First Home Guarantee: The 5% Deposit Scheme Explained
No waitlist. No income cap. No LMI. Here is exactly how the expanded scheme works in 2026, who qualifies, and how to apply.
First Home Guarantee 2026 — Plain English Guide
The First Home Guarantee (formerly the First Home Loan Deposit Scheme) allows eligible Australians to purchase their first home with a 5% deposit and pay zero Lenders Mortgage Insurance. Housing Australia underwrites up to 15% of the property value on behalf of the federal government, covering the gap between the buyer’s 5% deposit and the 20% threshold that would normally trigger LMI.
From 1 October 2025, the scheme became an unlimited entitlement: income caps were removed entirely, annual place limits were scrapped, and property price thresholds were significantly increased. There is no waitlist. Any eligible first home buyer can now apply at any time through a participating lender.
What is the First Home Guarantee and how does it work?
The First Home Guarantee is a federal government scheme in which Housing Australia underwrites up to 15% of a property’s value for eligible first home buyers. This allows the buyer to purchase with only a 5% deposit without triggering Lenders Mortgage Insurance. The buyer takes on the full loan and makes every repayment. The government guarantee sits in the background and is never paid out unless the buyer defaults and the property sale does not cover the outstanding debt.
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The scheme is delivered through participating lenders. You apply through your chosen lender or broker, not through Housing Australia directly. The lender assesses your borrowing capacity, completes a credit assessment, and applies to Housing Australia for the guarantee as part of your loan application. Once issued, the guarantee is valid for 90 days.
The guarantee does not change your interest rate, your repayment structure, or your loan terms in any way. You own 100% of the property from settlement day. This is the key distinction from the Help to Buy shared equity scheme, where the government owns a portion of your home until you buy it back.
On a $750,000 property, avoiding LMI through the First Home Guarantee saves approximately $24,000 to $28,000 upfront. Capitalised into a 30-year loan at 6%, the true saving including accumulated interest is closer to $55,000 over the life of the loan.
Is the First Home Guarantee a cash grant?
No. The First Home Guarantee is not a cash handout, a discount, or a subsidy. It is a federal equity guarantee where Housing Australia underwrites up to 15% of your property value so your participating lender waives the LMI requirement. You borrow the full loan amount. You make every repayment. No money is transferred to you by the government.
This distinction matters because many buyers assume the scheme reduces what they need to save or pay. It does not reduce your loan size. It does not lower your purchase price. What it does is eliminate a significant additional fee that would otherwise be charged by the lender at settlement.
The First Home Owner Grant (FHOG), available separately through state governments, is a cash payment. The First Home Guarantee is not. They are different schemes with different purposes that can in many cases be used together.
What changed in October 2025?
Three major changes took effect on 1 October 2025 under the government’s Homes for Australia plan. Income caps were removed entirely. Annual place limits were scrapped, eliminating the waitlist. Property price thresholds were significantly increased across every capital city and regional centre. The scheme is now available to any eligible first home buyer at any time.
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| Criteria | Previous policy | Current rules (from Oct 2025) |
|---|---|---|
| Income cap — singles | $125,000 per year | No limit |
| Income cap — couples | $200,000 combined | No limit |
| Annual places | 35,000 per year — waitlist common | Unlimited — no queue, apply anytime |
| Sydney price cap | $900,000 | $1,500,000 |
| Brisbane price cap | $700,000 | $1,000,000 |
| Melbourne price cap | $800,000 | $950,000 |
| LMI requirement | Waived under scheme | Waived under scheme |
| Regional scheme | Separate Regional FHBG with distinct rules | Merged into single expanded scheme |
“We both earn well above the old income cap so we had written this scheme off entirely. Ross told us the cap was scrapped and we qualified straight away. Saved us $31,000 in LMI.”
“I thought I had missed the annual intake. Found out there is no intake anymore. Applied in March, got approved in two weeks, bought in April.”
