First Home Guarantee Scheme: FHB With 5% Deposit & No LMI

First Home Guarantee Scheme: FHB With 5% Deposit & No LMI
First Home Guarantee Scheme

First Home Guarantee Scheme

The First Home Guarantee Scheme is designed to help first home buyers purchase a home with a small deposit of 5%.

By allowing eligible buyers to secure a home loan with a small deposit, the scheme makes home ownership more accessible.

This initiative, supported by the Australian Government, aims to reduce the financial barriers for first home buyers.

Importance for First Home Buyers

Buying your first home can be challenging, especially when saving for a large deposit. The First Home Guarantee Scheme (FHGS) eases this burden by reducing the deposit requirement, making it easier for you to enter the property market sooner.

This can be particularly beneficial in a competitive real estate market where property prices are rising.

How DotCapital Can Assist You?

At DotCapital, we understand the complexities of the home buying process. Our expertise in finance and mortgage broking allows us to guide you through every step of applying for the First Home Guarantee Scheme.

We offer personalised advice and support, ensuring you have the best chance of securing your first home. Our goal is to make the journey to home ownership as smooth and efficient as possible.

Call us on 03 8707 2892 or use this form to contact us.

What is the First Home Guarantee Scheme?

The First Home Guarantee Scheme is a government initiative aimed at helping first home buyers enter the property market. It allows eligible buyers to purchase a home with a deposit as low as 5%.

The government guarantees up to 15% of the loan, eliminating the need for lenders mortgage insurance (LMI).

This scheme was previously known as First Home Loan Deposit Scheme (FHLDS).

Purpose and Benefits of the Scheme

The main purpose of the First Home Guarantee Scheme is to make home ownership more attainable for first-time buyers. Key benefits include:

  • Lower deposit requirements, making it easier to save for a home.
  • No lenders mortgage insurance, which can save thousands of dollars.
  • Quicker access to the property market.

These benefits are designed to support Australians in achieving their home ownership goals sooner.

Key Features of First Home Guarantee Scheme

The First Home Guarantee Scheme offers several key features:

  • Eligibility: The scheme is open to Australian citizens who are first-time home buyers. Specific income and property criteria apply.
  • Deposit requirement: Buyers can secure a home loan with a deposit as low as 5%.
  • Government guarantee: The government provides a guarantee of up to 15% of the loan, eliminating the need for lenders mortgage insurance.
  • Property value limits: The scheme has property price caps, which vary depending on the location of the property.

These features make the First Home Guarantee Scheme an attractive option for many first home buyers.

Eligibility Criteria of First Home Guarantee Scheme

To be eligible for the First Home Guarantee Scheme, applicants must fulfil certain criteria aimed at prioritising those who need financial support the most.

Who is Eligible?

To qualify for the First Home Guarantee Scheme, applicants must meet specific criteria. Eligibility requirements include:

  • Residency: Applicants must be Australian citizens or permanent residence.
  • First home buyer: Only those purchasing their first home are eligible.
  • Age: Applicants must be at least 18 years old.
  • Deposit: Applicants must have a deposit of at least 5% of the property’s value.
  • Income for singles: Must have a taxable income of up to $125,000 per year.
  • Income for couples: The combined taxable income must not exceed $200,000 per year.
  • Loan approval: Applicants must be able to secure a home loan from a participating lender.

Maximum income thresholds for singles and couples are determined by ATO’s Notice of Assessment (NOA) for the previous financial year. You can download the NOA from your myGov account.

Property Criteria

Properties purchased under the First Home Guarantee Scheme must also meet certain criteria:

  • Residential property: The property must be a residential property suitable for living in. This includes houses, apartments, townhouses, and units.
  • Price caps: The property must fall within the price cap set for its location. These caps vary by state and region to reflect market conditions.
  • Owner occupied: The property must be intended for owner-occupancy. It cannot be used as an investment property.

By meeting these eligibility criteria, first home buyers can benefit from the support provided by the First Home Guarantee Scheme. This assistance can make the dream of owning a home more achievable.

