For many Australians, saving a 20 percent deposit before buying a home can feel like an insurmountable hurdle. Fortunately, the federal and state governments now offer low‑deposit loan options backed by official guarantee schemes. These initiatives are specifically designed to help first home buyers get onto the property ladder faster, without paying thousands in Lenders Mortgage Insurance (LMI). In this article, we’ll explore the key schemes—such as the Home Guarantee Scheme and the First Home Owner Grant—and show how first home buyers across the country can benefit.

The Home Guarantee Scheme: Buy with as little as 2 – 5 percent deposit

Australia’s national Home Guarantee Scheme (HGS) enables eligible first home buyers to purchase a property with just a 5 percent deposit, and in some cases as little as 2 percent, without paying LMI, because the government underwrites part of the loan.

Options under the scheme

The HGS comprises three distinct guarantees:

First Home Guarantee supports first home buyers (or those who haven’t owned property in 10 years) to buy new or existing homes with a 5 percent deposit. The government guarantees up to 15 percent of the property’s value.

Family Home Guarantee is aimed at single parents or legal guardians with at least one dependent child, allowing purchase with as little as a 2 percent deposit. The government covers up to 18 percent of the property value.

Regional First Home Buyer Guarantee enables eligible first home buyers purchasing in regional areas to buy with a 5 percent deposit, with government guarantee support up to 15 percent

Eligibility criteria

To qualify for any HGS guarantee, you must:

• Be an Australian citizen or permanent resident,
• Be at least 18 years old,
• Have taxable income below $125,000 (individual) or $200,000 (couple) in the last financial year,
• Have saved the deposit (2 % or 5 % depending on the scheme),
• And not have owned residential property in Australia in the past ten years (except under the Family Home Guarantee).

You must be buying a home to live in, and the property must fall under prescribed state-specific price caps.

How the scheme works

Participating lenders (typically banks or mortgage providers approved by Housing Australia) submit your application for a Guarantee. If approved, they lend you up to 95 percent of the property’s value—meaning your 5 percent deposit is sufficient. Since the government is backing the remainder, you don’t pay LMI, saving thousands in upfront insurance premiums. You then have 90 days to find a property and settle the purchase.

The First Home Owner Grant (FHOG) and stamp duty concessions

In addition to the Home Guarantee Scheme, first home buyers in Australia may be eligible for state and territory grants and exemptions that further reduce upfront costs.

What is the FHOG?

The First Home Owner Grant is a one-off payment made by state governments to help eligible first home buyers. It typically ranges from AUD 10,000 to AUD 15,000, depending on your state or territory, and applies to new homes or substantially renovated properties—not established homes.

In New South Wales, the FHOG is AUD 10,000 for new homes valued up to AUD 600,000 or new builds up to AUD 750,000. Stamp duty exemptions apply on homes up to AUD 800,000 and concessions on properties up to AUD 1 million.

In Victoria, a AUD 10,000 grant is available for new homes valued up to AUD 750,000, with stamp duty waivers for properties under AUD 600,000 and concessions to AUD 750,000.

South Australia offers a larger AUD 15,000 grant, with no property value cap for contracts after June 2024, plus stamp duty concessions via the First Home Owner Rate.

Other states like Queensland, WA, Tasmania, ACT, and the Northern Territory also offer FHOG grants (usually AUD 10,000) and varying stamp duty relief depending on value and region.

How they work together

If you’re eligible for both the HGS and your state’s FHOG, you could combine these benefits—for example, using the FHOG to help cover part of your deposit (e.g. turning 5 percent into effectively 3.5 percent), and avoiding LMI entirely while saving on stamp duty where applicable.

Aligning national and state schemes: maximise the advantage

Real-world impact

According to HomeStart, a South Australian government‑backed lender, demand for low‑deposit loans skyrocketed, with around two‑thirds of borrowers being first‑time buyers. Their offerings include a 2 percent deposit loan plus shared‑equity options, and up to AUD 10,000 to assist with upfront costs through the Starter Loan add‑on. National Australia Bank reports a growing uptake in low‑deposit borrowers since interest rate cuts, especially thanks to the Home Guarantee Scheme and expanded LMI waiver programs.

Changes in government policy

Under the Albanese government’s housing package, starting in 2025, all eligible first home buyers may receive access to buying with a 5 percent deposit without paying LMI—even beyond the initial capped scheme—supported by expanded First Home Guarantee places and grants to build 100,000 homes for first‑time buyers through 2029. The Coalition has proposed reforms such as reducing the mortgage serviceability buffer from 3 percent to 2.5 percent to boost borrowing capacity, potentially helping nearly 270,000 median‑loan applicants and more younger buyers qualify for finance.

Practical benefits for first home buyers

Reduced waiting time

With deposit sinks as low as 2 percent or 5 percent, you can enter the housing market significantly sooner—especially critical in regions where property prices rise faster than wage growth. The HGS has already supported over 230,000 home buyers and continues to open new places each financial year (e.g. 35,000 HGS places).

No LMI costs

Avoiding Lenders Mortgage Insurance can save borrowers thousands of dollars upfront. Since government guarantees replace this requirement, buyers use more of their savings directly toward equity instea.

Government assistance with upfront fees

State FHOGs and stamp duty concessions can reduce or eliminate key upfront costs—for many FHOG recipients, this means AUD 10,000 or even AUD 15,000 cash that doesn’t need repaying, plus zero or reduced stamp duty in qualifying states.

Flexibility and broader access

Schemes like the Family Home Guarantee widen access to those who might otherwise struggle, such as single parents with dependents, by lowering deposit requirements while also waiving LMI. The Regional Guarantee also encourages affordable home ownership in non‑metro areas.

Things to consider before applying

First, make sure you meet all eligibility criteria: citizenship, income thresholds, first‑home status, and property caps in your state. Next, understand that the Home Guarantee Scheme does not provide cash—it underwrites the loan. You still need to meet loan repayments and other costs like stamp duty, legal fees, insurance, and loan establishment fees.

Processing times vary by state and lender; generally FHOG is paid at settlement or at the first loan drawdown if you’re building. The first step is usually speaking to a participating lender—many major banks like NAB, Westpac, CommBank and others offer HGS home loans and can submit the guarantee application as part of your loan process.

For first home buyers in Australia, low‑deposit loans underpinned by the Home Guarantee Scheme, combined with state‑level grants like the First Home Owner Grant and stamp duty relief, make home ownership more accessible than ever before. Buyers can now purchase with as little as 2 percent or 5 percent down, avoid expensive LMI, and benefit from substantial upfront financial support.

By understanding how these schemes interact, and meeting eligibility requirements, first home buyers can significantly reduce barriers to entry—turning property ownership from an aspiration into a realistic, achievable goal.