First Home Guarantee [2023 Comprehensive Guide]

When you are buying a property under the First Home Guarantee, you will need a minimum of 5% and up to 20% of the purchase price of the property you are buying (plus buying costs).

When you are building a home under the First Home Guarantee you will need between 5% to 20% saved as a deposit (plus buying costs).

You will need to take out one construction loan, up to the value of $700,000 which covers the costs of both buying land and building the home.

Typically, we see our clients spend around $300,000 to $350,000 on the land and normally around $300,000 to $350,000 on the build, keeping the total under the $700,000 cap (see the table below for some options).

As an example, say you planned to spend $650,000 in total, where $300,000 was for the land and $350,000 was the build.

You would need to save a total of $40,660 made up of:

• A 5% deposit of $32,500; plus
• $8,160 in buying costs.

Under the First Home Guarantee, you would save an additional $29,971 (normally added to your loan) which is the Lenders Mortgage Insurance you do not need to pay.

For more information on the steps to build a home, check out this post here.

When you spend under $750,000 in total (which you will need to do anyway to be eligible for the First Home Guarantee), you may also you qualify for the QLD First Home Owners Grant of $15,000.

I understand this is a lot to get your head around, so please do feel free to book a free 15 minute call and I can talk this through for your personal situation.

Let’s do a quick example so you can see how the $15,000 First Home Owners Grant gets you into your first home even sooner.

To be eligible for the scheme, you need to earn less than $125,000 as a single applicant and $200,000 as a couple.

There are now 32 lenders on the panel for residential mortgages.

If we are helping you with your home loan, then we will advise you on which is the best lender for your situation.

• The only major lenders are : NAB, CBA
• Some of the ‘non major’ lenders are: Bank Australia, Bendigo Bank, CUA, MyState Bank and Teachers Mutual Bank (there are many more found here)

There are a number of home loan products available and I will advise you of which one is right for you.

Some things to keep in mind:

• You can only apply for Owner Occupied home loans, meaning it must be your principle place of living (no investment property loans);
• Repayments must be principal and interest, meaning you need to repay the loan and the interest (no property investment and no Interest Only loans);
• Loan term must be 30 years (which is standard);
• The minimum 5% deposit you have must be what the industry calls ‘genuine savings’; which is money you have saved or held yourself in a bank account for at least a 3 month period  – I can advise you on this.
• You must use 100% of the loan for the purchase and improvement of the property (meaning you can’t use any of this loan for a holiday or car etc);
• Have a loan amount commitment not less than 80% and not more than 95% of the relevant Value of the property. For example:
• Some lenders have restricted the amount you can borrow, for example if you earn $80,000, the maximum you can borrow may be $480,000 under this scheme – I will advise you if this is relevant for you.

If you are building a home under the First Home Guarantee (formally the New Home Guaranyee),  the home loan you get is called a ‘construction loan’.

• It is designed to fit for the stages and payment schedule of building a house.
• Make sure the total value of the property once built, is still at or below the thresholds / price cap for your region.
• You can work this out the total value of your property by adding together:

Total Value = $ Land + $Build + $Extras like a pool, landscaping and fencing.

• The repayments, while you are building your home can be Interest Only.
• Once the build is complete the repayments will switch over to principle and interest repayments.

Eligible building contracts

To be an eligible building contract under the Scheme, your building contract must:

• Be with a licensed or registered builder;
• Specify a contract sum for all costs in respect of the construction of the dwelling; and
• The builder must:
  • i) Commence construction within 26 weeks of the settlement date for your home loan; and
  • ii) Complete construction and procure the issuance of an occupancy certificate within 24 months of the settlement date for your home loan.

For more information on the steps to build a home, check out this post here.

It is important to note that while you are on one of these loans, you will not be allowed to make any changes to your home loan.

You will not be able to borrow more money / increasing the limit (if you were to renovate for example).

To do this you would need to refinance your home loan to another loan that is not a part of the Scheme, then you maybe able to access the equity which is usually fairly easy to do.

In this case we would need to refinance your home loan to another lender which means you may need to pay Lenders Mortgage Insurance anyway if you do not have at least 20% equity in your home;

The way this Schemes works is the Federal Government (NHFIC are the administers) needs to control how many first time buyers take up each scheme (to control the cost), so they release a set number of ‘places’ or spots each financial year.

For FY 2022-23, there are 35,000 places available.

These are alloacted amongst the different lenders.

Finding the right lender for your home loan and making sure they have a place on the First Home Guarantee is something I can help with. I’d recommend you book a free 15min call with me at this point.

The saving you make under the First Home Guarantee is because you don’t need to pay the Lenders Mortgage Insurance (LMI).

The way home loans normally work, is if you have less than a 20% deposit of the purchase price saved, then you need to pay LMI.

