The First Home Guarantee Explained — Without the Jargon
The First Home Guarantee lets eligible buyers purchase with a 5% deposit and no Lenders Mortgage Insurance. Here's what it actually means, who qualifies, and the catch nobody talks about.
The First Home Guarantee (FHBG) is one of the most talked-about schemes for first home buyers in Australia. But the way it's explained — usually by people trying to sell you something — often leaves out the important details.
Here's a plain-English breakdown.
What it actually is
The FHBG is an Australian Government scheme that allows eligible first home buyers to purchase a property with as little as a 5% deposit, without paying Lenders Mortgage Insurance (LMI).
Normally, if you have less than a 20% deposit, the lender requires you to pay LMI — insurance that protects the lender (not you) if you default. On a $600,000 property with a 5% deposit, LMI can cost $15,000–$20,000.
Under the FHBG, the government guarantees up to 15% of the loan value, which means the lender treats your 5% deposit as if it were 20%. You don't pay LMI.
Who qualifies
To be eligible (as of 2025), you generally need to:
- Be an Australian citizen or permanent resident - Be a first home buyer (never owned property in Australia before) - Earn under $125,000 as an individual or $200,000 as a couple - Purchase a property under the price cap for your state or territory (these vary — check the official NHFIC website for current figures) - Plan to live in the property (investment properties don't qualify)
The catch nobody talks about
The FHBG lets you buy with 5% down — but you're still borrowing 95% of the property value. That means:
Your repayments are higher. A larger loan means more interest over the life of the loan.
You have very little equity buffer. If property values drop, you could find yourself in negative equity (owing more than the property is worth).
You still need to save the deposit. 5% of $600,000 is $30,000 — plus stamp duty (unless exempt), conveyancing, and other buying costs. The total cash required is often $40,000–$60,000 even with the scheme.
How to apply
You don't apply directly to the government. You apply through a participating lender — your mortgage broker can help you identify which lenders participate and whether you qualify.
Places are limited and released each financial year. They can run out, so if you're eligible and ready to buy, don't wait.
The bottom line
The FHBG is a genuinely useful scheme for buyers who are ready to purchase but haven't reached a 20% deposit. It's not a shortcut to buying before you're financially ready — but for buyers who are ready, it can save tens of thousands in LMI costs.
Always check current eligibility criteria on the official government website (Home | First Home Buyers) and speak to a licensed mortgage broker about whether it's right for your situation.
Disclaimer: This article is for general educational purposes only and does not constitute financial, credit, legal or tax advice. Always consult licensed professionals for advice tailored to your circumstances.
