Refinancing a First Home Guarantee Loan: What You Need to Know Before You Commit

By Andrew Paterson

The First Home Guarantee is one of the best tools available for first home buyers right now. Avoiding tens of thousands of dollars in Lenders Mortgage Insurance while getting into the market with just 5% deposit – for most people, that’s a genuinely good deal.

But like any scheme with significant benefits, there are conditions attached. One of the lesser-known ones relates to refinancing, and it’s worth understanding before you sign anything.

The refinancing condition

While the guarantee is active on your loan, you can only refinance to another participating lender. There are about 33 of them, including CBA, NAB, Westpac, Bendigo Bank, Great Southern Bank and a range of credit unions and smaller lenders.

That’s a reasonable spread, and for most borrowers it provides enough competition to keep rates in check.

The notable absence is ANZ – the only Big Four bank that doesn’t participate. Some non-bank lenders and fintechs sit outside the panel too, which means their rates (often among the sharpest in the market) aren’t accessible while the guarantee is in place.

If you refinance to a non-participating lender before your loan drops below 80% LVR, the guarantee ends and the new lender would require LMI – potentially the same cost you avoided by using the scheme.

How long does the guarantee stay active?

Housing Australia calculates whether you’ve reached 80% LVR based on scheduled repayments only – not extra repayments sitting in redraw, not offset account balances, and not increases in your property’s value.

For someone who started with a 5% deposit, that typically means 8 to 10 years of scheduled repayments before the guarantee naturally ends.

Extra repayments and offset balances still reduce your interest and build equity. They just don’t accelerate your exit from the guarantee. The timeline is fixed by your original loan structure.

What this looks like in practice

Say you bought an $800,000 property with a 5% deposit. Your loan is $760,000.

Three years in, you’re paying 6.4% and a participating lender is offering 6.15%. You switch, the guarantee transfers, no LMI. That happens all the time.

Now say a non-participating lender is advertising 5.85%. To access that rate, you’d need to pay LMI – probably around $25,000 on that loan size. The rate saving might be $4,000 a year, so it would take over six years just to break even.

For most people, the maths doesn’t stack up.

Use our mortgage repayment calculator to run the numbers for your situation.

The point isn’t that you’re trapped with bad options. It’s that your options are narrower than they would be without the guarantee, and that narrowness lasts longer than most people expect.

Situations where this matters more

For straightforward refinancing – chasing a better rate, switching to a lender with better service – the participating panel usually covers what you need. But there are a few scenarios where the restriction has more impact:

• Relationship changes: If you bought with a partner and the relationship ends, removing one person from the loan counts as a refinance. You’d need to stay within the panel, and the remaining borrower would need to qualify on their own income. Sometimes that works fine. Sometimes it means choosing between keeping both names on the loan, selling, or paying LMI to leave the scheme.
• Relocating for work: The scheme requires you to live in the property as your principal residence. If you need to move – say you bought in Armstrong Creek and landed a job in Melbourne – some lenders grant temporary exemptions. Not automatic, so check with your broker first.
• Major renovations: You can’t increase your loan amount while the guarantee is active. Funding would need to come from savings or a separate loan at a higher rate.

None of these are reasons to avoid the scheme. They’re just things worth factoring in when you’re weighing up your 

The October 2025 changes

The First Home Guarantee got a significant overhaul recently. Income caps were removed entirely, place limits were abolished, and price caps increased – Geelong and Melbourne both went to $950,000.

The refinancing conditions stayed exactly the same. The scheme became more accessible, but the mechanics of how the guarantee works didn’t change.

Is it still worth using?

For most first home buyers, yes.

The LMI saving is substantial. Getting in earlier gives property values more time to work in your favour. And 33 participating lenders is enough to maintain genuine competition on rates.

The refinancing condition isn’t a catch or a trap – it’s just part of the deal. You’re getting a significant benefit upfront, and in exchange you accept some restrictions for a period that’s largely determined by your original loan structure.

Whether that trade-off works for you depends on your circumstances.

Our job is to map out the scenarios

When we’re working with first home buyers, we walk through all of this before any paperwork gets signed. That includes:

• How the guarantee compares to options like guarantor loans or Help to Buy
• What your refinancing options look like at different points
• How specific circumstances – partner situations, potential relocation, renovation plans – might affect the picture

The goal is to make an informed decision, not discover the conditions after you’ve already committed.

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

Want to talk it through?

A 15-minute chat will tell you exactly where you stand – whether the First Home Guarantee makes sense for your situation, and what you’d need to know before going ahead.

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

Book a call or call us on (03) 5222 7453.