First home buyers
First Home Guarantee explained: how the scheme works in Australia
First Home Guarantee explained: how the scheme works, the 5 percent deposit, who may qualify, and how to apply. What it means depends on your situation.
The First Home Guarantee is a government scheme that lets an eligible first home buyer purchase a home with a deposit as small as 5 percent and avoid Lenders Mortgage Insurance. The government guarantees part of your loan, which lowers the risk for the lender, so you can buy sooner than if you waited to save a full deposit. It does not lend you money and it does not pay your deposit. Whether the scheme suits you depends on your circumstances and lender criteria.
This guide explains what the First Home Guarantee is, how it works, what it could save you, who may qualify, and how to apply. The scheme is administered by Housing Australia, which sets the rules and lists the participating lenders. The deposit and insurance figures here come from the Australian Securities and Investments Commission (ASIC) Moneysmart. From 1 October 2025, Treasury and Housing Australia removed the scheme’s income caps and its previous cap on the number of available places, and increased the property price caps. The property price cap is set and reviewed by Housing Australia and changes over time, so always check the current rules on the Housing Australia website before you make an offer. For where the scheme fits in your wider plan, start with our First home buyers hub.
What the First Home Guarantee is
The First Home Guarantee, sometimes called the first home guarantee scheme, is a government programme that helps eligible first home buyers get into a home sooner. The government guarantees part of your home loan, which means the lender carries less risk. That guarantee lets an eligible buyer purchase with a deposit as small as 5 percent, without paying Lenders Mortgage Insurance.
To see why that matters, it helps to know the usual rules. A great savings goal for a house deposit is 20 percent of the purchase price, plus enough to cover buying costs. A 20 percent deposit lets you avoid Lenders Mortgage Insurance. The guarantee changes that maths for an eligible buyer, because the government stands behind part of the loan instead of an insurer.
Three numbers sit at the centre of the scheme.
It is worth being clear about what the guarantee is not. It does not lend you money, it does not pay your deposit, and it does not remove the need to satisfy a lender. It stands behind part of your loan so the lender does not require mortgage insurance, even though your deposit is under 20 percent.
How the guarantee works
Normally, when you borrow more than 80 percent of a property’s value, which means a deposit of less than 20 percent, the lender asks you to pay Lenders Mortgage Insurance. Lenders Mortgage Insurance, or LMI, is a one-off cost that protects the lender if a borrower cannot repay the loan. It does not benefit the borrower, it only protects the lender.
Under the First Home Guarantee, the government guarantees the part of your loan that would usually attract that insurance. The lender accepts the government guarantee in place of LMI, so an eligible buyer can purchase with as little as a 5 percent deposit and avoid the insurance cost. For a fuller explanation of how the insurance works and when it applies, see our guide to What is lenders mortgage insurance.
The trade off is straightforward. A smaller deposit is not a smaller purchase. You still buy the same home, so a 5 percent deposit means you borrow more, and your repayments are larger than they would be with a 20 percent deposit on the same property. Whether that trade off works for you depends on your budget and lender criteria.
Who may qualify
Eligibility for the First Home Guarantee is set by Housing Australia, not by Finance Lab. The common tests below are a guide to the kind of rules that apply, and they are reviewed over time, so confirm the current detail before you rely on it.
- You are buying your first home and have not owned property in Australia before, within the rules the scheme sets.
- You will live in the home as an owner-occupier rather than renting it out as an investment.
- Your income does not limit your eligibility: Housing Australia removed the scheme’s income caps, for a single buyer or a couple, from 1 October 2025.
- The home you buy is priced under the property price cap for the area where you are buying.
- You apply through a participating lender, and you meet that lender’s own credit criteria.
The property price cap is not a single national number; it varies by state and territory, and it is usually higher for capital cities than for regional areas. Because Housing Australia sets and reviews this figure, we do not quote a dollar amount here that could go out of date. For a full walk through of the tests, see our companion guide to First home guarantee eligibility.
The scheme also supports related pathways. There is support for buyers in a regional area, and a separate pathway for single parents and guardians. If you are a single parent, our guide to the Family home guarantee single parent covers how that pathway works.
What it could save you
The headline benefit of the scheme is the deposit you need and the insurance you avoid. Without a guarantee, a deposit under 20 percent usually means LMI, because you are borrowing more than 80 percent of the property’s value. Under the First Home Guarantee, an eligible buyer can purchase with as little as a 5 percent deposit and avoid that insurance cost.
The amount you could avoid depends on the property price and the size of your deposit, so there is no single figure. To estimate the insurance you might avoid on a given purchase, try the LMI calculator.
LMI calculator
Open the calculator to run your own numbers.
Buying with a smaller deposit also brings the rest of the purchase forward, so it helps to plan the full picture. Beyond the deposit, you still need to budget for buying costs such as stamp duty, which is a state government property-transfer tax, and a building and pest report done by a professional. It also helps to look at what a lender might lend you, alongside what the price cap allows. To see what you may be able to borrow, try the borrowing power calculator.
Borrowing power calculator
Open the calculator to run your own numbers.
How to apply
You do not apply to Housing Australia directly. You apply for the First Home Guarantee through a participating lender, and the same application covers your home loan. The broad steps look like this.
- Check the current eligibility rules and property price caps on the Housing Australia website.
- Confirm your borrowing capacity and gather your documents, including identification, income evidence, and your most recent notice of assessment from the Australian Taxation Office (ATO).
- Speak to a participating lender or a mortgage broker who can submit a guarantee-backed application.
- Get pre-approval, then make an offer on a home priced under the cap for your area.
- Proceed to a full approval and settlement, with the guarantee removing the LMI requirement.
The scheme’s cap on the number of places was removed on 1 October 2025, so there is no waiting list for a place under the guarantee. A broker who works with participating lenders can still help you line up a guarantee-backed application smoothly.
Scheme rules change. Confirm the current property price cap for your location on the Housing Australia website, and check your eligibility with a lender or broker before you make an offer.
How the Finance Lab team can help
Working out whether the First Home Guarantee suits you, then lining up the price cap, your deposit, and your borrowing capacity at the same time can feel like a lot. The team at Finance Lab can talk you through whether the scheme may suit your situation and help you prepare a clean application with a participating lender. Whether the guarantee is right for you depends on your circumstances and lender criteria, and we can help you confirm the current rules before you make an offer.
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