Is there still a waitlist for the First Home Guarantee scheme?
No. The annual place limit and waitlist were eliminated from 1 October 2025. The scheme now operates as an unlimited entitlement. There is no queue, no annual cap, and no need to time your application around a new financial year intake. Any eligible first home buyer can apply at any time through a participating lender.
- ✓No annual cap on places — effective from 1 October 2025
- ✓No queue — applications accepted at any time of year
- ✗Many bank websites still show old waitlist information — confirm with your broker
Previously, 35,000 places were allocated each financial year. When those places were filled — often within weeks of the year opening — applicants were placed on a waitlist until the following year. That system no longer exists. The confusion persists because many financial websites, bank pages, and government information portals still reference the old framework. As of May 2026, no waitlist applies.
Can I apply for the 5% deposit scheme if I earn over $125,000?
Yes. The income cap of $125,000 for singles and $200,000 for couples was completely removed from October 2025. There is no income limit on the First Home Guarantee. A single person earning $300,000 and a couple earning $500,000 combined are equally eligible, provided they meet all other criteria.
- ✓Singles earning $125,000, $200,000, or $300,000 are equally eligible
- ✓Couples earning above $200,000 combined are equally eligible
- ✗You must still pass the lender’s serviceability assessment — your income must service the loan
- ✗Most major bank websites still display the old $125,000 cap — it no longer applies
This is one of the most commonly searched misconceptions about the scheme. Many Australians who previously earned above the threshold disqualified themselves from applying and stopped monitoring the scheme entirely. The confusion is compounded by the fact that some bank websites, mortgage calculator tools, and even certain Housing Australia FAQ pages still display the old income caps. The removal of income caps is confirmed by the official Housing Australia announcement dated 1 October 2025 and has been in effect since that date.
It is important to note that while there is no income cap at the scheme level, you must still pass the participating lender’s standard serviceability assessment. Your income must be sufficient to service the loan at the lender’s assessment rate, which includes a buffer above the actual interest rate. A high income helps rather than hinders this assessment.
What are the First Home Guarantee property price caps?
Property price caps apply by location and were significantly increased from October 2025. Both the purchase price and the lender’s valuation of the property must sit at or below the cap for your specific location. The cap boundary between capital city and regional zones can split individual suburbs, so always confirm your postcode before making an offer.
Cap boundaries between capital city and regional zones can split individual suburbs. One street may qualify at the capital city cap while the adjacent street falls under the regional cap. Always confirm your specific postcode with your broker before making offers or spending money on building inspections.
Who is eligible for the First Home Guarantee?
To be eligible you must be an Australian citizen or permanent resident, a genuine first home buyer who has not previously owned residential property in Australia, intending to live in the property as your primary residence, have a minimum 5% genuine deposit, and be purchasing within the price cap for your location. Principal and interest repayments are required. Income plays no role in eligibility.
- ✓Australian citizen or permanent resident at the time of entering the contract. New Zealand citizens on a Special Category Visa may also be eligible under updated rules.
- ✓Genuine first home buyer. You must never have owned residential property in Australia. If you held a property interest more than 10 years ago and have not owned since, you may still qualify under updated eligibility rules. Confirm with your broker.
- ✓Owner-occupier intent. You must intend to live in the property as your primary place of residence. Investment purchases do not qualify. You must move in within six months of settlement and occupy the property for a continuous period.
- ✓Minimum 5% genuine deposit held in your own name. See the next section for what counts and what does not.
- ✓Principal and interest repayments only. Interest-only loans are not eligible under the scheme.
- ✓Property within the price cap for your location. Both the purchase price and the lender’s formal valuation must sit at or below the cap.
- ✓No income cap. Removed entirely from October 2025. Your income level does not affect scheme eligibility.
What counts as genuine savings for the 5% deposit scheme?