Application Process

Applying for the First Home Guarantee Scheme involves several essential steps to ensure a smooth and successful application. It is crucial to understand each stage, from verifying your eligibility to submitting the required documentation.

Applying for the First Home Guarantee Scheme involves several key steps:

  • Check eligibility: Ensure you meet the scheme’s eligibility criteria, including residency, first home buyer status, income limits, and property criteria.
  • Prepare documentation: Gather necessary documents such as proof of income, identification, and evidence of your deposit savings.
  • Find a participating lender: Choose a lender that participates in the First Home Guarantee Scheme. Many major banks are part of the scheme.
  • Submit application: Work with your chosen lender to submit your application. They will guide you through the process and submit your application to Housing Australia.
  • Loan approval: If approved, you will receive a conditional loan approval.
  • Property purchase: Proceed with purchasing your chosen property, ensuring it meets the scheme’s criteria.
  • Finalise loan: Complete the loan process with your lender and settle on your new home.

Financial Considerations

When applying for the First Home Guarantee Scheme, it is essential to understand the financial aspects involved. These include the Loan-to-Value Ratio (LVR), the impact on lenders mortgage insurance, and various costs and fees associated with purchasing a home.

Understanding Loan-to-Value Ratio (LVR)

The Loan-to-Value Ratio (LVR) is an important factor when applying for the First Home Guarantee Scheme. LVR is the percentage of the loan amount compared to the value of the property.

For example, if you are purchasing a property worth $500,000 with a $25,000 deposit, your LVR would be 95%. The scheme allows for a high LVR by guaranteeing up to 15% of the loan, eliminating the need for lenders mortgage insurance.

Impact on Lenders Mortgage Insurance

One of the significant benefits of the First Home Guarantee Scheme is the potential savings on lenders mortgage insurance (LMI). LMI is typically required for loans with an LVR above 80%.

Under the scheme, the government guarantee can eliminate the need for LMI, saving you thousands of dollars. This makes it more affordable to enter the property market with a smaller deposit.

Costs and Fees Involved

When considering the First Home Guarantee Scheme, it’s essential to be aware of all associated costs and fees. These can include:

  • Loan application fees: Fees by the lender for processing your home loan application.
  • Property valuation fees: Costs for assessing the value of the property you wish to buy.
  • Legal & conveyancing fees: Expenses for legal services related to property purchase.
  • Stamp duty: A tax imposed on property transactions, which may vary by state and property value. Some first home buyers may be eligible for stamp duty concessions or exemptions.
  • Ongoing loan fees: Regular charges such as monthly or annual fees imposed by the lender.

Understanding these costs helps you budget effectively and ensures there are no surprises during the home buying process.

First Home Guarantee Scheme Participating Lenders

The First Home Guarantee Scheme is supported by a range of participating lenders across Australia. These lenders include major banks, credit unions, and non-major financial institutions. There are 40 lenders in total who support this scheme.

These lenders have partnered with Housing Australia to offer home loans under the scheme. Here are some lenders to consider:

  • Major banks: Major banks include ANZ, BankSA, NAB and Westpac.
  • Non-major banks: These include Auswide Bank, Bank Australia, Gateway Bank and IMB Bank.
  • Credit unions: Credit unions like People’s Choice and Teachers Mutual Bank also provide loans under this scheme.

When choosing a participating lender, it is important to compare the loan options, interest rates, and service offerings to find the best fit for your financial situation and home ownership goals.

DotCapital can assist you in selecting the right lender and guide you through the application process to maximise your chances of securing a home loan under the First Home Guarantee Scheme.

Downloadable Guides and Fact Sheets

Housing Australia has published the following guide and fact sheet about First Home Guarantee Scheme, you can download them from our website:

We offer a range of other guides and checklists to support you through the home buying process. Please contact us for more information.

Alternative Schemes for First Home Buyers

In addition to the First Home Guarantee Scheme, there are several other government initiatives designed to support first home buyers in Australia.

