First Home Guarantee: Buy Your First Home With a 5% Deposit
The First Home Guarantee lets eligible buyers in Australia buy with just a 5% deposit and no LMI. See how it works, what changed, and if you qualify.
By Timothy Hirou GaschereauPublished 11 min read
Saving a 20% deposit in Australia is genuinely hard, and in the bigger cities the target keeps moving faster than the savings grow. The First Home Guarantee scheme changes the maths: it lets eligible first home buyers purchase with as little as a 5% deposit, without paying Lenders Mortgage Insurance (LMI). That is a real saving of tens of thousands for many buyers.
The scheme was significantly expanded from 1 October 2025, removing the annual cap on places and income limits, and raising property price caps across most of the country. If you looked at it before and thought you did not qualify, it is worth checking again. It is general information only, not advice: always confirm current rules with Housing Australia.
🎯 The essential: The First Home Guarantee lets eligible buyers purchase with a 5% deposit and NO LMI, because the government guarantees up to 15% of the loan to the lender. It is NOT a cash grant. Apply through a participating lender, not the government. From 1 October 2025 it was expanded: no place limits, income caps removed, higher price caps (which vary by area). Avoiding LMI is a real saving, but a 5% deposit means a bigger loan. Check Housing Australia for current caps.
What the First Home Guarantee actually is
The First Home Guarantee is part of the Home Guarantee Scheme, run by Housing Australia (a federal body). The core mechanic: the government guarantees up to 15% of the property value to your lender, so the lender's risk is effectively covered to 80% and they waive the requirement for LMI. It is not a cash payment, a grant, or a deposit top-up: the government gives you no money. You still borrow the other 95% and repay every cent with interest. The LMI saving, though, is real: on a $600,000 property with a 5% deposit, LMI can run to $23,000 to $31,000.
How you avoid LMI
Normally, borrow more than 80% of a property's value (a loan-to-value ratio, or LVR, above 80%) and lenders charge LMI to protect themselves. LMI protects the lender, not you. With the guarantee covering up to 15%, the lender's effective exposure drops to 80% LVR, so they do not require LMI.
You do not apply to the government. You apply through a participating lender on Housing Australia's panel (30+ banks and customer-owned lenders): check your eligibility on the Housing Australia site, confirm the price cap for your area, then apply for a home loan as normal. The lender assesses it like any other loan and applies the guarantee behind the scenes.
What changed in 2025-26
The scheme was significantly expanded from 1 October 2025:
- No place limits: the previous annual cap (for example, 35,000 places a year) was removed. All eligible first home buyers can apply.
- No income caps: the earlier limits (such as $125,000 single / $200,000 couple) were eliminated.
- Higher price caps: eligible purchase-price limits rose substantially in most markets (for example, the NSW capital-city and regional-centre cap rose from $900,000 to $1,500,000).
These are the changes as announced, and the scheme has been updated several times. Property price caps still vary by city and region, so what applies in Melbourne differs from regional Victoria or Perth. Always check Housing Australia for the cap and current rules that apply to your specific area before you apply.
Eligibility basics
- Genuine first home buyer (some streams differ, so check).
- Australian citizen or permanent resident.
- Owner-occupier: you must move in and live there; investment properties are not eligible.
- Under the price cap for your area (caps vary by city and region).
- A participating lender on Housing Australia's panel.
Eligibility rules can change, so treat this as a guide and confirm the current requirements with Housing Australia before you apply.
The trade-offs, honestly
The guarantee removes one big barrier, but not the responsibility of a large loan. A 5% deposit on a $600,000 property means a $570,000 loan; a 20% deposit means $480,000. That $90,000 difference compounds over 30 years into significantly more total interest. With only 5% equity, a modest fall in prices could put you in negative equity (owing more than the property is worth), which limits your options if you need to sell early. And the lender still checks you can service the bigger repayments.
| Feature | 5% deposit (Guarantee) | 20% deposit |
|---|---|---|
| Deposit needed | $30,000 | $120,000 |
| LMI | $0 (waived by guarantee) | $0 (not required at 80%) |
| Loan size | $570,000 | $480,000 |
| Total interest (illustrative) | Higher (larger loan) | Lower (smaller loan) |
| Equity buffer | Thin (5%) | Solid (20%) |
| Negative-equity risk | Higher | Lower |
The genuine upside: you avoid LMI, stop paying rent, start building equity, and may benefit from any capital growth, and in rising markets, waiting to save 20% can push your target further out of reach. Go in clear-eyed.
Other guarantees and stacking schemes
The Family Home Guarantee lets eligible single parents and single legal guardians buy with a deposit as low as 2%, no LMI (different rules, so check). And the First Home Guarantee can generally be combined with other help:
- The First Home Owner Grant (a state cash payment, usually for new builds).
- Stamp duty concessions (which vary by state and can cut your upfront cost).
- The First Home Super Saver (FHSS) scheme (saving for a deposit inside super).
Each has its own rules, but stacking those you qualify for can meaningfully cut the cost of buying. When you are ready to line up finance, our home loan comparison guide helps.
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❓ Frequently asked questions
What is the First Home Guarantee?
+
The First Home Guarantee is a federal scheme administered by Housing Australia. It lets eligible first home buyers purchase with as little as a 5% deposit without paying Lenders Mortgage Insurance, because the government guarantees up to 15% of the property value to the lender, bringing the lender's effective exposure to 80%.
Do I still pay LMI with the First Home Guarantee?
+
No. LMI is waived entirely under the scheme: the government guarantee replaces the role LMI would normally play in protecting the lender. On a $600,000 property with a 5% deposit, that can save you roughly $23,000 to $31,000 or more.
Is the First Home Guarantee a cash grant?
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No, and this is the most common misconception. The government does not give you any money. The guarantee is a commitment to the lender that covers part of the loan if you default. You still borrow and repay the full loan amount with interest.
How do I apply for the First Home Guarantee?
+
You do not apply to Housing Australia directly. You apply through a participating lender on Housing Australia's approved panel. Check your eligibility on the Housing Australia website first, then contact a participating lender to begin your home loan application, and the lender handles the rest.
What is the Family Home Guarantee?
+
The Family Home Guarantee is a related scheme for eligible single parents and single legal guardians with at least one dependent child, allowing a deposit as low as 2% with no LMI. It has different eligibility rules from the main First Home Guarantee, so check Housing Australia.
Can I combine the First Home Guarantee with other first home buyer help?
+
Generally yes. It can typically be combined with the First Home Owner Grant (a state cash payment, usually for new builds), stamp duty concessions (which vary by state), and the First Home Super Saver scheme. Each has its own eligibility rules, so check them separately.
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Making Money Made Simple
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Some links above are affiliate links. If you buy through them, Snowball Invest may earn a small commission at no extra cost to you. We only recommend books we'd suggest anyway.
Sources
This article is general information only, not financial advice. The Home Guarantee Scheme's rules, income conditions and property price caps are set by Housing Australia and change over time. Always check Housing Australia for the current rules and a mortgage broker for your situation.
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General information only. This article is educational and does not constitute personal financial advice. It does not account for your circumstances. Consider your own situation and seek advice from a licensed adviser before acting. Read our full disclaimer.
Timothy Hirou Gaschereau
Founder of Snowball Invest, not a financial adviser.
I write about what I'm learning myself, because nobody ever taught us how to take control of our own money. It's a skill, not a mystery, and it's never too late to learn it. The best day to start was yesterday, the second best is today.
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