Government First Home Buyer Guarantee vs 95–98% LVR Home Loans Without Lenders Mortgage Insurance (LMI)

Buying your first home is one of the biggest financial decisions you’ll ever make. For many Australians, the Australian Government’s Home Guarantee Scheme (First Home Guarantee) has made home ownership possible with as little as a 5% deposit and no Lenders Mortgage Insurance (LMI). 

However, many buyers are already thinking ahead. 

A common strategy is: 

1. Buy a first home to live in. 
2. Build equity. 
3. Purchase a second home to live in. 
4. Keep the first property as an investment. 

While this strategy can work very well, many buyers don’t realize there are important differences between the Government Guarantee Scheme and a standard home loan. 

Understanding these differences before you buy could save thousands of dollars and provide much greater flexibility in the future. 

 Understanding the Two Separate Benefits 

Victorian first home buyers may receive assistance from two completely different government initiatives. 

1. Australian Government Home Guarantee Scheme

This allows eligible buyers to purchase with only a 5% deposit without paying Lenders Mortgage Insurance because the Australian Government guarantees part of the loan. 

2. Victorian First Home Buyer Stamp Duty Concession

Victoria provides: 

• No stamp duty on eligible homes up to $600,000. 

• Reduced stamp duty between $600,001 and $750,000. 

Although these benefits are often received together, they have completely different eligibility rules and ongoing commitments. 

 

Victorian Stamp Duty Concession – How Long Must You Live There? 

The Victorian concession is relatively straightforward. 

You must: 

• move into the property within 12 months of settlement; and 

• live there continuously for at least 12 months as your principal place of residence. 

Once this residency requirement has been satisfied, buyers generally do not have to repay the stamp duty exemption or concession solely because they later rent out the property, provided all other eligibility requirements were met. 

For many investors, this means the Victorian residency requirement is completed after approximately one year.  

Government First Home Guarantee – Different Rules Apply 

The Australian Government Guarantee is different. 

Its purpose is to help first home buyers purchase their own home, not an investment property. 

To qualify you must: 

• be an Australian citizen or permanent resident 

• be at least 18 years old 

• have a minimum 5% genuine deposit 

• buy within the property price caps 

• obtain an owner-occupied principal and interest loan 

• intend to live in the property. 

Unlike the Victorian stamp duty concession, these obligations continue while the Government Guarantee remains active. 

How Long Does the Government Guarantee Last? 

Many buyers assume the guarantee finishes after twelve months. 

It does not. 

The guarantee generally remains active until one of the following occurs: 

• your loan reduces to 80% Loan to Value Ratio (LVR) or lower; 

• you refinance; 

• you sell the property; 

• your loan is discharged. 

This distinction is extremely important. 

The Government Guarantee is tied to your loan, not simply to how long you have lived in the property.  

Why Does 80% LVR Matter? 

Normally: 

• loans above 80% LVR require Lenders Mortgage Insurance. 

• loans at or below 80% LVR generally do not. 

Because the Government guarantees part of your loan above 80% LVR, that guarantee is no longer required once your loan reaches 80% LVR. 

For many borrowers, reaching 80% LVR can take several years unless: 

• the property increases substantially in value; 

• extra repayments are made; 

• a revaluation improves the LVR. 

This means living in the property for two years does not automatically end the Government Guarantee.  

What Happens If You Move Out Too Early? 

While the Government Guarantee remains active, borrowers are generally expected to continue satisfying the owner-occupier requirements (subject to any approved exceptions). 

If you: 

• purchase another owner-occupied property, 

• move into that property, 

• rent your first property, 

before the guarantee has ended, your lender may determine that you no longer satisfy the ongoing scheme requirements. 

Depending on the circumstances, the guarantee may cease to apply. If the loan is still above 80% LVR, the lender may require Lenders Mortgage Insurance or take other action permitted under the loan contract and scheme rules. 

This is one of the least understood aspects of the Government Guarantee Scheme.  

Common Example 

Imagine the following scenario. 

Year 1 

You buy a $700,000 property. 

Deposit: 5%. 

Government Guarantee applies. 

No LMI. 

Year 2 

You have lived in the property for two years. 

You now wish to buy a larger family home. 

Your original loan remains at approximately 91% LVR. 

Because the Government Guarantee may still be active, changing the first property into an investment could affect your ongoing eligibility under the scheme. 

Although you have satisfied the Victorian stamp duty residency requirement, that does not necessarily satisfy the ongoing obligations of the Government Guarantee. 

These are separate programs with separate rules.  

Our Lender’s Alternative 

Some borrowers prefer greater flexibility. 

Instead of relying on the Government Guarantee, our lender offers owner-occupied and investment lending of up to 98% LVR, with: 

• no traditional Lenders Mortgage Insurance premium 

• lender fees that are guaranteed to be less than the LMI charged by most major lenders 

• competitive interest rates compared with many high-LVR bank loans 

• the ability to purchase both owner-occupied and investment properties. 

Most importantly, because the loan is not dependent on an Australian Government Guarantee, borrowers are not subject to the Government Guarantee’s ongoing owner-occupier conditions. 

This means borrowers may choose to change the property’s use from owner-occupied to investment in accordance with their loan contract, without the risk of breaching the Government Guarantee Scheme solely because the property’s use changes while the loan remains above 80% LVR. 

Borrowers should still check their lender’s terms and any applicable tax or legal implications before changing the property’s use.  

Which Option Is Better? 

Government First Home Guarantee 

Advantages: 

• 5% deposit. 

• No upfront LMI. 

• Government-backed support. 

• Excellent for buyers planning to remain in their first home for several years. 

Potential limitations: 

• Ongoing owner-occupier obligations while the guarantee remains active. 

• Less flexibility if you intend to convert the property into an investment before the guarantee ends. 

• The guarantee generally remains until the loan reaches 80% LVR or another discharge event occurs.

Our Lender 

Advantages: 

• Borrow up to 98% LVR. 

• No traditional LMI premium. 

• Fees lower than typical LMI costs. 

• Competitive interest rates. 

• Available for owner-occupied and investment lending. 

• Greater flexibility if your long-term strategy is to build a property portfolio. 

Potential considerations: 

• A higher LVR generally means a larger loan and higher repayments. 

• Eligibility depends on the lender’s credit policy and serviceability requirements. 

Final Thoughts 

The Government First Home Guarantee is an excellent initiative that has helped thousands of Australians enter the property market with a smaller deposit and without paying LMI. 

However, it is designed primarily for owner-occupiers, and its obligations can continue while the Government Guarantee remains in place—not merely for the first 12 months. 

For buyers whose long-term strategy includes converting their first home into an investment and purchasing another owner-occupied property, it is important to understand these ongoing commitments before deciding which loan structure best supports their goals. 

A specialist mortgage broker can compare the Government Guarantee with alternative lending options, helping you choose the solution that provides the right balance of affordability, flexibility and future investment potential. 

This draft is written to be informative, SEO-friendly, and careful not to overstate the consequences of the Government Guarantee Scheme. Before publishing, I recommend a legal/compliance review if you intend to use it as marketing material for a lending business, particularly any claims comparing rates, fees, or flexibility with competitors.