First Home Guarantee: What to Know About the Ongoing Conditions
The First Home Guarantee is one of the most useful schemes available to Geelong first home buyers right now. Skipping Lenders Mortgage Insurance entirely while getting into the market with just 5% deposit is a significant saving.
Like any scheme with significant benefits, there are conditions attached. They relate to where you live, how you manage your loan and when you can refinance. They’re not complicated, but they do last for the life of the guarantee.
Living in the property
You need to move into the property within six months of settlement and continue living there as your principal place of residence while the guarantee is active.
How long is that? It depends on how quickly your scheduled repayments bring your loan down to 80% of the property’s value at purchase.
Housing Australia calculates this based on scheduled repayments only.
Extra repayments in redraw, offset balances and property value increases don’t change the timeline.
For someone who bought an $850,000 property with 5% deposit, that means paying the loan down from $807,500 to $680,000. Roughly 8 to 10 years at typical interest rates.
If you stop living there, the guarantee may no longer apply and your lender may require LMI.
Exemptions may apply in certain circumstances. However, what qualifies depends on your lender, so it’s worth raising early – ideally before you commit, not after you’ve already moved out.
Taking on a housemate while you still live there is generally fine, but worth confirming with your lender.
Refinancing
While the guarantee is active, you can refinance to another participating lender.
There are about 33 on the panel, including three of the four major banks, Bendigo Bank, Great Southern Bank and a range of credit unions.
You can’t increase your loan amount or extend the term, but switching for a better rate is straightforward.
The notable absence is ANZ. Some non-bank lenders and fintechs also sit outside the panel, which means their rates aren’t accessible while the guarantee is in place.
If you refinance to a non-participating lender before reaching 80% LVR, the guarantee ends and the new lender would require LMI.
With 30+ lenders available your options aren’t as limited as they might sound, but they are narrower than they would be without the guarantee.
Equity and loan changes
While the guarantee is in place, you can’t:
- Increase your loan limit
- Withdraw equity
- Borrow additional funds against the property
If you’re planning renovations, the funds would need to come from savings or a personal loan at a higher rate.
If you’re thinking about using equity as a deposit on a second property, that would need to wait until the guarantee ends.
The scheme also requires principal and interest repayments. You can’t switch to interest-only, with limited exceptions during construction periods.
When the guarantee ends
The guarantee ends naturally when your scheduled repayments bring the loan balance to 80% of the property’s original value. For most buyers with a 5% deposit, that’s roughly 8 to 10 years.
It can also end earlier if you refinance to a non-participating lender, stop living in the property without an approved exemption, or repay the loan in full. In any of these cases, if your LVR is still above 80%, your lender may require you to pay LMI.
Situations worth thinking through
For most first home buyers, the conditions are unlikely to cause problems.
If you’re buying somewhere you plan to live with no immediate plans to renovate or invest, the scheme works as intended and the savings are significant.
There are a few scenarios where the conditions have more impact:
- Relocating for work. Renting out the property breaches the occupancy requirement. What qualifies as an exemption depends on your lender, so if relocation is realistic for your job, it’s worth understanding their approach before you apply.
- Relationships change. If you bought with a partner and the relationship ends, both borrowers remain liable for the full loan. Buying one person out typically requires refinancing within the participating lender panel.
- Renovation plans. Without equity access, major work would need to come from savings or a separate loan.
- Investment plans. If you’re planning to turn your first home into a rental and buy again, you’d need to wait until the guarantee ends before converting the property.
None of these are reasons to avoid the scheme. They’re situations worth factoring in so you’re making an informed decision.
How this compares to other programs
| Scheme | How long you must live there |
|---|---|
| First Home Owner Grant (VIC) | 12 months continuous |
| Stamp duty concession (VIC) | 12 months continuous |
| First Home Guarantee (federal) | Until LVR reaches 80%, typically 8 to 10 years |
The state benefits are one-off savings with a fixed residency period. Our guides to the First Home Owner Grant and stamp duty concessions cover what’s involved.
The guarantee runs longer but delivers ongoing value through avoided LMI and earlier market entry.
Want to talk it through?
When we’re working with first home buyers, we cover the ongoing conditions before any paperwork gets signed.
That includes how the guarantee compares to alternatives like guarantor loans or Help to Buy, what your refinancing options would realistically look like and how your specific circumstances might affect the picture.
For more on how the First Home Guarantee works alongside other benefits, see our complete guide to Geelong grants and schemes.
About The Author
Known to most as “Pato”, Andrew Paterson is an award-winning, Licensed Mortgage Broker with over 15 years’ experience in finance and real estate. He works with first home buyers, refinancers and upgraders, making the process clear, calm and practical.
He’s been a finalist for Best Regional Broker, Best Finance Broker and Thought Leader at the Better Business Awards. A lifelong learner and advocate for the industry, he speaks at national events and represents Aussiewide on the world stage internationally.
