- Changes include the removal of place caps and income caps, as well as a significant increase in property price caps.
- As a result of the broadening of the scheme, the Regional Home Guarantee is defunct.
- The government says this will unlock and make-accessible a much wider array of properties for many more first home buyers, and in isolation only contributes a modest amount to property prices rising.
- Cotality estimates close to two-thirds of property markets Australia-wide will now be accessible, up from around a third.
- However critics say this is poorly timed in light of supply constraints, and that it will only serve to boost demand further without actually addressing affordability concerns.
Initially cooked up in 2020 by the Morrison Government, the Home Guarantee Scheme has evolved a bit over the years but the core remains: It allows first home buyers to enter the market with a 5% deposit without paying lenders mortgage insurance, or LMI. There is also an offshoot program called the Family Home Guarantee that allows single parents to buy a home with as little as 2% deposit without paying LMI.
LMI is often a significant cost for mortgage applicants who have less than a 20% deposit. It's because the lender deems those without a 20% deposit are riskier borrowers - and the insurance policy covers the lender in case the borrower defaults. However, with this program the government guarantees up to 15%.
The Scheme is provided by the government department called Housing Australia. This sits in the portfolio of Housing Minister Clare O'Neil (pictured above). So, how does it work, and what are the finer details?
Home Guarantee Scheme Explained
The main scheme offers first home buyers the ability to purchase a home with a deposit as low as 5%, without the need to pay Lenders Mortgage Insurance (LMI).
Aspiring home owners are eligible to borrow up to 95% of the property value, with the Federal Government providing participating lenders with a guarantee of up to 15% of the property's value.
The properties available for purchase using the HGS are fit for residential owner occupier purposes only. This means investors are ineligible for the HGS. Eligible residential properties include:
-
An existing house, townhouse or apartment
-
A house and land package
-
Land and a separate contract to build a home
-
An off-the-plan apartment or townhouse
Unlike many state government-based grants, this Scheme is much more liberal with which properties you can buy; many state grant schemes limit home buyers to new properties.
The Family Home Guarantee
The FHG supports eligible single parents with at least one dependent child to buy a home, with a deposit as little as 2%. 5,000 guarantees will be made available each financial until 30 June 2025 to help single parents purchase a property with as little as a 2% deposit without having to pay lenders mortgage insurance (LMI).
Unlike the main guarantee where a 5% deposit is required, the FHG requires a deposit of as little as 2% to be eligible.
How to apply for a home loan under the Home Guarantee Scheme
To apply for a HGS home loan, you must meet eligibility criteria outlined by Housing Australia and make an application through bank or lender that is participating in the scheme.
Eligible home buyers under the scheme include the following:
-
Australian citizens and permanent residents (all guarantees) aged over 18
-
First home buyer in the case of the main Home Guarantee, or not currently having a property interest in the case of the Family Home Guarantee
-
Single applicants; married or de-facto couples; joint applicants i.e. friends, siblings, and other family members
-
Single natural, adoptive parents, or single legal guardians of at least one dependent (for the Family Home Guarantee). Separated but not divorced doesn't count
-
Savings & Financial Information
Requests for your financial information - as is the case with normal home loan applications - will come from the bank in which you apply.
They will ask for the usual financial information such as payslips and bank statements for not just serviceability but also eligibility with the scheme. However as of 1 October 2025, no income caps apply, which also negates the need for an income notice of assessment from the ATO/your employer.
Eligibility of the Scheme is also typically predicated on you having less than 20% of the home's value in savings. What this means is that if you have more than 20%, with extra saved for a rainy day, you could be ruled ineligible. This makes it an additional consideration if you are also saving money for stamp duty.
What are the property price caps for the Home Guarantee Scheme?
Property price caps refer to the maximum purchase prices for eligible properties purchased under the Home Guarantee Scheme (HGS).
Importantly, property price caps will vary depending on the financial year that you take up the scheme and where the property is located. Below you will find the latest price cap information provided by Housing Australia.
|
Location |
Property Price Cap effective 1 October 2025 |
|---|---|
|
Sydney, Illawarra, Newcastle, Lake Macquarie |
$1,500,000 |
|
NSW - other |
$800,000 |
|
Melbourne, Geelong |
$950,000 |
|
VIC - other |
$650,000 |
|
Brisbane, Gold Coast, Sunshine Coast |
$1,000,000 |
|
QLD - other |
$700,000 |
|
Perth |
$850,000 |
|
WA - other |
$600,000 |
|
Adelaide |
$900,000 |
|
SA - other |
$500,000 |
|
Hobart |
$700,000 |
|
TAS - other |
$550,000 |
|
ACT |
$1,000,000 |
|
NT |
$600,000 |
|
Jervis Bay Territory and Norfolk Island |
$550,000 |
|
Christmas Island and Cocos (Keeling) Islands |
$400,000 |
Which Banks & Lenders Participate in the Home Guarantee Scheme?
