First Home Guarantee Scheme

In this article we will explain the First Home Guarantee (FHBG) Scheme and what is the home-buying process for a client(s).

What is the First Home Guarantee Scheme?

The First Home Guarantee Scheme is a government initiative aimed at helping first-time home buyers get into the property market sooner. It allows you to purchase a home with a deposit as low as 5%, without the need to pay for Lenders Mortgage Insurance (LMI). The government provides a guarantee of up to 15% of the property’s value, making up the difference between your deposit and the standard 20% deposit that most lenders typically require.

How Does It Benefit You?

1. Lower Deposit Requirement: Instead of needing a 20% deposit, you can secure a home loan with just a 5% deposit. For example, on a $500,000 property, instead of needing $100,000, you could purchase with as little as $25,000.
2. No Lenders Mortgage Insurance (LMI): Normally, if you have a deposit of less than 20%, lenders will require you to pay for LMI to protect themselves in case you default on the loan. With the First Home Guarantee, the government’s guarantee removes the need for LMI, potentially saving you thousands of dollars.
3. Faster Path to Home Ownership: Saving for a 20% deposit can take years, especially with rising property prices. This scheme allows you to enter the property market sooner, which can be crucial in a rapidly appreciating market.

Who is Eligible?

• First-Time Buyers: This scheme is specifically for individuals or couples purchasing their first home.
• Income Requirements: Your annual income must be within certain limits—$125,000 for individuals and $200,000 for couples.
• Property Value Caps: The property you want to purchase must fall within specific price caps, which vary based on location. These caps are in place to ensure the scheme is used for purchasing affordable homes, not luxury properties.
• Owner-Occupier: The home must be your primary residence. You can’t use this scheme to purchase an investment property.

How the Process Works

1. Determine Eligibility: The first step is to check if you meet the eligibility criteria, including income and property value limits.
2. Choose a Participating Lender: Not all lenders are part of the scheme. As your mortgage broker, I can help you find a participating lender that suits your needs.
3. Apply for a Loan: Once you’ve selected a lender, you can apply for a home loan. The lender will assess your application and, if approved, they’ll apply for the government guarantee on your behalf.
4. Government Guarantee: If everything checks out, the government will guarantee up to 15% of the loan amount, reducing your required deposit to 5%.

Important Considerations

• Limited Spots: The government limits the number of guarantees issued each year, so it’s important to act quickly if you’re eligible.
• Loan Repayments: While the scheme reduces your upfront costs, you’re still borrowing a significant amount, so it’s essential to ensure that you’re comfortable with the ongoing loan repayments.
• Property Selection: The price caps mean that you might need to be flexible about the location or type of property you purchase.

Next Steps

If you’re interested in the First Home Guarantee Scheme, we can start by reviewing your financial situation and determining your eligibility.

From there, I can guide you through the process of selecting a lender, applying for the loan, and securing the government guarantee.

This scheme is a fantastic opportunity for first-time buyers to get into the market with less financial strain, and I’m here to help you navigate it every step of the way.

Written by Juan Castano Quirama
Finance Broker
0434 309 884