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5% Deposit, No LMI: The Home Guarantee Scheme Explained

Eligible first home buyers can now purchase with just 5% deposit and no Mortgage Insurance (LMI), using a government guarantee backed by the scheme.

What is the Home Guarantee Scheme?

The Home Guarantee Scheme (HGS), previously called the First Home Loan Deposit Scheme, allows eligible first home buyers to purchase a property with just a 5% deposit. Instead of paying Mortgage Insurance (LMI), a government guarantee sits behind the loan, protecting the lender if you default.

Key advantage: You save the LMI premium (typically $20,000–$40,000), which can be the difference between affording a home now or waiting years to save.

Who is eligible?

  • First home buyer: You haven't owned residential property in Australia in the past 12 months
  • Australian citizen or permanent resident
  • Maximum household income: Usually around $120,000–$180,000 (varies by state and scheme year)
  • Scheme place availability: The government releases limited places each year
  • Lender approval: Not every lender participates; must be approved by a HGS-participating bank

How the Home Guarantee Scheme works

Step 1

Check eligibility

Confirm you're a first home buyer, meet income limits and lender criteria.

Step 2

Apply for a scheme place

Apply through the government's online portal. Approved applicants get a confirmation letter.

Step 3

Find a lender

Contact a HGS-participating bank and submit your pre-approval application with the scheme letter.

Step 4

Purchase & settle

Once approved, find a property, make an offer and proceed to settlement with your 5% deposit.

Important conditions

Property value limits

Maximum purchase price varies by state and postcode. Generally around $600,000–$800,000, but can be lower in some regions.

Owner-occupier only

You must live in the property as your main residence. Investment properties don't qualify.

New or established properties

Both new builds and existing properties can qualify, but established properties must be within the state's maximum price cap.

Limited number of places

The scheme releases a limited number of places each financial year. Demand often exceeds availability, so apply early.

Lender requirements under HGS

Even with the scheme guarantee, lenders still assess your application. You'll need:

  • Employment history: Usually 2+ years in your current role (some flexibility for recent graduates)
  • Income verification: Payslips, employment letter, tax returns
  • Good credit history: No recent defaults or missed payments
  • 5% deposit: Evidence of genuine savings or acceptable gift documentation
  • Serviceability: Ability to repay the loan at current interest rates plus a buffer (usually 2–3% buffer)

HGS vs. LMI: The savings

Example: $500,000 property, 5% deposit

  • Without HGS (LMI): $475,000 loan + $38,000 LMI = $513,000 total owed
  • With HGS: $475,000 loan + $0 LMI = $475,000 total owed
  • Savings: $38,000 (roughly $200–250 per month in lower repayments)

When does the guarantee apply?

The government guarantee is a safety net for the lender, not ongoing protection for you. It applies if you default significantly on your loan. In normal circumstances, it doesn't affect your loan or repayments.

Next steps

  1. Visit the government's First Home Loan Deposit Scheme portal to check eligibility and apply.
  2. Once approved, contact CredQ or a HGS-participating lender.
  3. Prepare your income documents and 5% deposit evidence.
  4. Get pre-approval and start searching for a property.

Ready to explore the Home Guarantee Scheme?

CredQ can guide you through eligibility, lender matching and application. Let's see if HGS is your best path forward.

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