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Home Guarantee Scheme: Buy Your Home with Just 2% Deposit

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The Home Guarantee Scheme Explained: How to Buy With a Smaller Deposit

Saving up a 20% deposit has always been one of the biggest hurdles for Aussies wanting to buy their own home. The Federal Government’s Home Guarantee Scheme (HGS) is designed to help eligible buyers get their foot in the door sooner—with as little as a 2% deposit.

Let’s break down exactly how the scheme works, who’s eligible, and how you can use it to your advantage.

What Is the Home Guarantee Scheme?

  • The HGS lets eligible buyers purchase a home with a low deposit—sometimes as little as 2%—without paying Lenders Mortgage Insurance (LMI).
  • The government steps in to guarantee part of your loan, which reduces the risk for the lender and helps you access better rates.

The scheme includes three main options:

  • First Home Guarantee
  • Regional First Home Buyer Guarantee
  • Family Home Guarantee

First Home Guarantee

  • Deposit required: As little as 5%
  • Who it’s for: First home buyers
  • Property price caps: There use to be a cap however as at October 2025 these have been removed!

You’ll avoid LMI and still get access to competitive interest rates.

Regional First Home Buyer Guarantee

  • Designed for buyers purchasing in regional areas.
  • Key differences:
    • Broader eligibility based on location
    • Higher property price caps in some regions
    • Aimed at encouraging growth in regional communities

Family Home Guarantee

  • Supports single parents with dependants.
  • Deposit required: As little as 2%
  • No income cap
  • Available for both first home buyers and previous homeowners

This is one of the most powerful (and under-used) schemes out there.

Property Price Caps (Indicative)

  • Price caps change based on state and city.
    • Sydney: Higher metropolitan caps
    • Regional NSW: Lower, but more accessible
    • Other states and regions vary—always check the latest figures before signing a contract.

How Does the Scheme Work in Practice?

  1. Secure loan pre-approval under the scheme.
  2. The government guarantee replaces the need for LMI.
  3. Purchase your property.
  4. Your loan works just like a standard home loan.

Important: The guarantee isn’t a cash payment and doesn’t reduce your loan balance.

Common Mistakes to Avoid

  • Assuming all lenders offer the scheme (they don’t)
  • Waiting too long and missing out on allocation caps
  • Buying a property above the price cap
  • Forgetting to factor in stamp duty and other costs

Is the Home Guarantee Scheme Right for You?

This scheme is a great fit for buyers who:

  • Have a solid income but limited savings
  • Want to avoid paying LMI
  • Are comfortable borrowing a higher percentage of the purchase price

It might not be ideal if you’ve already got family support or a larger deposit sorted.

Whats Next?

The Home Guarantee Scheme has already helped tens of thousands of Aussies buy their own homes sooner. With the right advice and lender, it can be a fantastic way to get into the market sooner rather than later.

If you’re considering your options or want to know if you’re eligible, reach out for a personalised chat—I’m here to help you make sense of it all and find the best path forward.

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