06 Aug What Is the First Home Guarantee Scheme and How Does the 5% Deposit Work?
Saving a full 20% deposit can feel like an impossible task for many first home buyers, especially in a market like Hurstbridge where property prices continue to climb. The First Home Guarantee is a government initiative designed to change that, allowing eligible buyers to purchase a home with as little as a 5% deposit, without paying Lenders Mortgage Insurance (LMI).
Understanding how the scheme actually works can help you decide whether it’s the right pathway to home ownership for you.
What Is the First Home Guarantee Scheme?
The First Home Guarantee is a federal government scheme that allows eligible first home buyers to purchase a property with a deposit as low as 5%, rather than the traditional 20%. Normally, borrowing more than 80% of a property’s value means paying LMI, a cost that protects the lender rather than the buyer.
Under the scheme, the government acts as a guarantor for the difference between your deposit and the standard 20% threshold. This means you can avoid LMI entirely, even with a smaller deposit, provided you meet the eligibility requirements.
How Does the 5% Deposit Work in Practice?
With a 5% deposit, you’re borrowing a larger portion of the property’s value, which means your loan repayments will be higher than if you’d saved a 20% deposit. However, the savings on LMI can be substantial, often tens of thousands of dollars depending on the purchase price.
For buyers looking into first home buyers loans in Hurstbridge, this can make a real difference to how quickly you’re able to enter the market. Rather than spending years saving an additional 15%, you may be able to purchase sooner while still avoiding one of the biggest upfront costs associated with a low-deposit loan.
Who Is Eligible for the First Home Guarantee?
Eligibility depends on several factors, and not every buyer or property will qualify. Generally, you’ll need to meet requirements around:
- Income thresholds, which vary for individuals and couples
- Property price caps, which differ depending on location
- Being a first home buyer or not having owned property previously
- Intending to live in the property as your primary residence
- Being an Australian citizen or permanent resident
Places under the scheme are also limited each financial year, so availability can vary depending on when you apply.
What Other Costs Should You Still Budget For?
While the First Home Guarantee removes the cost of LMI, it doesn’t cover every expense involved in buying a home. Buyers should still budget for:
- Stamp duty, though concessions may apply depending on the purchase price
- Conveyancing and legal fees
- Building and pest inspections
- Loan application and settlement fees
- Moving costs
In areas like Hurstbridge, where many properties sit on larger blocks, inspections covering septic systems and bushfire attack level (BAL) ratings can be a worthwhile additional cost to factor into your budget.
Is the First Home Guarantee the Right Choice for You?
For many buyers, the ability to purchase sooner while avoiding LMI outweighs the trade-off of higher repayments. It can mean getting into the Hurstbridge market before prices rise further, rather than waiting years to save a larger deposit.
That said, a bigger loan means your financial position needs to be strong enough to comfortably manage repayments, even if interest rates change. Speaking with experienced home loan brokers in Hurstbridge can help you work out whether the scheme suits your circumstances.
MBG Services is Here to Help
If you are considering buying your first home in Hurstbridge with a 5% deposit, speak with MBG Services today. We can assess your eligibility for the First Home Guarantee and help you find a loan solution that suits your situation. Call 03 9492 4860 to get started.