Regional Home Guarantee – 5% Deposit and no LMI on Regional Homes for First Home Buyers

Similar to the other sections of the Government’s Home Guarantee Scheme (First Home Guarantee, Family Home Guarantee and the previous New Home Guarantee), the Regional Home Guarantee will allow you to purchase a new home with a lower deposit.  

With the Regional Home Guarantee you are able to purchase a home with a deposit as low as 5% and avoid paying lenders’ mortgage insurance (LMI). In most cases LMI is applicable when borrowing more than 80% of a property’s value and is an insurance that is used to protect the lender. Due to being a part of the First Home Guarantee scheme offered by the Government, eligible applicants for the Regional Home Guarantee can avoid paying LMI as the Government serves as a guarantor on your loan, meaning there is no need for the bank to take out this insurance.  

It is important to note that the Regional Home Guarantee does differ from the other components of the New Home Guarantee and the Family Home Guarantee as it is only available to eligible participants who have not owned a home for at least 5 years and are looking to purchase a new home in a regional location.  

To be eligible for the Regional Home Guarantee scheme you will need to meet these basic conditions:  

• You must be purchasing a new home in a regional location 
• Do not current and have not owned a home for at least 5 years, including commercial property, investment property, owning land or a company title interest in land in Australia 

In addition to these requirements, as the Regional Home Guarantee is a subsection of the First Home Guarantee, the following eligibility requirements will also apply:  

• Be an Australian citizen, at least 18 years of age 
• Singles with a taxable income less than $125,000, couples less than $200,000 for the previous financial year. Please note when applying for a place in this scheme you will need to provide the relevant Notice of Assessment from the ATO for the previous financial year. 
• Couples are only allowed to apply if they are married or in a de-facto relationship. Other joint applicants (siblings, friends, parent/child, etc) are not eligible. 
• You need to move into the property within six months of owning your home and continue to live there for so long as your home loan has a guarantee under the Scheme. 
• Have a deposit saved of at least 5% of the value of the property you are purchasing. 

In order to apply for a place in the Regional Home Guarantee, you will need to ensure the property you are looking at purchasing is within the price caps, previously established for regional areas in the First Home Guarantee.  

Source: National Housing Finance and Investment Corporation¹   

The main benefit of the Regional Home Guarantee scheme is the ability to purchase your home in a regional area and enter the market quicker due to being able to provide a low deposit and pay no LMI. The amount of LMI you would usually pay can vary depending on where you are purchasing your home, your lender, and the size of your deposit. With this scheme, you may be able to save thousands by not paying LMI.  

It is of course important to understand that owning a home and purchasing a property with a mortgage involves more than the deposit. During the purchase process, extra costs may arise and home buyers will need to factor these into their budget. Extra costs may include pest and building, legal fees and more. 

In the context of the Regional Home Guarantee, a “new home” is defined as a property that has completed construction on or after 1 January 2020 and has never been sold as a residential premises, rented or leased, or lived in at any time.  

In some cases, a property may also be eligible if it has been substantially renovated to replace demolished premises. Although in this case the property will need to be ready for you to move in from settlement, as you would be ineligible if you were looking to purchase a property to do your own substantial renovations.  

Applying for the Regional Home Guarantee is a similar process to the First Home Guarantee as all applications will need to be made directly with one of the Scheme’s participating lenders or through a mortgage broker. There are currently 27 participating lenders across Australia offering places under this scheme. 

Contact your local Mortgage Choice broker today to find out if you’re eligible – and to find out which lenders are involved in the scheme.