The Home Guarantee Scheme (HGS) is a federal government initiative that enables first home buyers to purchase a property with a smaller deposit, as low as 5%, without paying Lenders Mortgage Insurance (LMI).
In short: The government acts as a guarantor for up to 15% of the loan amount, allowing borrowers to meet a lender’s 20% equity requirement sooner.
Key features:
“It’s a great way to get into the market sooner,” explains Jake de Ruyter, broker at UNO Home Loans. “Instead of needing that traditional 20% deposit, eligible buyers can enter with as little as 5%, and avoid paying thousands in LMI.”
The Home Guarantee Scheme allows a buyer to purchase a property with a smaller deposit while the government guarantees the shortfall between their deposit and the 20% threshold.
“It’s not free money,” says host Vincent. “The government doesn’t give you $150,000, they simply guarantee it. Your loan and repayments are still based on the full borrowed amount.”
This distinction is important. The government guarantee reduces upfront costs, not your debt.
The scheme targets first home buyers, eligible citizens or permanent residents, and Australians re-entering the property market after 10 years.
Recent changes (effective 1 October):
“These updates are huge,” says Jake. “Lifting the caps and removing income limits means more Australians especially those on higher incomes or with growing families can now access the scheme.”
Yes, the Home Guarantee Scheme can be used alongside state-based incentives such as stamp duty concessions and first home owner grants.
For example:
“You can layer them,” Jake explains. “For instance, in Queensland you might use the federal scheme for your 5% deposit and still claim the $30,000 first home grant for a new build.”
While the Home Guarantee Scheme property price cap has risen, many state-based stamp duty concessions haven’t.
“In Brisbane, the federal cap is now $1 million, but the state stamp duty concession still stops at $700,000,” says Jake. “That means you could owe up to $30,000 in stamp duty, so your deposit effectively jumps from 5% to closer to 9%.”
Genuine savings refers to money a buyer has personally saved over time, demonstrating a habit of saving, not lump-sum gifts or windfalls.
Banks typically want to see:
This helps lenders confirm that borrowers can manage repayments responsibly.
“The banks just want to know you can save and budget,” says Jake. “You can’t just have $50,000 appear overnight and expect that to count as genuine savings.”
Some lenders may also consider consistent rental payments as proof of genuine savings, showing a similar capacity to manage regular repayments.
Applying for the Home Guarantee Scheme typically happens through your lender or mortgage broker as part of your loan application.
“I always tell clients, even if you think you’re a year or two away, start the conversation now,” Jake advises. “You might be closer than you think.”
The scheme’s primary advantage is reducing upfront costs for buyers.
It’s particularly helpful for Australians who’ve been priced out due to rising housing costs.
“The removal of limits and caps gives buyers breathing room,” says Vincent. “It means you can focus on buying well, not racing against deadlines.”
While the scheme provides a boost, it’s not without risks.
Watch out for:
“The biggest misconception,” notes Vincent, “is thinking the government gives you a 20% deposit. They don’t, they just guarantee it so you can avoid LMI.”
You must continue meeting the scheme’s requirements while the guarantee is in place.
If you move out before reaching 20% equity, your loan may be reassessed as an investment loan, triggering Lenders Mortgage Insurance or higher interest costs.
“The guarantee stays until your loan-to-value ratio (LVR) hits 80%,” explains Jake. “Once you’ve built enough equity, the guarantee naturally drops off.”
While Treasury modelling suggests only a modest 0.5% property price increase over six years, brokers like Jake believe the actual impact could be stronger.
“With unlimited spots and no income caps, we’re expecting more competition,” he says. “Entry-level properties between $700,000 and $1 million could see the most pressure.”
However, both Jake and Vincent emphasise smart buying:
With nearly a decade of experience in finance, including years at one of Australia’s Big Four banks, Jake de Ruyter brings deep lending knowledge and a genuine passion for helping Australians achieve homeownership. As part of the UNO Home Loans team, Jake combines strategic insight with hands-on guidance to make the buying process simple, transparent, and stress-free.
Jake can help you with:
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