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One-In-Three First Home Buyers Use Guarantee Schemes

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First home buyers are ignoring headlines warning that it can take years to save a deposit. Instead, they are flocking to guarantee schemes that allow them to get into the market with just a 5% deposit, and without the cost of lenders’ mortgage insurance (LMI).

NHFIC, which runs the First Home Guarantee schemes set up by the federal government, says that in 2022/23, close to one in three first home buyers tapped into the guarantee schemes. That’s up from one in seven the year before.

In total, 41,700 home buyers got into the market with the help of guarantee schemes last financial year, following an uptick in the number of places available.

Younger Australians are buying a home 

What’s especially exciting about NFHIC’s research is that it shows the schemes are allowing younger buyers to crack the property market.

In 2022/23, more than half of all places in the First Home Guarantee and Regional First Home Buyer Guarantee were taken by people under the age of 30. There has also been a fivefold increase in the number of buyers aged 18-24.

Key workers are buying with just a 5% deposit 

The low deposit schemes are also helping a growing number of key workers such as teachers, nurses and social workers purchase a home. Around 7,721 guarantees were issued to key workers last financial year.

Debunking the low deposit myth 

The First Home Guarantee has at times attracted criticism. This has largely been around the risks of buying with just a 5% deposit, which can mean taking on a larger loan with higher repayments. However, NFHIC data suggests that this has not been a problem.

Fewer than 0.1% of homeowners using the schemes have fallen behind on their loan repayments, which is less than the market average for all buyers with a low deposit loan. Better still, close to 10,000 scheme borrowers (over 12% of total guarantees issued to date) have already transitioned out of the scheme, with most of these buyers having accumulated enough equity to achieve a loan-to-value ratio (LVR) of less than 80%.

Could you be eligible for a 5% deposit scheme? 

If you are a first home buyer struggling to save a 20% deposit, it is good to know there is a pathway to home ownership that can get you into a place of your own sooner. It can also help you to avoid paying LMI, which can cost you anywhere between $4,000 and $35,000, depending on the property price and your deposit amount.

Conditions apply for the 5% deposit schemes, but new rules mean you can buy with a sibling or a friend and still be eligible for this valuable financial helping hand.

With property values rising in many markets across Australia, time is of the essence. Call us today to see if you can buy a home with a 5% deposit and zero LMI.

Frequently Asked Questions

What are the guarantee schemes mentioned in the article?

The guarantee schemes include the First Home Guarantee and the Regional First Home Buyer Guarantee, which assist first home buyers in entering the market with a lower deposit.

How do these schemes benefit first home buyers?

These schemes allow first home buyers to purchase a property with just a 5% deposit and avoid paying lenders’ mortgage insurance.

How many first home buyers used these schemes last year?

Last financial year, 41,700 home buyers got into the market with the help of these guarantee schemes.

Is it risky to buy a home with just a 5% deposit?

Despite concerns, data shows that fewer than 0.1% of homeowners using these schemes have fallen behind on repayments, indicating that it is not as risky as perceived.

Can these schemes be used for any type of property?

The schemes are generally available for a range of property types, but specific criteria should be checked for the type of property you are interested in.

How can a first home buyer apply for these guarantee schemes?

First home buyers should consult with a mortgage broker or financial advisor to understand the application process and check their eligibility for these schemes.

Phone: 1300 855 022


Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.

About the Author:   

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.   

Connect with Louisa on Linkedin.   

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

Disclaimer:This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial. 



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