It’s pretty exciting when you get to that stage in your life when you’re ready to buy your first home in Australia. That said, there is a lot more admin and finance preparation for this in comparison to just renting – especially for getting a home loan.
You might have heard people talk about “first home buyer loans.” Technically, there isn’t a separate type of mortgage just for first-timers – banks mostly offer the same kinds of home loans to everyone. What makes a loan a “first home buyer loan” is really the context and the special assistance programs that first-time buyers can access.
So essentially, it’s a regular home loan, but you might be eligible for government-backed schemes that make it easier to qualify or reduce some of the costs when buying your first home. But these little measures can make a big difference if you don’t have a huge deposit saved up.
First Home Guarantee: How It Works
One of the key government programs for new buyers is the First Home Guarantee. It’s designed to help you get into a home with a much smaller deposit than you’d normally need.
Saving up the ideal 20% deposit can take years for most first-timers (and in the meantime, property prices might keep rising). So that’s where this scheme comes in, because it gives you a head start so you can buy sooner. Normally, if you have under a 20% deposit, you’d need to pay Lenders Mortgage Insurance (LMI) to protect the lender. Under the First Home Guarantee, eligible buyers can purchase a home with as little as 5% deposit and no LMI to pay.
How is that possible? Essentially, the government (through an agency called Housing Australia) acts as a guarantor for part of your loan to make up the difference. Housing Australia guarantees up to 15% of the property’s value to the lender, so your 5% deposit plus the guarantee effectively looks like a 20% deposit to the bank.
This reduces the bank’s risk and means they won’t charge you mortgage insurance. However, you need to keep in mind that this guarantee isn’t a cash payment or a freebie – you still need to provide at least 5% of the price from your own savings. But not having to reach a full 20% can shave years off the time you’d spend saving, and avoiding LMI could save you thousands of dollars.
Eligibility and Requirements
Because the First Home Guarantee involves the government helping out, there are going to be some strings attached. It targets people who genuinely need the leg up, so not everyone can use it.
To be eligible, you must be a first home buyer (or someone who hasn’t owned property in Australia in the last ten years), and you need to intend to live in the home you’re buying – the scheme isn’t for investment properties.
You can apply as an individual or as two people jointly (the two applicants don’t even have to be married – friends or siblings can team up under this scheme now). You also have to be at least 18 years old and an Australian citizen.
Income Caps
There are income caps too: currently around $125,000 per year for a single, or up to $200,000 combined for two people buying together. These limits make sure the assistance goes to low- and middle-income earners.
Additionally, the property’s price has to be under a certain threshold, which depends on where you’re buying (higher in expensive city markets like Sydney and lower in regional areas).
Availability
The scheme supports only a limited number of loans each year (for instance, 35,000 places were available in 2024-25, although this could change in the future), so there can be competition to get a spot.
You don’t apply to the government directly – instead, you apply for a regular home loan through a participating lender, and the lender handles the paperwork to get the guarantee for you. You can also use the First Home Guarantee alongside other help, like the First Home Owner Grant or the First Home Super Saver Scheme, if you’re eligible for those programs. Using multiple programs together can further reduce the upfront money you need.
Lastly, it’s worth noting that the government also offers a Family Home Guarantee (for eligible single parents, allowing a 2% deposit) and a Regional First Home Buyer Guarantee (for first home buyers in regional areas). These have specific criteria but the idea is fairly similar – a government guarantee to reduce the deposit needed. Still, the First Home Guarantee is the primary option for most first home buyers.
First Home Buyer Loan vs Standard Loan
For the most part, taking out a loan under the First Home Guarantee feels a lot like a normal home loan. You borrow from a bank, you have an interest rate and regular repayments – all that stays the same. The differences come in behind the scenes.
Standard Loans
With a standard loan, if you only have a 5% deposit, you would normally have to pay LMI or get a family member to guarantee your loan. With the First Home Guarantee, the government is stepping in as the guarantor, which spares you that LMI cost.
Another difference is the extra rules: a regular home loan doesn’t care whether you’re a first-time buyer or how much you earn (beyond ensuring you can afford the repayments), and it won’t impose a price cap on the property.
First Home Guarantee Loans
In contrast, a loan under the First Home Guarantee does come with those eligibility conditions and property value limits. Also, as mentioned earlier, it’s only for buying a home to live in – you can’t use the scheme for an investment property or a holiday house.
In terms of the deal you get from the bank, the interest rate and features for a First Home Guarantee loan are typically the same as you’d get on an equivalent loan without the guarantee. The scheme doesn’t give you a special lower rate by itself; its benefit to you is mainly that it helps you buy sooner and avoid extra costs.
Making Your First Home Purchase Easier
If you’re gearing up to buy your first home, it’s worth exploring all available support. The First Home Guarantee can be a real game-changer if you qualify. Remember, though, you still have to meet the lender’s criteria and budget for the normal home-buying expenses (like stamp duty, legal fees, inspections, etc.).
Every bit of preparation helps when it comes to making a strong loan application. And you should still shop around for a competitive interest rate and a loan that suits your needs, just as you would with any mortgage.
How Upscore Can Help
Upscore’s Finance Passport can help you compare different offers from mortgage lenders and shop around so you’re able to get the best mortgage possible for your circumstances. In a competitive market, that can give you an edge.
