First Home Guarantee: The 5% Deposit, No LMI Pathway

Scheme rules, price caps and participating lenders change from time to time. The details below are correct as at August 2026. Always check the current settings at firsthomebuyers.gov.au or with your broker before relying on them.

What is the First Home Guarantee?

The First Home Guarantee (FHBG), run by the federal government through Housing Australia, lets eligible first home buyers purchase a property with a deposit as low as 5%, without paying Lenders Mortgage Insurance (LMI).

Normally, if you have less than a 20% deposit, the bank requires LMI to protect itself against the extra risk. Under the First Home Guarantee, the government guarantees up to 15% of the property’s value to the lender instead, covering that gap. This means you can borrow up to 95% of the purchase price and skip an LMI bill that can easily run into the tens of thousands of dollars.
Important: this is a guarantee, not a cash payment. The government isn’t contributing money to your purchase or paying down your loan, it’s simply standing behind part of the loan so the bank doesn’t need LMI. You still borrow, and repay, the full amount.

Why It Exists

Saving a full 20% deposit is the single biggest barrier for a lot of first home buyers, particularly in expensive capital city markets. The scheme exists to let people buy sooner with a smaller deposit, without the added cost of LMI eating into what they’ve already saved.

A Big Change in October 2025

Until late 2025, the scheme had a limited number of places each year and excluded higher income earners, so places would sometimes run out mid year. From 1 October 2025, the government significantly expanded the scheme:

  • No income caps, buyers of any income level can now apply
  • No place limits, every eligible applicant can access a guarantee, there’s no annual quota or waiting list
  • Higher property price caps, to reflect current market prices

As part of this expansion, the separate Regional First Home Buyer Guarantee, which used to specifically support buyers in regional areas, was folded into the main First Home Guarantee. If you’ve heard of the regional scheme as a separate thing, it’s now effectively part of the same expanded scheme, with regional price caps built in rather than a standalone program.

Property Price Caps (as at August 2026)

Caps vary significantly by location:

  • Sydney and NSW regional centres (Newcastle, Lake Macquarie, Illawarra): $1,500,000
  • Melbourne and Geelong: $950,000
  • Brisbane, Gold Coast and Sunshine Coast: $1,000,000
  • Canberra: $1,000,000
  • Adelaide: $900,000
  • Perth: $850,000
  • Hobart: $700,000
  • Darwin: $750,000, rest of the Northern Territory: $600,000
  • Other regional and smaller areas: lower caps depending on the specific postcode

Because these caps genuinely vary suburb to suburb in some cases, it’s worth checking the exact figure for your target area before you get too attached to a property.

Related Pathway: Family Home Guarantee

Alongside the First Home Guarantee, there’s a separate Family Home Guarantee for eligible single parents or legal guardians with a dependent child, allowing a deposit as low as 2% with the same LMI free structure. Unlike the First Home Guarantee, you don’t need to be a first home buyer to access it.

How to Get Onto These Schemes

This is the part people often miss: you can’t apply to Housing Australia directly. The scheme is only accessed through a panel of participating lenders, currently around 50, including the major banks alongside a range of smaller and regional lenders. Not every bank offers it, so if your usual bank isn’t on the panel, you’ll need to either apply with a lender who is, or go through a mortgage broker who can match you with one.

Pros of the First Home Guarantee

  • Avoid LMI entirely, a saving that can range from around $10,000 to $35,000 or more depending on your loan size.
  • Get in sooner with just a 5% deposit rather than waiting years to save 20%.
  • No income test, since the October 2025 changes.
  • No waiting list, since places are no longer capped.
  • Can be combined with your state’s FHOG, stamp duty concession, and the First Home Super Saver Scheme.

Cons and Risks

  • A larger loan means more interest paid over time, and higher ongoing repayments compared to buying with a full 20% deposit.
  • Less of a buffer if property values fall. Buying at 95% loan to value ratio leaves very little room before you’d be in negative equity.
  • You still need to pass normal lending criteria. The guarantee removes the LMI requirement, it doesn’t guarantee loan approval, you still need to service the loan and meet the lender’s credit standards.
  • Owner occupier only. You can’t use this scheme for an investment property.
  • Limited to participating lenders, which may mean fewer options or a slightly less competitive rate than shopping the entire market.
  • Property must be under the price cap for its location, which can rule out some properties in hot pockets of an otherwise eligible suburb.

Case Example

Michael has saved $35,000, a 5% deposit on a $700,000 property in a regional Queensland centre. Without the scheme, he’d either need to save a further $105,000 to reach 20%, or pay LMI, which on a loan this size could easily be $15,000 or more. Through a participating lender, he uses the First Home Guarantee, borrows 95% of the purchase price, and avoids the LMI bill entirely, getting into his first home years sooner than if he’d kept saving.

The Bottom Line

The First Home Guarantee is a genuinely useful tool for getting into the market sooner without an LMI bill, and the October 2025 changes have made it accessible to a much wider range of buyers. Just go in with your eyes open about the trade off, a smaller deposit means a bigger loan and less of a buffer, so make sure you’re comfortable with the higher repayments before you commit.