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First Home Guarantee 2026: The Complete Guide to Buying with a 5% Deposit

The Biggest Change to First Home Buyer Policy in Years

On 1 October 2025, the Australian Government expanded the First Home Guarantee (previously known as the First Home Buyer Guarantee) in a way that fundamentally changed how first home buyers can enter the market. The result: more Australians than ever before can now purchase their first home with just a 5% deposit — and without paying Lenders Mortgage Insurance (LMI).

If you’ve been saving hard and wondering how much deposit you actually need, the answer for many buyers is now significantly less than 20%.

What Is the First Home Guarantee?

The First Home Guarantee is a federal government scheme administered by Housing Australia. It allows eligible first home buyers to purchase a home with as little as a 5% deposit, with the government guaranteeing the remaining 15% of the deposit. This means lenders treat the loan as if it has a 20% deposit, which eliminates the need for LMI.

Importantly, the government guarantee is not a cash payment — you still borrow 95% of the property value. The guarantee simply protects the lender from loss if you default and the property sale doesn’t cover the outstanding debt. In the vast majority of cases, the guarantee is never called upon. The primary benefit is LMI savings and the ability to get into the market sooner.

What Changed on 1 October 2025?

Three major changes took effect from 1 October 2025, making this the most accessible the scheme has ever been:

No More Income Caps

Previously, the scheme required singles to earn less than $125,000 and couples to have a combined income below $200,000. Those caps have been removed entirely. Now, regardless of your income — whether you earn $80,000 or $300,000 a year — you can access the scheme as long as you meet the other eligibility criteria.

No More Place Limits

The previous annual cap of 35,000 guarantee places per year has been abolished. All eligible first home buyers who meet the criteria can now apply. There’s no rush to “get in before places run out” as there was in prior years. According to the ABC, in the four months following the October 2025 overhaul, 22,921 guarantees were issued — a 75% rise compared to the prior period.

Higher Property Price Caps

The property price caps have increased significantly in most capital cities and regions to better reflect current market values. The key caps effective 1 October 2025 are:

New South Wales (Sydney + regional centres): $1,500,000 (up from $900,000)
Queensland (Brisbane + regional centres incl. Gold Coast, Sunshine Coast): $1,000,000 (up from $700,000)
Victoria (Melbourne + Geelong): $950,000 (up from $800,000)
Western Australia (Perth): $850,000 (up from $600,000)
South Australia (Adelaide): $900,000 (up from $600,000)
Tasmania (Hobart): $700,000 (up from $600,000)
Australian Capital Territory: $1,000,000 (up from $750,000)

For buyers in Sydney, the increase from $900,000 to $1.5 million is transformative — it opens up a far wider range of established homes, townhouses and apartments that were previously out of reach under the scheme.

Who Is Eligible?

While income caps have been removed, other eligibility criteria remain. You must:

Be an Australian citizen or permanent resident
Be 18 years or older
Have never previously owned residential property in Australia (includes investment properties)
Intend to live in the property as your principal place of residence
Have a minimum 5% deposit saved in genuine savings
Purchase a property within the relevant price cap for your location

The scheme is open to individuals, and also to two or more people purchasing together — for example, two friends or siblings buying jointly, as long as both are first home buyers. You can purchase new or existing homes, townhouses, apartments, house and land packages, or off-the-plan properties within the price caps.

How Much Can You Save on LMI?

LMI is typically required when your loan-to-value ratio (LVR) exceeds 80% — that is, when your deposit is less than 20%. On a 5% deposit, LMI costs can be substantial. Here are some illustrative examples of what the First Home Guarantee saves you:

$600,000 property, 5% deposit ($30,000): LMI saving of approximately $15,000–$22,000
$900,000 property (Melbourne cap), 5% deposit ($45,000): LMI saving of approximately $28,000–$35,000
$1,500,000 property (Sydney cap), 5% deposit ($75,000): LMI saving of approximately $50,000–$65,000

These are significant sums. And because LMI is typically capitalised into the loan when borrowers don’t use the scheme, avoiding it also means a lower loan balance and lower total interest paid over the life of the loan.

How to Apply: The Role of Participating Lenders

You cannot apply for the First Home Guarantee directly through Housing Australia. The scheme is accessed through participating lenders — a panel of banks, credit unions and non-bank lenders approved to offer the scheme. As of 2026, there are both major banks and smaller lenders on the panel.

Here’s the process:

Check you meet the eligibility criteria
Speak to a mortgage broker or participating lender about your situation
Your broker will confirm the correct price cap for your location and property type
Lodge a loan application with a participating lender — they apply for the guarantee on your behalf
Once approved, the guarantee is issued and you proceed to purchase

Working with a mortgage broker is particularly valuable here because brokers have access to the full panel of participating lenders, not just a single bank. Some lenders offer more competitive rates or features within the scheme than others, and a broker can compare these for you. Explore the loan types available to first home buyers before you commit to a product.

First Home Guarantee vs Help to Buy: What’s the Difference?

The Australian Government has also proposed a separate shared equity scheme called Help to Buy. While the First Home Guarantee involves a government guarantee (where you own 100% of the property from day one), Help to Buy involves the government taking an equity stake in your property — meaning you own a percentage and the government owns the rest, to be bought out over time.

The First Home Guarantee is available now. Help to Buy has been through legislative debate and has a more complex structure. For most buyers in 2026, the First Home Guarantee is the more straightforward and immediately accessible option.

You can also combine the First Home Guarantee with state-based grants such as the Queensland FHOG ($30,000 for new builds) or Victoria’s stamp duty concessions — they are separate schemes with separate eligibility criteria. If you want to understand all the grants available across Australia, we’ve covered all states in detail.

Common Questions About the First Home Guarantee

Can I use the First Home Guarantee to buy an investment property?

No. The First Home Guarantee requires you to occupy the property as your principal place of residence. Purchasing an investment property does not qualify, and you must move in within a reasonable timeframe after settlement.

Is there a minimum deposit required?

Yes. You need a minimum 5% genuine deposit to access the scheme. “Genuine savings” typically means funds that have been held in your account for at least three months, though lender policies vary. Gifted funds, inheritance, or equity from another property may be treated differently by individual lenders.

What happens if I sell the property after buying through the scheme?

Once you’ve purchased the property, you own it outright (unlike shared equity schemes). There are no government claw-back provisions on sale. The guarantee simply means the government would cover any shortfall to the lender if you defaulted during the loan — not that they retain any equity interest in the property.

Can two first home buyers apply together?

Yes. The scheme allows for joint applications from two or more eligible first home buyers. Both applicants must each meet all the eligibility criteria — including the requirement to never have previously owned residential property in Australia.

Start Your First Home Journey with Lagos Financial

The First Home Guarantee has never been more accessible — and with no place limits and no income caps, there’s no reason to delay. Whether you’re buying in Sydney up to $1.5 million, Brisbane up to $1 million, or anywhere else in Australia, a Lagos Financial mortgage broker can confirm your eligibility, find the best participating lender for your situation, and help you structure your loan to get into your first home sooner. Book a complimentary assessment today and let’s map out your 5% deposit strategy.

Also explore the Family Home Guarantee for single parents and First Home Super Saver Scheme.