First Home Guarantee (5% Deposit Scheme): Everything You Need to Know Before You Buy
Buying your first home can feel like an uphill battle, especially when saving a 20% deposit seems impossible. The First Home Guarantee (FHBG), part of the Australian Government’s Home Guarantee Scheme, is designed to make home ownership achievable sooner.
With recent changes, this scheme is now more accessible than ever. Here’s what you need to know.
What Is the First Home Guarantee?
The First Home Guarantee allows eligible first home buyers to purchase a property with as little as 5% deposit, without paying Lenders Mortgage Insurance (LMI).
Normally, if you have less than 20% deposit, banks charge LMI, which can cost $10,000 to $30,000 or more. Under this scheme, the government acts as guarantor for up to 15% of the property value, so you avoid that cost entirely.
How Does It Work?
Here’s the process in simple steps:
Save a 5% deposit (or 2% if you’re a single parent under the Family Home Guarantee)
Apply through a participating lender, the government guarantees the remaining 15%
Borrow up to 95% of the property value without paying LMI
Buy and move in, you must live in the property as your principal residence.
What Changed in 2025?
The October 2025 reforms are game-changing:
Unlimited places, no more quotas or waitlists
No income caps, previous limits of $125K (single) and $200K (couple) are gone
Higher property price caps, Sydney up to $1.5M, Melbourne up to $950K, Brisbane up to $1M, Perth up to $850K
No LMI, saving thousands upfront
Expanded eligibility, friends, siblings, and family members can apply together.
Eligibility Criteria
To qualify, you must:
Be an Australian citizen or permanent resident
Be 18 years or older
Be a first home buyer (or not owned property in the last 10 years)
Intend to live in the property (owner-occupied)
Have at least 5% genuine savings for the deposit
Apply through a participating lender.
What Properties Are Eligible?
Existing house, townhouse, or apartment
House and land package
Off-the-plan apartment or townhouse
Land with a separate contract to build a home (must meet title and build requirements).
Benefits of the Scheme
Enter the market sooner, cuts years off saving time
Save thousands, avoid LMI costs
Combine with other incentives, stamp duty concessions, First Home Owner Grant, and First Home Super Saver Scheme
Competitive interest rates, similar to 80% LVR loans, not 95% LVR loans.
Limitations and Risks
You still need to budget for stamp duty and other upfront costs
Property price caps apply by location
You must remain eligible, if circumstances change, you may need to pay LMI
If you sell or refinance, the guarantee ends, and normal lending rules apply.
Example: How Much Could You Save?
Property price: $950,000 (Melbourne cap)
Normal deposit (20%): $190,000
Under FHBG: $47,500 (5%)
Savings: $142,500 in deposit plus up to $30,000 in LMI costs.
How to Apply
Check eligibility on Housing Australia’s website
Find a participating lender (major banks and many non-bank lenders are included)
Get pre-approval, you’ll have 90 days to find a property
Sign contracts and move in within six months.
Final Thoughts
The First Home Guarantee is one of the most powerful tools for first home buyers in decades. It removes the biggest barriers, large deposits and LMI, and opens the door to home ownership sooner.
If you’re unsure whether you qualify or how to structure your loan, it’s worth speaking to a broker who understands the scheme and can help you combine it with other incentives.
They might seem similar at first glance, but the way they work can have a big impact on flexibility, tax planning and how much interest you actually save over time.
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