FIRST HOME GUARANTEE SCHEME (FORMERLY THE FIRST HOME LOAN DEPOSIT SCHEME)
The First Home Guarantee Scheme, formerly the First Home Loan Deposit Scheme (FHLDS), has been designed to help eligible first home buyers get into the property market sooner.
What is the First Home Loan Deposit Scheme?
The First Home Guarantee (formerly First Home Loan Deposit Scheme) began on 1 January 2020. It allows eligible first home buyers to purchase a property with as little as a five per cent deposit and without the need to take out lenders mortgage insurance (LMI).
The Commonwealth Government guarantees the difference between what the eligible first home buyer has saved and the 20% deposit threshold lenders usually require before they’ll provide a loan without LMI.
For instance, if you have $45,000 to put towards a $500,000 home, the government would step in and guarantee the first $55,000 of your loan so that it brings your security up to $100,000, or 20% of the total value of the property, excluding government fees like stamp duty. In this sense, the First Home Loan Deposit Scheme has a similar effect to a family guarantee but with the government playing the role of guarantor over the loan instead of a family member.
While the scheme doesn’t offer a cash payment, the good news is that you can use it in conjunction with any other government grants, schemes, concessions and waivers you qualify for. For instance, any First Home Owner Grant or stamp duty concessions you qualify for in your State or Territory will still apply.
From 1 July 2022, the scheme will be expanded to 35,000 places per year, ongoing, for the purchase of both new and existing homes.
FHLDS New Home Guarantee
A temporary expansion of the FHLDS, known as the New Home Guarantee, was launched during the COVID-induced recession.
It works in the same way as the original scheme, but is limited to new homes only, allowing buyers to buy or build their first home with a deposit of as little as 5% without the need for lenders mortgage insurance (LMI).
10,000 places in the program were available in the 2020 and 2021 financial years.
What is a ‘new home’?
Eligible New Home Guarantee properties include:
- * newly constructed dwellings (e.g. whether a freestanding house, townhouse or apartment)
- * off-the-plan dwellings (e.g. whether a freestanding house, townhouse or apartment)
- * house and land packages
- * land and a separate contract to build a new home.
To be eligible, the borrower purchasing the newly built dwelling must be an eligible first home buyer. Owner builder constructions are ineligible under the New Home Guarantee.
To find out more about the New Home Guarantee, visit the National Housing Finance and Investment Corporation (NHFIC) website.
Am I eligible for the First Home Loan Deposit Scheme?
To be eligible for the scheme you must be an Australian citizen who’s over 18 years old. If you’re buying as a couple, it must be with your spouse or partner. You must also never have owned residential property previously in Australia, whether as an owner-occupier or investor. The eligibility criteria for the temporary New Home Guarantee is the same as the criteria for the FHLDS.
There are other requirements you’ll need to meet, when it comes to your salary, your home loan and the property itself. We’ve set these out in more detail below.
1. Property requirements
For the First Home Guarantee (formerly the First Home Loan Deposit Scheme), both newly-built and established properties qualify for the scheme.
For the ‘New Home Guarantee’ (NHG) eligible first home buyers need to build a new dwelling or purchase a newly built dwelling as opposed to an established property.
There are thresholds on the value of the property a recipient can purchase. These vary depending on which State or Territory you’re located in and whether you’re in a metropolitan or regional area.
These caps are reviewed annually by the NHFIC with the most recent thresholds set in July 2021.
First Home Guarantee (formerly First Home Loan Deposit Scheme)
| State or Territory | Capital city and regional centres | Rest of state |
| NSW | $800,000 | $600,000 |
| Victoria | $700,000 | $500,000 |
| Queensland | $600,000 | $450,000 |
| Western Australia | $500,000 | $400,000 |
| South Australia | $500,000 | $350,000 |
| Tasmania | $500,000 | $400,000 |
| Australian Capital Territory | $500,000 | – |
| Northern Territory | $500,000 | – |
New Home Guarantee
| State or Territory | Capital city and regional centres | Rest of state |
| NSW | $950,000 | $600,000 |
| Victoria | $850,000 | $550,000 |
| Queensland | $650,000 | $500,000 |
| Western Australia | $550,000 | $400,000 |
| South Australia | $550,000 | $400,000 |
| Tasmania | $550,000 | $400,000 |
| Australian Capital Territory | $600,000 | – |
| Northern Territory | $550,000 | – |
For the purposes of the scheme, a regional centre includes any centre with a population greater than 250,000. This includes the Gold Coast, the Sunshine Coast, Newcastle and Lake Macquarie, the Illawarra and Geelong. Some other regions have different thresholds.