LMI is like an insurance which covers the bank if you are unable to make repayments on your loan and the bank takes possesion of the home to sell.

Before the First Home Guarantee was around, this is how it worked.

If you purchased an established home for $700,000, where you saved a total of $59,400 (5% deposit of $35,000 + 3.5% for buying costs  of $24,400) you would need to pay LMI of between $26,501 to $32,345, depending on which lender you got your home loan with.

Most people would capitalise this cost, which means adding it to their home loan rather than paying the LMI upfront.

Now that the First Home Guarantee is here, what they do is cover you by providing a guarantee to the bank to make up the 20% deposit required.

This means, the bank effectively sees you as having a ‘20% deposit’ so you no longer have to pay the LMI when you buy the home.

You do not get this saving / money into your account, it is arranged in the ‘background’ for you.

Most types of properties are covered.

• An existing house, townhouse or apartment;
• Brand new homes – off the plan or newly built
• Building a home – house and and package or land and separate contract to build

You must be Australian citizens.

Permanent residents are not eligible.

Your incomes need to under these thresholds to be eligible:

Singles can earn a taxable income of up to $125,000 per annum (before tax);

Couples can earn a combined taxable income of up to $200,000 per annum (before tax).

Note, for all applications made from 1 July 2022 to 30 June 2023, the relevant financial year assessed will be 2022-23.

For applications made from 1 July 2023 to 30 June 2024, the relevant financial year assessed will be 2023-24.

Couples are only eligible if they are married or in a de-facto relationship.

This means you can’t buy with siblings, parent/child or friends.

No, you must be either defacto or married to be eligible.

No, you can’t.

You must not have previously owned or had an interest in a residential property, either separately or jointly with someone else (this includes residential strata and company title properties, regardless of whether it was an investment or owner-occupied property and whether it was ever lived in).

You must intend to move into and live in the property as your principal place of residence (i.e. you must be owner occupiers).

You must move into the property within 6 months from the date of settlement or, if later, the date an occupancy certificate is issued.

No, you must continue to live in that property for so long as your home loan has a guarantee under the Scheme.

If you move out of the property  for some reason, then you are no longer covered by the Scheme, which means you will need to refinance your loan.

If you still have less than 20% equity  / your own money in the property then you will need to pay the Lenders Mortgage Insurance yourself.

No, you are not eligible for the Scheme if you are buying an investment property (the property must be your principle place of residence)

If you are purchasing an existing property (one that has already been built and lived in):

• you must move into the property within 6 months of the settlement of your home loan, and
• the property must be purchased under a contract of sale dated on or after 1 January 2020.

Buying off the plan, usually means buying a property before it has been built.

If you are buying ‘off-the-plan’ :

• you must have signed the contract of sale before the settlement date for your home loan, and
• the settlement date for your home loan must occur within 90 days that your home loan becomes guaranteed under the Scheme.

You will also need to move into the property within 6 months of the settlement date for your home loan.

A house and land package is when you buy the land and the home to be build, from the same person / company.

You will need to do this before the settlement date for your home loan:

• Purchase and sign the contract of sale for a block of land;
• Sign an eligible building contract to build your home on that land.

These can either be in the same contract or two separate contracts.

In terms of when you need to start building:

• start building your home within 12 months; and
• finish building your home within 24 months of the settlement date for your home loan.

You need to move into the property:

• within 6 months of an occupancy certificate being issued.

It common to buy a block of land from one vendor, then find a separate builder to build their home.

The home loan, called a construction loan, is covered by this scheme, and is used to buy both the land and pay for the building of your home.

You will need to enter into an eligible building contract before the settlement of your home loan and:

• start building your home within 12 months; and
• finish building your home within 24 months,

of the settlement date for your home loan.

You may be able to obtain a home loan to buy the land before obtaining a loan to finance the building of your home. If you do so, then your Participating Lender will require you to:

• enter into an eligible building contract within 6 months;
• start building your home within 12 months; and
• finish building your home within 24 months, of the settlement date of your home loan to buy the land.

If you already own the block of land

If you are intending to buy vacant land and construct a dwelling on that land, you will need to enter into a building contract to build a home on the land within six months of the loan settlement date.

If you already own vacant land and intend to take a new home loan to construct a dwelling on that land, your home loan is not eligible for the Scheme

These are currently the main programs you may be eligible for as a First Home Buyer in QLD:

1. First Home Buyers Grant – which is $15,000 towards the cost of building a home;
2. Stamp Duty Rebate – which is a rebate or discount on the amount of Stamp Duty you pay when buying a home or vacant land to build on. You can get up to $8,750;
3. First Home Guarantee – where some or all of the Lenders Mortgage Insurance you pay when taking out a home loan is covered for you, up to the value of $32,277
4. Family Home Guarantee –  which is for single parents, where you do not need to be a first home buyer