Recently there has been a change to the Federal Government’s Home Guarantee Scheme (HGS).  But what actually is this scheme, how does it work and what are the changes coming in on 1 October 2025?

The HGS has been in place since January 2020 and it is a scheme designed to help first home buyers to purchase a property with savings of 5% of the property value as opposed to the traditional 20% which is required by many lenders.  The Federal Government then acts as a Guarantor for the remaining 15% deposit, required by the lender.  The Federal Government promises (guarantees) to the buyer’s lender to pay 15% of the property value in the event that the home buyer defaults on their loan and there is not enough value in the property purchased to pay out the home loan. 

Further, because of the Federal Government’s promise for the balance of the 20%, this then does away for the requirement for the lender to impose Lenders Mortgage Insurance (LMI) on the home buyers.  LMI is an insurance product taken out by lenders to protect themselves when the borrower (home buyer) does not have 20% of the loan value already saved.  This is usually calculated at 1% - 2% of the loan or property value and usually is either added onto the loan amount or is an upfront fee.  This is another saving for home buyers under the HGS.

So what are the changes coming in on 1 October 2025?

The first change is the change to income caps, which have been scrapped.  Previously the scheme was only available to those applicants whose taxable income did not exceed $125,000.00 per annum for singles and $200,000.00 per annum for couples. 

The second change is the limit on applicants.  Previously, the HGS was limited to 50,000 places per year.  Now, this cap has been removed so there is no limit on the number applicants in the HGS.

Thirdly, the cap on property prices has been lifted.  Previously, the HGS was only available for properties that did not exceed $900,000.00 (for Sydney and regional areas including Newcastle and Lake Macquarie) and this has now been raised to $1,5 million (for Sydney and regional areas including Newcastle and Lake Macquarie).

Of course, home buyers should check their own specific eligibility criteria and speak further with their lender or mortgage broker.

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