What is the Regional First Home Buyer Guarantee?
The Regional First Home Buyer Guarantee is a federal government scheme that allows eligible first home buyers in regional Australia to purchase with as little as a 5% deposit, without paying Lenders Mortgage Insurance. The government guarantees up to 15% of the loan, covering the gap between the buyer's deposit and the 20% lenders typically require. Places are limited each financial year and are allocated through participating lenders.
The Fuller Picture
The Regional First Home Buyer Guarantee (RFHBG) is part of the federal government's Home Guarantee Scheme, administered by Housing Australia. Under the scheme, the government acts as a guarantor for up to 15% of the purchase price, allowing buyers with a 5% deposit to access a loan without paying Lenders Mortgage Insurance (LMI). LMI typically costs thousands of dollars and is charged when a buyer has less than a 20% deposit — the guarantee effectively removes that cost without the buyer needing to save more.
To be eligible, buyers must be Australian citizens or permanent residents, meet income caps (currently $125,000 per year for singles and $200,000 for couples), be genuine first home buyers, and intend to live in the property as their principal place of residence. The property must also be located in a qualifying regional area and fall within the relevant price cap for that region. Buyers still need to demonstrate genuine savings and serviceability — the guarantee supports the deposit gap, not the overall loan assessment.
The scheme is available through participating lenders, which include major banks and a range of approved lenders. Places are capped each financial year, so applications can close early if demand is high. Buyers apply directly through a participating lender, who handles both the standard loan application and the guarantee eligibility check at the same time. The guarantee is a backstop for the lender — it is not a cash grant or a reduction in your loan amount.
What This Means for Your Purchase
For buyers in regional areas, the guarantee can meaningfully reduce the time it takes to enter the market. Rather than spending years saving a full 20% deposit, buyers can enter with 5% and channel the money they would have paid in LMI toward building equity or managing early ownership costs instead.
The key thing to understand is that the guarantee removes the LMI cost but does not lower your repayments or reduce what you are borrowing. You are still taking on a loan at the 5% deposit level, which means higher monthly repayments than a buyer with a larger deposit. Lenders will still stress test your application at a higher interest rate buffer, and serviceability remains the main hurdle for many buyers even with the guarantee in place.
There is also a property price cap tied to the scheme, which differs depending on whether you are buying in a capital city or a regional area. For buyers in the Illawarra, the regional cap applies — not the Sydney metro cap. That distinction matters, because it may place some properties in established or coastal suburbs outside the scheme's reach. Knowing the cap before you start inspecting helps you focus on properties that actually qualify.
How This Shows Up in the Illawarra
The Illawarra — including Wollongong, Shellharbour, and the surrounding local government areas — qualifies as a regional area under the scheme. This puts buyers here in the regional price tier, not the Sydney metro tier. The regional cap for NSW has been approximately $750,000 in recent scheme settings, though this is subject to annual review and buyers should confirm the current figure through Housing Australia or their lender before committing to a purchase. For much of the Illawarra's entry-level market — units, townhouses, and smaller houses in suburbs like Warrawong, Dapto, or Albion Park — prices sit within reach of the cap.
Buyers targeting more established or coastal areas such as Thirroul, Austinmer, Gerringong, or Kiama may find that properties there exceed the regional cap. In those cases, the guarantee cannot be used for that purchase and buyers would either need a 20% deposit or be willing to pay LMI. A buyers agent with knowledge of the local market can help you identify where the cap lines up with realistic property options for your priorities, so you are not spending time inspecting properties the scheme cannot support.
Frequently Asked Questions
Is the Illawarra considered regional for this scheme?
Yes. Wollongong, Shellharbour, and the surrounding Illawarra region qualify as regional areas under the Regional First Home Buyer Guarantee. The regional price cap applies here, not the Sydney metro cap.
What is the current property price cap for the Illawarra?
The cap is set by Housing Australia and reviewed each year. For regional NSW it has been approximately $750,000 in recent settings, but you should confirm the current figure directly with Housing Australia or a participating lender before inspecting. Buying above the cap means the guarantee cannot be used for that property.
Can I use the Regional First Home Buyer Guarantee for an investment property?
No. The scheme is only available for owner-occupiers who intend to live in the property as their principal place of residence. Investment purchases are not eligible under this scheme.
How many places are available each year?
Places are capped each financial year and allocated across participating lenders. Once they are filled, no further applications are accepted until the next year begins. If you are ready to buy, applying early in the financial year improves your chances of securing a place.
What if the property I want is above the price cap?
The guarantee simply cannot be used for that purchase. You can still buy the property, but you would either need a 20% deposit or pay LMI on a smaller deposit. Some buyers start with a property that fits within the scheme, build equity, then upgrade later.
Can a buyers agent help me find properties that qualify for the scheme?
Yes. A buyers agent can filter for properties within the regional price cap, assess whether the scheme suits your situation, and connect you with suitable lenders. In a competitive market, having someone who understands both the property and the scheme conditions saves time and avoids pursuing properties the guarantee cannot support.
If you want to work out whether the Regional First Home Buyer Guarantee is the right path for your purchase, we can walk through the eligibility and property options with you. Get in touch with the team at The Shoreline Agency.