2. Buying as a single or couple
You can qualify for the scheme as an individual buyer or as a couple. To be eligible as a couple, you need to be married or in a de facto relationship. Unfortunately, you’re not eligible if you’re buying with people you have a different relationship with, such as a parent or grandparent, sibling or friend
3. Salary threshold
If you’re purchasing a home on your own, you need to have earned $125,000 or less in the last financial year (as declared in your ATO Notice of Assessment) to qualify for the First Home Guarantee (formerly First Home Loan Deposit Scheme). If you’re purchasing as a couple, you must have had a combined taxable income of less than $200,000 in the last financial year.
4. How much deposit do you need to have saved?
To be eligible, you’ll need to have saved at least a 5% deposit. The government says these need to be ‘demonstrated savings’, which means you won’t be able to count any First Home Owner Grant money towards this amount.
5. Principal and interest loan
Your loan usually needs to be a principal and interest home loan for the entire period of the guarantee. The exception to this is if you’re taking out a loan over both vacant land and to construct a new home. In these circumstances, interest-only loans are eligible while your home is in construction.
Owner/occupiers only
Finally, the scheme is only open to owner-occupiers, so you’ll need to be purchasing the home to live in it.
How to apply for the First Home Loan Deposit Scheme?
New scheme places are released at the start of each financial year.
You must apply for the scheme through a participating lender, either directly or through a mortgage broker.
A full list of participating lenders can be found on the National Housing Finance and Investment Corporation’s (NHFIC) website.
To apply to the Scheme, you’ll be subject to the following eligibility criteria. You need to be able to provide documentation of your eligibility to secure your position.
Eligibility criteria includes:
- All applicants must be eligible First Home Buyers and must not have owned or had an interest in residential property (whether as an investment or owner occupied).
- Individual applicants must have earned less than $125,000 or $200,000 for couples in the last financial year (as evidenced on your ATO Notice of Assessment).
- Couples must be married or in a de facto relationship. Other persons buying together, including friends, siblings or a parent/child are not eligible.
- All applicants must be at least 18 years of age and have a valid Medicare card (or Defence ID).
- All applicants must be Australian citizens with either a valid Australian passport or proof of Australian citizenship. Permanent residents are not eligible.
- Applicants must have a deposit of between 5% and 20% of the property’s value.
- Your purchased property price must be within the property price threshold for the suburb and postcode. You can check the property price cap for your area using NHFIC’s online tool.
- On top of this, you should also bring any documents you would usually expect to take to your first home loan meeting. This includes proof of your current income and expenses, details of your employment status and information on any debts or credit cards.
Other things to look out for before applying for the First Home Loan Deposit Scheme
While the First Home Loan Deposit Scheme promises to help many eligible first home buyers onto the property ladder sooner, you still need to consider whether it’s right for you. This includes asking yourself the following questions.
- Are you currently employed? If you are not currently employed, you are not eligible for the scheme.
- Do you meet the lender’s credit requirements? Your home loan application will still be assessed like any other, which means you need to be able to meet the lender’s income and expenses requirements and have a sound credit history.
- Can you meet the repayments throughout the whole period? A smaller deposit usually means a larger home loan. And, remember, you won’t be able to switch to interest-only while you’re covered by the scheme. If your circumstances change you’ll still need to keep making the same repayments.
- Do you have genuine savings? If you can’t demonstrate you’ve saved at least five per cent of the value of the home, you may not qualify under the scheme at all, even though some lenders may still allow you to borrow.
- Can you afford stamp duty and other up front costs. You may still need to pay these amounts, even though some state and territory governments offer generous discounts for eligible first home buyers.
- Are there better alternatives? For instance, would you be better off saving towards a larger deposit and reducing the size of your home loan?
Alternatively, you may be able to turbocharge your savings so that you meet the 20% deposit threshold through the First Home Super Saver Scheme. And you may well also be entitled to a First Home Owner Grant to help you get to that point sooner.
Update from the 2022 Federal Budget
In the 2022 federal budget, the government announced an expansion of the Home Guarantee Scheme, with 50,000 places split across three separate programs – the First Home Guarantee (formerly the First Home Loan Deposit Scheme), the Family Home Guarantee, and a new program specifically targeting the regions, called the Regional Home Guarantee.
The First Home Guarantee (formerly the FHLDS) will have 35,000 guarantees per year, ongoing, from the 2022/23 financial year. This is up from 10,000 places per year.
The number of places in the existing Family Home Guarantee will double to 5,000 places per year, until June 2025, for eligible single parents with a deposit of as little as 2%, plus costs.
The newly announced Regional Home Guarantee includes 10,000 places per year for eligible buyers purchasing a new home in regional Australia, with a deposit of 5% or more, plus costs. It’s not limited to just first-home buyers, but applicants must not have owned a home for at least five years.
