Renting Out Your First Home Guarantee Property? You’ll Lose the Guarantee
If you bought your first home using the government’s 5% deposit scheme, chances are life has moved on since then. A new job in another city. A growing family. Maybe even a chance to rent out that first home and buy again. It happens more often than people think.
In fact, a recent Guardian Australia report found that nearly 1,500 homes bought under the scheme have since been turned into investment properties. That might not sound like a lot compared to the more than 208,000 guarantees issued since 2020, but it’s a trend worth understanding, especially if you’re thinking about doing the same thing.
A Quick Refresher On How The Scheme Works
The First Home Guarantee lets eligible buyers get into the market with just a 5% deposit, with the government guaranteeing part of the loan so buyers can skip paying Lenders Mortgage Insurance (LMI). Since October 2025, the high-income restrictions were also removed, which means more people, some earning well over $300,000 a year, are now using the scheme. Today, it’s supporting around 5,600 purchases every month, and encouragingly, 89% of participants are ahead on their repayments.
It’s a genuinely useful leg-up for first home buyers. But like most good things, it comes with fine print.
Here’s The Part People Often Miss
The guarantee is tied to one condition: you need to live in the home. The moment you move out and start renting it to someone else, you’re technically leaving owner-occupation, and that means you’re also leaving the guarantee behind.
This isn’t just a formality. Changing how a scheme property is used can affect your loan structure. Without the guarantee sitting behind your loan, you may suddenly be looking at LMI costs you didn’t have to think about before, or a lender wanting to reassess your finances altogether.
Why This Matters Before You Make The Move
If you’re even considering turning your first home into an investment, this is exactly the kind of decision that benefits from a conversation before you act, not after.
A few things worth checking:
- Whether your current eligibility still applies to any future purchase
- How much equity you actually have to work with
- What your loan looks like once the guarantee is no longer part of it
- Whether refinancing makes more sense before or after the change
Everyone’s situation is different, and the right structure for someone renting out one property while buying another looks nothing like a standard refinance.
Thinking About Your Next Step?
Plans change, and that’s completely normal. What matters is having the right finance strategy behind the change, not just the intention.
At OM Financials, we make the loan process simple and guide you every step of the way. Whether you’re reviewing your options before renting out your first home, or comparing loans as your circumstances evolve, our brokers can walk you through what makes sense for you.
Speak with us today to understand your borrowing power in this market. Book your free consultation now, or contact us anytime on 0478 876 967.
Follow us on LinkedIn and Instagram as well.