To take part in the 2-5% deposit scheme you will need to choose an appropriate product from the participating panel of lenders, detailed below:
- Westpac
-
Border Bank
-
Indigenous Business Australia
-
Queensland Country Bank
-
Bank WAW
Compare low-deposit home loans
Compare low-deposit home loans - not necessarily just those participating in the Home Guarantee Scheme - in the table below.
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.29% p.a. | 5.33% p.a. | $2,773 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.29% p.a. | 5.46% p.a. | $2,773 | Principal & Interest | Variable | $null | $null | 90% | |||||||||||||
5.20% p.a. | 5.20% p.a. | $2,746 | Principal & Interest | Variable | $0 | $0 | 90% | |||||||||||||
5.54% p.a. | 5.57% p.a. | $2,852 | Principal & Interest | Variable | $0 | $845 | 90% | |||||||||||||
5.89% p.a. | 6.16% p.a. | $2,962 | Principal & Interest | Variable | $null | $null | 98% | |||||||||||||
5.24% p.a. | 5.70% p.a. | $2,758 | Principal & Interest | Variable | $0 | $530 | 90% |
| Disclosure |
Can I use the Home Guarantee Scheme with other government grants?
As the HGS is an Australian Federal Government initiative, home buyers may also be eligible to receive state government grants.
State government grants are typically titled First Home Owner Grants (FHOG), yet eligibility and availability of the grants varies from state to state. First home buyers can head to this state government website to determine if the state or territory to be called home offers the FHOG and eligibility criteria to receive this grant.
In addition, stamp duty concessions may also be available to first home buyers depending on the state. Stamp duty is one of the most significant upfront expenses when purchasing a home, therefore state-based reductions can help with the overall cost of purchasing your first home.
Shared Equity and Home Guarantee Schemes
An advent over the past few years has been state governments offering their own shared equity programs. These promote access to homeownership via the state government providing an equity stake in your home - which makes the deposit hurdle easier - in return for a proportionate return in capital gains.
As both shared equity schemes and the Home Guarantee Scheme interact with your deposit, they are generally unable to be used together. Such a move would be like giving Thanos the sixth Infinity Gem of homeownership domination.
What are the risks of a small deposit home loan?
Unlike other government-based homebuyer support, the Home Guarantee Scheme seems one with few downsides. However the fundamentals remain: There are more risks associated with small-deposit home loans.
You will have to weigh these up against taking longer to save the full 20%.
Higher repayments
First-timers with a small deposit will ultimately pay more interest as they have less equity than the same property value with a bigger deposit.
You can use our home loan repayment calculator to find out how different deposit sizes affect your repayment.
Higher interest rates and less choice
Home loans requiring only a 5% deposit might also have higher interest rates. While it is possible to refinance, this is generally only recommended if you have at least 20% equity. If interest rates rise, and your equity is less than 20%, you might be stuck in a 'mortgage prison' where you're paying a higher rate yet unable to do anything about it.
Further, not all lenders offer 5% deposit home loans, and participating Scheme lenders might only have one or two products available. The Australian banking landscape comprises of around 100 entities - there are fewer than 40 participants in the Scheme, and many are sub-brands e.g. Teachers Mutual owns Firefighters Mutual.
Promotes maxing out borrowing power
The fact is you have more borrowing power if you don't need to pay LMI and can use more leverage to get into the home of your dreams.
While banks will still apply stress tests and determine your ability to service the loan, the Scheme arguably promotes reaching just a bit further to get a better home.
For example, a $1.5 million property in Sydney would ordinarily require a $300,000 deposit to avoid LMI. Now that's only $75,000. You'll also still be on the hook for stamp duty.
Borrowing $1,425,000 at a 5.5% p.a. interest rate over 30 years results in a $8,091 monthly repayment, which to avoid mortgage stress, requires a monthly income of nearly $27,000.
Banks often don't pay too much mind to mortgage stress provided you can service life's necessities as measured by the Household Expenditure Measure or HEM. This could still be a squeeze on the finances.
And if every first home buyer now has extra borrowing power, this increases competition for properties, which puts question marks on the overall viability of the scheme if affordability doesn't actually improve.
Less cushion
Because they have less equity, in the event of a sudden price drop, homebuyers could find themselves in negative equity. Negative equity is when the amount of outstanding mortgage on a property is higher than the property value.
While not a liability in itself, if you fall on hard times and need to sell the home, you could find yourself getting less than the loan is worth.
Other restrictions
There are typically restrictions with how you use your cash savings. For example, you might have the equivalent of more than 20% of the home's value saved up, but want to keep some for a rainy day or another purpose. In this case, you might be ruled ineligible for the scheme.
This might also affect the viability of using an offset account until you've built up enough cash savings.
Under the Scheme you'll also be required to be an owner occupier, not an investor, and also pay principal & interest (P&I) - interest-only is allowed only in some scenarios.
Your maximum mortgage timeframe will also be 30 years.
