What is the First Home Guarantee Scheme?

The First Home Guarantee Scheme is designed to help eligible first home buyers own their first property sooner. It does this by making it possible for a buyer to purchase a home with a deposit as low as 5% without the need to pay for Lenders Mortgage Insurance.

The Scheme was introduced by the federal government in 2019 and it is administered by the National Housing Finance and Investment Corporation (NHFIC). It was previously called the First Home Loan Deposit Scheme but was renamed in the 2022 and the number of places available for scheme applicants in each financial year was also increased at that time from 10,000 to 35,000.

The scheme was also expanded in 2022 to provide support specifically for single parents. There are now also 10,000 Family Home Guarantees available for eligible single parents with at least one dependent child who have a deposit of as little as 2%.

2023 Changes to the Scheme

In the 2023 Budget, the Federal Government revealed that the First Home Guarantee Scheme will expand its definition of a couple to allow family members or two friends living together to access to scheme. Since 1st July 2023, “any two eligible individuals” can apply for the First Home Guarantee Scheme. The definition of single parent was also be expanded from that date to include legal guardians, including aunts, uncles and grandparents.

These new rules also apply to previous home buyers who have not owned a property in the past decade and the scheme has been expanded to include permanent residents, as well as Australian citizens.

How Does the Scheme Work?

The First Home Guarantee Scheme enables eligible first home buyers to purchase a home within a certain price range with a deposit of as little as 5% (or 2% for single parent applicants). The NHFIC guarantees up to 15% of the value of the property that is financed by a participating lender for single or couple applicant and up to 18% of the value for single parent applicants. Usually, without a deposit of 20% of the property value, home buyers must take out mortgage insurance which is a significant added expense.

Eligible borrowers can also use the First Home Guarantee Scheme in conjunction with other government programs, like the First Home Super Saver Scheme and each state and territories first homeowner grants and stamp duty concession schemes.

Eligibility Requirements

A number of requirements must be met to take advantage of the First Home Guarantee Scheme. Primarily applicants must be at least 18 years of age and be an Australian citizen or permanent resident. If this is the case, then the following further eligibility requirements apply:

1. Price Limits
The value of the residential property must not exceed the price caps that have been set by the government for each state and territory. In New South Wales the cap is set at $900,000. The cap represents the total value of the property and home buyers who are purchasing a house-and-land package need to be especially mindful of this, as they risk having their application rejected if the combined price of the house and land is over the maximum limit.

2. Property Types
There is flexibility in terms of the type of property able to be purchased under the scheme however it’s essential that the property is a residential one. Eligible residential properties include:
• an existing house, townhouse or apartment
• a house and land package
• land and a separate contract to build a home
• an off-the-plan apartment or townhouse

Applicants must also be the owner-occupiers of the residential property and investment properties are excluded from the scheme.

3. Relationship Status
Both singles and couples can benefit from the scheme. Previously, only couples were eligible for the First Home Guarantee if they are married or in a de-facto relationship. However, from 1 July 2023, other people buying together, including siblings or friends, will be eligible.

4. Loan Requirements
Loans under the First Home Guarantee require scheduled repayments of the principal and interest of the loan for the full period of the agreement. There are limited exceptions for interest-only loans, which mainly relate to construction lending.

5. Income Thresholds
A single person is eligible if they earn $125,000 per year or less, as are a couple who earns a maximum combined income of $200,000. Incomes must be as shown on the applicants the Notice of Assessment issued by the Australian Taxation Office.

6. Deposit Size
To be eligible for the scheme, the minimum deposit size is 5% of the total price of the property. A single parent with children can have a deposit of 2%. The maximum deposit size allowed is 20%.

Participating lenders

NHFIC has authorised a panel of 32 participating lenders to offer the scheme. The major bank lenders are the Commonwealth Bank and NAB, while some of the non-major lenders include Auswide Bank, Australian Military Bank, Bank Australia, Police Bank, Regional Australia Bank and Indigenous Business Australia.

If you want to know more about the First Home Guarantee Scheme or any Property Law issue or need advice or assistance with a property transaction, please contact one of our accredited property law specialists, John Bateman or Michael Battersby on 02 4731 5899 or email us at propery@batemanbattersby.com.au