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More lenders to help buyers with low deposits through Home Guarantee Scheme

Alex Ritchie avatar
Alex Ritchie
- 5 min read
More lenders to help buyers with low deposits through Home Guarantee Scheme

First home buyers looking to get a foot on the property ladder know that saving for a deposit is one of the largest hurdles to overcome. Thankfully, more lenders have joined the list of those offering mortgages with deposits as little as 5%, even 2% in some instances. 

More of Australia's biggest lenders are now part of the Australian Government’s Home Guarantee Scheme. Westpac today announced that St.George, Bank of Melbourne and BankSA have joined the scheme.

The Home Guarantee Scheme covers multiple initiatives that were designed to assist Australians in purchasing a home sooner. The scheme is comprised of three Guarantees, all of which Westpac and its subsidiaries will offer:

  • First Home Guarantee: Eligible home buyers can purchase a home with a deposit as low as 5%. For FY 2023-24, 35,000 places are available.
  • Regional First Home Buyer Guarantee: Eligible home buyers can purchase a home in a regional area with a deposit as low as 5%. For FY 2023-24, 10,000 places are available.
  • Family Home Guarantee: Eligible single parents, and eligible single legal guardians of at least one dependent, can purchase a home with a deposit as low as 2%. For FY 2023-24, 5,000 places are available.

These three guarantees allow eligible Australians to apply for a loan through the participating lender and pay a much smaller deposit than would normally be required. The government will guarantee the loan, so paying costly Lender’s Mortgage Insurance (LMI) will not be required.

Westpac Managing Director of Mortgages, Richard Burton, said: “Through expanding access to the Home Guarantee Scheme, St.George, Bank of Melbourne and BankSA will be able to help more Australians into the property market sooner with a smaller deposit."

“We’ve already helped more than 1000 Australians purchase their home through the HGS since Westpac joined the panel in July this year and we’ve heard some amazing stories about the difference it’s making for these customers in terms of accelerating their home ownership journey,” Mr Burton said. 

“That’s why we’re keen to let prospective customers know about initiatives such as the Home Guarantee Scheme, as they can make a real difference to helping people into homes sooner,” He said. 

Taking out a home loan with a lower deposit

The golden rule for saving a home deposit has always been that lenders favour applicants with at least 20% saved up. Having a deposit of 20% also helps home buyers to avoid paying costly Lender’s Mortgage Insurance (LMI).

However, this is no easy feat when you consider median national dwelling prices are currently $747,424, according to the latest CoreLogic Hedonic Home Value Index. A 20% deposit would require home buyers to squirrel away $149,484 - which is extremely difficult amidst the current cost-of-living pressures. And the amount borrowers are required to save up in capital cities like Sydney and Melbourne can feel near unobtainable. 

This is where these Guarantees come in, assisting eligible borrowers in purchasing a home without waiting years and years to save a six-figure deposit, all while avoiding paying LMI. 

Who is eligible for low deposit home loan schemes?

Home Guarantee Scheme

Eligibility criteria

First Home Guarantee 

  • Apply as individual or 2 joint applicants 
  • Australian citizen(s) or permanent resident(s)* at the time they enter the loan
  • At least 18 years of age
  • Earning up to $125,000 for individuals or $200,000 for joint applicants
  • Owner-occupiers only
  • First home buyers or previous homeowners who haven't owned a property in Australia in the past ten years.

Regional First Home Buyer Guarantee

  • Apply as individual or joint applicants 
  • Australian citizen(s) or permanent resident(s)* at the time they enter the loan
  • At least 18 years of age
  • Earning up to $125,000 for individuals or $200,000 for joint applicants
  • Owner-occupiers only
  • Home buyers who have not previously owned, or had an interest in, a property in Australia or in the ten years prior to the date they execute their home loan.
  • First home buyers or previous homeowners who haven't owned a property in Australia in the past ten years.

Family Home Guarantee

  • Individual applicants only
  • Single parent or single legal guardian of at least one dependent
  • Australian citizen or permanent resident* at the time they enter the loan 
  • At least 18 years of age 
  • Earning no more than $125,000 per year 
  • Owner-occupier only
  • NOT currently owning property, or upon settlement of the guaranteed property they’re buying, not intending to own a separate property.

Source: HousingAustralia.gov.au

Which other lenders participate in the Home Guarantee Scheme?

There are currently 33 participating lenders involved in the Home Guarantee Scheme. This includes major lenders such as the Commonwealth Bank, NAB and Westpac, and now its subsidiaries - BankSA, Bank of Melbourne and St.George.

For a full list of all participating lenders, including non-major lenders, please refer to the HousingAustralia website.

Compare home loans in Australia

Product database updated 23 Jul, 2024

This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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