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Buy a house with only 5% deposit? Yes, it’s possible with the First Home Guarantee Scheme (FHBG)

Buyers are ignoring the advice it can take years to save for their first home deposit. Instead, they’re taking advantage of government schemes – like the First Home Guarantee Scheme (FHBG) – which allows first home buyers to get into the property market with as little as 5% deposit.

National Housing (previously the National Housing, Finance and Investment Corporation – NHFIC), which runs the federal government guarantee schemes, reports that in 2022/23, almost one-in-three first home buyers tapped into these schemes.

When you’re borrowing more than 80% of the property price/property value (i.e. you don’t have 20% deposit), a lender will typically charge you Lenders Mortgage Insurance (LMI). However, under a FHBG loan, because a portion of the loan is guaranteed by the government, eligible buyers can borrow up to 95% of the property price/property value without having mortgage insurance added to their loan.

FHBG loans are helping first time buyers get into the market sooner and in some cases, enabling buyers to purchase property for a higher price than otherwise achievable. Eligible buyers are able to buy property with smaller deposits, resulting in larger loans which has attracted some criticism.

Data from National Housing suggests this hasn’t been a problem though, with less than 0.1% of homeowners using the schemes falling behind on their loan repayments. This figure is less than the market average for all buyers with a low deposit loan.

In addition, more than 12% of total guarantees issued to date have already transitioned out of the scheme, with most of these buyers having accumulated enough equity to achieve a Loan-to-Value Ratio (LVR) of less than 80%.


Are you eligible for the First Home Guarantee Scheme (FHBG)?

To be eligible for the FHBG, you need to satisfy the following:

  • You are an Australian citizen or permanent resident
  • You’re at least 18 years old
  • You’re purchasing a property to move into, as an owner occupier residence
  • You are a first home buyer or a previous homeowner who hasn’t owned property in Australia for the past ten years
  • You’re looking to purchase a property for up to $750K (each state has their own price cap – check your state here)
  • You can demonstrate you have 5% deposit (some lenders have additional requirements around this)
  • If you’re applying as a couple, your combined Taxable Income for 2022-23 needs to be less than $200K. For a single applicant, your 2022-23 Taxable Income needs to be less than $125K
    • This is evidenced by your 2023 ATO Notice of Assessment/s, which means you need to have completed and lodged your Individual/s 2023 Tax Return.

Even if you can satisfy the criteria above, you still need to be able to secure a spot in the scheme. Approved FHBG lenders are allocated a number of spots, which they then distribute to eligible borrowers throughout the year. It all depends on the demand for FHBG loans with approved lenders at the time you wish to apply.

In addition to securing a FHBG spot, you must also qualify for the loan itself. This means you must demonstrate you can meet the repayments on the proposed loan and satisfy credit policies of the specific lender you’re applying with. (We can help you with this part!)


How does it work?

Reserving a spot in the FHBG typically occurs at the same time you lodge a pre-approval application. If everything goes according to plan, once you have confirmation your loan is pre-approved, you’ll also receive confirmation that you’ve reserved a spot in the FHBG. Once these two milestones have occurred, you’re good to start house hunting.

To see if the FHBG might be able help you purchase your first home sooner, please give us a call on 02 6286 6501 or get started here.



The information presented here was accurate at the date of posting (23 October 2023). To confirm eligibility for the First Home Guarantee Scheme against current criteria – which may or may not have changed – please refer to information provided here. 


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