First Home Guarantee: What Happens If Your Circumstances Change Before Settlement

By Andrew Paterson

Getting approved for the First Home Guarantee feels like the hard part is done. You’ve saved your 5% deposit, passed your lender’s checks and secured a scheme place with Housing Australia.

But approval doesn’t lock everything in. A job loss, relationship breakdown, new employer or reduced hours between approval and settlement can put the whole application at risk.

The Home Buyer Declaration you signed includes a legal obligation to disclose those changes.

What the Home Buyer Declaration actually requires

The Home Buyer Declaration includes a Commonwealth Statutory Declaration under the Statutory Declarations Act 1959. It commits you to notifying your lender if your circumstances change before settlement, and making a false statement is a criminal offence carrying up to four years imprisonment.

If your lender discovers incorrect information, they must notify Housing Australia. The guarantee gets cancelled, and you may need to pay Lenders Mortgage Insurance retrospectively, potentially $20,000 to $35,000.

Losing your job between approval and settlement

Most lenders verify your employment in the weeks before settlement. If you’ve been made redundant since approval, this is typically where it surfaces.

Your lender can withdraw the loan if there’s been a material change in your circumstances. Whether that costs you money depends on your contract of sale.

If the subject-to-finance clause is still live, you can exit and get your deposit back. If it’s expired and the contract has gone unconditional, you lose your deposit.

On an $850,000 Geelong property, that’s $85,000.

The finance clause is worth understanding properly:

• It typically gives you 14 to 21 days. If you haven’t obtained a written extension from the vendor by then, the contract becomes unconditional automatically.
• Switching lenders without updating the contract can invalidate the clause.
• If you bought at auction, there is no finance clause. The contract is unconditional from the moment the hammer falls.

If your broker knows early, they may be able to work with the situation. If the lender discovers it during pre-settlement checks, you risk losing the deposit as well.

Changing employers during the process

If your new role has a probation period, most lenders won’t approve at 95% LVR. Some cap probation borrowers at 90% LVR, and others won’t lend to them at all.

NAB is generally more flexible about same industry moves, and CBA will sometimes consider borrowers three months into a new role. Other participating lenders take a harder line.

Switching lenders under the FHBG means more than a new loan application:

• A new scheme reservation from Housing Australia
• A new 90-day property search window

If you’ve already signed a contract, those timelines may not line up with your settlement date.

When a joint application becomes a solo one

If a couple applied together, the loan was assessed on combined income. If the relationship ends before settlement, the remaining partner usually can’t service the loan alone.

A couple earning $180,000 combined has very different borrowing capacity to a single applicant earning $100,000.

The remaining partner would need to withdraw, reapply solo, pass a new serviceability assessment and obtain a new scheme reservation.

The resulting borrowing capacity may not cover the contracted purchase price. If the contract has gone unconditional, the deposit is at risk.

This also applies to friends and family who applied jointly under the expanded eligibility rules from mid-2024.

Pregnancy and maternity leave

Some lenders reassess borrowing capacity if one applicant falls pregnant between approval and settlement. They may reduce or exclude the income of the applicant going on leave.

For a standard 30 to 60-day settlement, this is less likely to come up. For construction loans where settlement can be 12 to 18 months away, it becomes a real possibility.

Some lenders count a guaranteed return-to-work income. Others won’t count any income during leave. The difference can be tens of thousands in borrowing capacity.

Reduced hours, overtime or commission

If your overtime gets cut, your commission drops or your hours are reduced, the income your lender approved you on may no longer reflect reality.

A buyer approved at $110,000 including $20,000 of regular overtime, now earning $90,000 base only, may no longer meet serviceability for an $800,000 loan. This is particularly relevant in Geelong’s manufacturing, healthcare and construction industries where overtime fluctuates.

What your options are

Your broker may be able to:

• Switch you to a different participating lender with more flexible policies
• Request an extension on the finance clause from the vendor
• Adjust the loan structure to accommodate changed circumstances
• Help you withdraw and reapply with a new scheme reservation

The earlier they know, the more of these remain available.

Want to talk it through?

For more on how the First Home Guarantee works alongside other benefits like Help to Buy, see our complete guide to Geelong grants and schemes.

If something has changed mid-application, or you want to understand these risks before you start, a 15-minute chat will help you figure out where you stand.

No cost, no pressure, no paperwork until you’re ready.

Schedule a free chat or call us on (03) 5222 7453.