Genuine savings are funds held in your own name for at least three months. This includes money in savings accounts, term deposits, and amounts accessed through the First Home Super Saver Scheme. First Home Owner Grants count as genuine savings at most participating lenders. Gifted funds are accepted by many lenders. A personal loan does not count as genuine savings under any lender’s policy.
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- ✓Funds in savings or transaction accounts held for at least 3 months
- ✓First Home Super Saver Scheme funds released from super
- ✓First Home Owner Grant funds (accepted at most lenders)
- ~Gifted funds — accepted by many but not all participating lenders
- ✗Personal loan funds — do not count under any lender’s policy
Counts as genuine savings: Funds held in savings or transaction accounts for at least three months. Term deposits. First Home Super Saver Scheme withdrawals. In many cases, rent payment history. First Home Owner Grant funds at most lenders.
May count, lender dependent: Gifted funds from a family member. Inheritance. Sale proceeds from other assets. Each lender applies its own policy.
Does not count: Personal loan funds. Buy now pay later balances. Cash held outside the banking system without a verifiable paper trail.
Can you buy an apartment off-the-plan with the First Home Guarantee?
Yes. Off-the-plan apartments, house and land packages, and vacant land with a separate building contract are all eligible property types under the First Home Guarantee. The price cap applies to both the purchase price at contract date and the lender’s valuation of the completed property at settlement. If property values fall significantly between contract and settlement, a valuation shortfall can affect your loan structure.
- ✓Off-the-plan apartments qualify
- ✓House and land packages qualify
- ✓Vacant land with a registered building contract qualifies
- ✗Price cap applies to both the purchase price AND the lender’s valuation at settlement
For off-the-plan purchases, the guarantee is applied at settlement, not at contract exchange. This means the scheme must still be available and you must still meet all eligibility criteria at the time your loan is drawn down. Given the scheme now has unlimited places, this is less of a concern than it was under the old annual allocation system.
Eligible property types under the scheme include: existing houses and apartments, new builds, townhouses, off-the-plan apartments, house and land packages, and vacant land with a registered building contract. The property must be residential and intended as the buyer’s primary place of residence.
Do all Australian banks participate in the First Home Guarantee?
No. The scheme is available through a panel of participating lenders approved by Housing Australia. Three of the Big Four banks are on the panel, along with over 30 other lenders including regional banks, credit unions, and non-bank lenders. You cannot apply to Housing Australia directly. The scheme must be accessed through a participating lender or a broker with access to the full panel.
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- ✓3 of the Big 4 banks are on the panel
- ✓Over 30 approved lenders including regional banks, credit unions, and non-bank lenders
- ✗You cannot apply directly through Housing Australia — must go through a participating lender
- ✗Not all lenders on the panel offer identical rates or features — comparison matters
Lender selection within the scheme matters. All participating lenders deliver the same government guarantee. But the interest rate, offset account availability, repayment flexibility, cashback offers, and loan structure vary significantly between lenders. Two buyers using the First Home Guarantee on the same $700,000 property with the same 5% deposit can end up with meaningfully different loans depending on which panel lender they choose.
A broker with access to the full participating lender panel can compare your options across all approved lenders, not just one bank. This comparison is typically where buyers recover more value than in any other part of the process.
How do I apply for the First Home Guarantee?
You apply through a participating lender or a mortgage broker who works with the panel. You cannot apply directly through Housing Australia. The lender or broker lodges your home loan application and flags the guarantee request simultaneously. Once your loan is approved and the guarantee is issued, it is valid for 90 days. Your broker manages the full process on your behalf.
Confirm your eligibility
Check that you meet all criteria: genuine first home buyer, Australian citizen or PR, intending to live in the property, 5% genuine deposit saved, and purchasing within the price cap for your target suburb. A broker can run through this in a single call.
Confirm your suburb’s price cap
The boundary between capital city and regional cap zones can split individual suburbs. Confirm your specific postcode before making offers or paying for building inspections on properties that might fall outside the cap.
