Buying a $910k property in Sydney disqualifies you even if the loan amount is within scheme parameters.

Multiple applicants: if you are buying with someone who has previously owned property, the application fails. Both applicants must be first home buyers.

Regional vs metro: the Regional First Home Buyer Guarantee has different caps and different requirements than standard FHG. Don’t confuse the two.