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The Home Guarantee Scheme helps first home buyers in Melbourne purchase a property with as little as a 5% deposit without paying Lenders Mortgage Insurance. The government guarantees up to 15% of the property’s value through Housing Australia. It removes income caps and property limits apply based on location.
That’s where the Australian Government’s Home Guarantee Scheme comes in, providing a fantastic opportunity to get your foot on the property ladder sooner. Let’s break down what it is and how it works.
What is the Home Guarantee Scheme?
The Home Guarantee Scheme (HGS) is a government initiative designed to help eligible home buyers purchase a home with a smaller deposit without needing to pay for LMI. As of 1 October 2025, this program is also known as the Australian Government 5% Deposit Scheme.
Traditionally, if you have less than a 20% deposit, your lender will charge you LMI. This insurance protects the lender, not you, in case you default on your loan. It can add thousands of dollars to your upfront costs.
Under the HGS, the government, through Housing Australia, provides a guarantee to your lender for up to 15% of the property’s value. This brings your deposit on par with a 20% deposit from the lender’s perspective, removing the need for LMI.
How Does it Work?
The scheme essentially bridges the gap between your savings and the 20% deposit mark.
Here are the key features:
- Minimum 5% Deposit: You can purchase a home with a deposit as low as 5% of the purchase price.
- No Income Caps: Eligibility has been expanded, and there are no longer income caps for applicants.
- Unlimited Places: The previous cap on the number of available places per year has been removed, making the scheme accessible to all who qualify.
- Property Price Caps: The scheme applies to properties up to a certain price, and these caps have recently been increased. It’s crucial to check the current price cap for Melbourne when you are looking to buy.
Important Considerations from a Conveyancer’s Perspective
While the HGS is an excellent pathway to homeownership, it’s not free money. The guarantee simply removes the LMI cost. You still need to remember:
- A Larger Loan: A smaller deposit means you will be borrowing more money. This results in a larger loan, and you will likely pay more in interest over the life of the mortgage.
- Other Upfront Costs: The scheme does not cover other essential purchasing costs such as stamp duty, legal and conveyancing fees, and bank fees. These must be budgeted for separately.
- Lender Criteria: You must still meet all of your chosen lender’s eligibility and credit criteria to be approved for the home loan.
How We Can Help
The Home Guarantee Scheme is a fantastic leg-up for first-home buyers in Melbourne. It makes the dream of owning a home a reality for many who might otherwise be saving for years to come.
As your conveyancer, our role at Red Door Conveyancing is to manage the legal transfer of the property, thoroughly review the Contract of Sale, and ensure your rights are protected throughout the entire transaction. If you’re considering using the Home Guarantee Scheme, get in touch with us today. We can help you navigate the process with confidence and clarity.
If you are a first time home buyer in Melbourne, contact us on 03 8456 6797 for all your conveyancing concerns for smooth transactions.
