First Home Guarantee: how the federal scheme actually works

The federal Home Guarantee Scheme lets eligible buyers buy with a small deposit and skip Lenders Mortgage Insurance. Here's how the three streams work and where to verify current settings.

The Home Guarantee Scheme is the federal program that lets eligible Australian buyers purchase a home with a small deposit (5% in most cases, 2% for some single parents) without paying Lenders Mortgage Insurance. The Commonwealth, via Housing Australia, guarantees the gap between the buyer's deposit and 20% of the property value — so the lender treats the loan as low-LVR for capital purposes and waives LMI.

This guide explains how the mechanism works in practice. The exact income caps, place numbers and property price caps change each financial year — always verify current settings on the [Housing Australia website](https://www.housingaustralia.gov.au/) before relying on a number for an application.

The three streams

The scheme is administered as three separate streams under the same statutory framework:

- **First Home Guarantee (FHBG)** — for first-home buyers buying any home (new or established). 5% minimum deposit. - **Family Home Guarantee (FHG)** — for single parents or single legal guardians of dependents. 2% minimum deposit. Doesn't require first-home-buyer status — you can have previously owned property. - **Regional First Home Buyer Guarantee (RFHBG)** — same eligibility as FHBG but specifically for regional purchases (postcodes outside the capital city statistical areas).

Place numbers refresh on 1 July each financial year. Each stream has its own annual cap. When the caps fill, no further guarantees are issued under that stream until the next financial year — which is why brokers usually try to lodge applications shortly after the new financial year starts.

How the no-LMI mechanism actually works

The buyer takes out a normal loan from a participating lender (Commonwealth Bank, NAB, Westpac, ANZ and around 30 others — Housing Australia publishes the [participating lender list](https://www.housingaustralia.gov.au/sites/default/files/2024-06/HGS-Participating-Lenders.pdf)).

The Commonwealth, via Housing Australia, guarantees the portion of the loan above 80% LVR. From the lender's capital-allocation perspective, the loan is treated as if the buyer had a 20% deposit — so the lender doesn't need to require LMI.

The buyer still owes the full loan amount. If the buyer defaults and the property sells for less than the loan balance, the Commonwealth pays the lender's shortfall and then has a debt against the buyer for that amount. The buyer's protection is identical to any other home loan; the LMI saving is the only structural difference.

Eligibility — the rough shape

The criteria across the streams have a common backbone:

- Australian citizen (Housing Australia confirms permanent residents are eligible for some streams; check current rules). - Aged 18+ at settlement. - Income under stream-specific caps (FY25 settings: $125K single, $200K combined for FHBG / RFHBG; $125K combined for FHG). - Intent to live in the property as principal place of residence. - Property price under the regional/metro cap for the relevant location.

Property price caps differ by stream and by region. They're indexed annually and can be checked directly on the [Housing Australia caps page](https://www.housingaustralia.gov.au/support-buy-home/property-price-caps).

What you should do

If a low-deposit purchase is on the table:

Confirm eligibility against the current rules on housingaustralia.gov.au — specifically the income cap, your residency status, and the property price cap for your target suburb. The participating lender list is also worth checking — not every bank participates in every stream.

Get a credit-assessed pre-approval through a participating lender before you bid. The scheme requires the lender to have an unconditional guarantee allocation reserved against your application, so the application paperwork is slightly different from a standard pre-approval.

Read the [scheme guidelines](https://www.housingaustralia.gov.au/support-buy-home/first-home-guarantee) yourself before you commit. Brokers and lenders shorthand the eligibility rules constantly — when you're putting your name on a contract, the source-of-truth document is on Housing Australia's site.