These schemes offer financial assistance, tax benefits, and other incentives to help you achieve your goal of owning your first home.

Below, we explore two of these options: the Victorian Home Buyer Fund and the First Home Super Saver Scheme. Both schemes address the challenge of saving for the initial deposit required for a home loan.

Victorian Home Buyer Fund

The Victorian Home Buyer Fund is a shared equity scheme that helps first-time buyers purchase a home in Victoria. Under this program, the Victorian Government contributes up to 25% of the purchase price, reducing the amount you need to borrow. Key features include:

  • Eligibility: Open to Australian citizens and permanent residents purchasing a home in Victoria, with certain income and property value limits.
  • Government contribution: The government’s share in the property can be bought out over time, allowing buyers to increase their equity gradually.
  • Repayment flexibility: Buyers are not required to make regular repayments towards the government’s share but must repay the contribution upon selling or refinancing the property.

First Home Super Saver Scheme

The First Home Super Saver Scheme (FHSSS) allows first-time buyers to save for a home deposit within their superannuation fund. This scheme provides tax advantages and potentially higher returns on savings. Key features include:

  • Eligibility: Available to first-time home buyers who meet the age and superannuation contribution criteria.
  • Tax benefits: Contributions to superannuation are taxed at a lower rate, and withdrawals for a home deposit also receive favourable tax treatment.
  • Savings cap: Buyers can withdraw up to $50,000 of voluntary contributions, along with associated earnings, to use towards a home deposit.

These government schemes provide valuable support for first-time home buyers, offering different benefits and options to help you achieve home ownership.

Other government schemes include state based First Home Buyer Grants and Stamp Duty Exemptions and Concessions.

How We Can Help You Secure the Guarantee?

At DotCapital, we specialise in helping first home buyers navigate the complexities of the First Home Guarantee Scheme. Our team of experienced mortgage brokers provides personalised guidance throughout the entire process.

From initial eligibility checks to submitting your application, we ensure you meet all requirements and maximise your chances of approval.

Call us on 03 8707 2892 or click the button below to apply for a pre-approval.

FAQs About First Home Guarantee Scheme

Navigating the First Home Guarantee Scheme can raise many questions for first-time home buyers. To help you better understand the scheme and its benefits, we have compiled a list of frequently asked questions.

What is the First Home Guarantee Scheme?

The First Home Guarantee Scheme is a government initiative that allows eligible first home buyers to purchase a home with a deposit as low as 5%, with the government guaranteeing up to 15% of the loan.

Who is eligible for the First Home Guarantee Scheme?

Australian citizens and permanent residents who are first home buyers, aged 18 or older, with a taxable income of up to $125,000 for singles and $200,000 for couples, are eligible. The property must also meet certain criteria.

What types of properties are eligible?

The scheme applies to residential properties, including houses, apartments, townhouses, and units. The property must be intended for owner-occupancy and fall within the scheme’s price caps.

How do I apply for the First Home Guarantee Scheme?

You need to apply through a participating lender or a mortgage broker. The process involves checking your eligibility, gathering required documents, and submitting your application through the lender.

Do I need lenders mortgage insurance (LMI)?

No. With the First Home Guarantee Scheme, the government guarantee eliminates the need for lenders mortgage insurance, potentially saving you thousands of dollars.

Can I use the scheme with other first home buyer incentives?

Yes, the First Home Guarantee Scheme can be used in conjunction with other incentives such as the First Home Super Saver Scheme and state-based first home buyer grants, subject to eligibility.

What are the property price caps?

Property price caps vary by state and region to reflect local market conditions. It’s important to check the specific price caps for your area to ensure your chosen property qualifies.

What happens if my application is unsuccessful?

If your application is unsuccessful, you can review the reasons with your lender or mortgage broker. You may need to address specific issues or reapply once your circumstances have changed.

Can I apply if I have previously owned property overseas?

The scheme is specifically for those who have not previously owned property in Australia. If you have owned property overseas, you may still be eligible, but it’s best to confirm with your lender or a broker.

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