Apply through a participating lender or broker
Your broker lodges the loan application with a participating lender and flags the guarantee request simultaneously. The lender completes a credit and serviceability assessment, then applies to Housing Australia for the guarantee. Pre-approval typically takes 3 to 10 business days.
Receive your guarantee — valid for 90 days
Once issued, your guarantee is valid for 90 days. You can make offers and purchase with confidence knowing LMI is eliminated. If you have not purchased within 90 days, your broker can apply to renew. There is no penalty for renewal under the unlimited scheme.
Can I combine the First Home Guarantee with state grants and the FHSS scheme?
Yes. The First Home Guarantee can be combined with state First Home Owner Grants, stamp duty exemptions, and the First Home Super Saver Scheme. Each has separate eligibility criteria and some property type restrictions apply. Used together, the total benefit package for an eligible buyer can exceed $80,000 on a qualifying purchase.
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First Home Guarantee: no LMI on a $750,000 property saving approximately $26,000. Queensland FHOG: $30,000 cash for a new home signed before 30 June 2026. Stamp duty exemption on new QLD home: approximately $24,500 saved. FHSS used for deposit: up to $50,000 accessed from super.
Total benefit package on a single $750,000 purchase: approximately $80,500 plus the FHSS deposit contribution.
The First Home Guarantee and Help to Buy shared equity scheme cannot be used simultaneously. These are mutually exclusive. If you are deciding between the two, the Guarantee gives you 100% ownership from day one. Help to Buy requires only a 2% deposit but the government owns a share of your property. Your broker can model both options.
What happens if the property valuation comes in lower than the purchase price?
If the lender’s formal valuation of the property is lower than the purchase price, the guarantee and your 5% deposit requirement are calculated against the lower valuation figure, not the purchase price. This can mean your deposit no longer covers the required 5%, creating a shortfall you would need to fund from your own savings.
- ✗Your 5% and the guarantee are calculated on the lower valuation, not the purchase price
- ✗The gap between purchase price and valuation must be funded from your own cash
- ✓A pre-purchase building inspection can indicate whether the price is supportable
For example: you agree to pay $720,000 for a property. The lender’s valuer assesses the property at $680,000. Your 5% requirement is now calculated on $680,000 ($34,000), but the purchase price gap of $40,000 must still be funded. You would need $74,000 at settlement rather than the $36,000 you originally planned for.
Valuation shortfalls are more common in competitive markets where buyers pay above comparable sales to secure a property. Your broker will flag this risk before you commit to a purchase price. Getting a building and pest inspection done before auction or committing to a private treaty price can provide some indication of whether the price is likely to be supportable at valuation.
Can couples both use the First Home Guarantee?
Yes. Joint applications are permitted and both applicants must individually meet all eligibility criteria, including having never previously owned residential property in Australia. Friends and siblings can also apply jointly. If one partner has previously owned property, the couple cannot apply jointly, though the eligible partner may apply as a sole applicant.
Income is assessed collectively to confirm serviceability for the combined loan amount, but there is no income cap on the combined figure at the scheme level. A couple earning $600,000 combined is as eligible as a couple earning $100,000 combined, provided both have never owned property and meet all other criteria.
If one partner has owned residential property in Australia at any point, the couple cannot apply jointly. The other partner may still apply as a sole applicant, with income and borrowing capacity assessed individually. Discuss this with your broker before you start looking at properties, not after you have found one.
General information only. The content on this page is for educational purposes and does not constitute financial advice. Scheme eligibility, price caps, participating lenders, and lender criteria are subject to change. Always confirm current details with a licensed mortgage broker and review the official Housing Australia website (housingaustralia.gov.au) before making any purchasing or borrowing decision. Ross McFarlane (Credit Representative 526725) is an authorised Credit Representative of Australian Associated Advisers Pty Ltd t/a Keylend, Australian Credit Licence 392169.
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Ross McFarlane • Credit Representative 526725 • Australian Associated Advisers Pty Ltd t/a Keylend • ACL 392169
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