Getting into the property market with no deposit is possible in Australia—if you understand your options. Two of the most popular strategies are the First Home Guarantee Scheme and Guarantor Home Loans. But which is better for your situation?
What Is the First Home Guarantee?
The First Home Guarantee (formerly the First Home Loan Deposit Scheme) is a federal government initiative. It allows eligible first-time buyers to purchase a home with just 5% deposit, while avoiding Lenders Mortgage Insurance (LMI).
Key features:
- No LMI required
- Available through selected lenders
- Income capped at $125,000 (single) or $200,000 (couple)
- Property price caps apply
This scheme is ideal for buyers who have saved a small deposit but fall short of the traditional 20%.
What Is a Guarantor Loan?
A guarantor home loan involves a family member, usually a parent, offering part of their own property’s equity as security for your loan. This means you can borrow up to 100% of the property price.
Key features:
- No deposit needed
- No LMI required
- No income or property price caps
- Guarantor shares legal responsibility if the borrower defaults
This option is attractive for those with family support and no savings.
First Home Guarantee vs Guarantor Loan: Pros and Cons
| Feature | First Home Guarantee | Guarantor Loan |
|---|---|---|
| Deposit Required | 5% | 0% |
| LMI Waived | Yes | Yes |
| Income Caps | Yes | No |
| Property Price Caps | Yes | No |
| Family Involvement | Not required | Required |
Which One Should You Choose?
- Choose the First Home Guarantee if you qualify under income and property value limits and want to avoid involving family.
- Choose a Guarantor Loan if you have no deposit and supportive family members willing to back your purchase.
Final Thoughts
Both options are powerful tools to enter the property market without the traditional 20% deposit. By comparing their advantages and limitations, you can choose the option that aligns with your financial situation and long-term goals.
Consult with a licensed mortgage broker to see which lenders support these options and help you get approved faster.