Government Guarantee Scheme – an update on the changes from 1st October 2025

The government guarantee scheme is a real game changer for a lot of first home buyers.

Those with deposit amounts as low as 5% can get into a property up to a certain threshold, which as of October 1^st 2025 is a $1.5 million purchase price in the Sydney metro area, without the burden of lender mortgage insurance (LMI) being charged. This can save a first home buyer a substantial amount of money, potentially up to $60K!

The way the scheme works is the government guarantees the portion of the bank’s loan amount above 80% of the property value. This frees the bank up to lend with the same risk appetite and same low interest rates as if lending to someone with a full 20% deposit.

For example, say a first home buyer is buying a property for $1,000,000 and wants to borrow $950,000. This is a 95% loan to value ratio or LVR for short. This LVR would usually incur significant lender mortgage insurance costs of up to $36K-$42K depending on lender. Importantly this ratio is also too high for most lenders to accept. It's important to note that applicant/s must still undergo standard borrowing capacity assessments to ensure they can afford the loan they’re applying for.

With the government guarantee scheme the difference between 80% of the property value $800,000 and the amount borrowed $950,0000 becomes the guaranteed amount i.e. $150,000 in this example. The lender is still lending the full $950,000 but their funds “at risk” of loss are limited to $800,000.

Please note in this example a First home Buyer would need the 5% deposit funds of $50,000, plus funds to cover the stamp duty on the $1,000,000 purchase which would be approx. $40,000, so you would need to have saved a total of at least $90,000.

Government Scheme & NSW stamp duty concessions combined

NSW first home buyers are also entitled to stamp duty waivers for properties under $800,000 and a reduced stamp duty on a sliding scale for properties between $800,000 and $1,000,000. For example, stamp on a $900,000 property would be roughly half the normal amount of duty while a purchase price of $999,000 would effectively be charged the full amount of duty.

A potential sweet spot for NSW first home buyers would be to buy for $800,000 or less that way attracting nil stamp duty and requiring just a 5% deposit of $40,000 under the scheme. This would save them over $57,000 and get them into a property so much sooner than if they had to save these funds.

To apply for the Guarantee, home buyers must be:  

• *applying as an individual or two joint applicants.  
• *an Australian citizen(s) or both permanent resident(s) at the time they enter the loan.
• *at least 18 years of age.
• *intending to be owner-occupiers of the purchased property.
• *first home buyers or previous homeowners who haven't owned or had an interest in a real property in Australia (this includes owning land only) in the past ten years.
• *be applying through a lender participating in the scheme.