Buying your first home is a huge achievement, but saving up that daunting 20% deposit can make the dream feel out of reach, especially with property prices rising across Australia. The Australian Government’s First Home Guarantee (FHBG), running from 1 October 2025, is here to make it much easier for first-home buyers to enter the market with just a 5% deposit—and avoid the massive cost of Lenders Mortgage Insurance (LMI). Let’s break down how this scheme works, who can apply, the big benefits, and everything you need to know to get started in clear, simple language.

What Is the First Home Guarantee Scheme?

The First Home Guarantee is a government-backed initiative that lets eligible first-home buyers purchase property with as little as a 5% deposit. Housing Australia manages the scheme, and from October 2025, it comes with several big improvements:

No limit on the number of applicants—no more waiting lists.
No income caps—anyone who meets the other criteria can apply.
Higher property price limits—so more homes around the country are eligible.
Easier access in regional areas, by including the old regional guarantee in this scheme.

The main aim is to make homeownership possible for everyday Australians who might have struggled to save a big deposit or missed out due to income limits.

How Does the 5% Deposit Scheme Work?

Here’s how the First Home Guarantee makes low-deposit home ownership possible:

Usually, lenders want you to have at least a 20% deposit to avoid LMI. If you only have 5%, you’d generally have to pay expensive LMI on top of your loan.
With the FHBG, the government acts as your guarantor—covering up to 15% of the loan. This means your lender sees you as having the full 20% deposit (on paper), so you skip the LMI completely.
This saves you tens of thousands of dollars in many cases, and you’ll also get more favourable interest rates compared to borrowers with high Loan-to-Value Ratios (LVR).

For example, if you buy a home worth $1,000,000 with a 5% deposit and borrow $950,000, you could save over $34,000 in LMI costs alone. That’s money you don’t need to shell out upfront, making your entry into the property market much faster.

What are the Property Price Caps?

The property price limits for the First Home Guarantee are much more generous from 1 October 2025, helping more people buy in high-value markets. Here’s a quick look at the new caps:

These higher limits mean even first-home buyers in our most expensive cities have a chance at support.

Who Can Apply? Eligibility Rules

The scheme is designed to open doors for more Australians. Here’s what you need to qualify from October 2025:

Deposit: A minimum 5% deposit is required, usually from genuine savings.
Residency: Must be an Australian citizen or permanent resident, aged 18 or older, and hold a valid Medicare card.
Income: No income caps—high-earning singles and couples can now benefit too.
Applicants: Apply solo or with anyone—partners, siblings, friends, or other family members.
Ownership history: Must be a first-home buyer, or someone who hasn’t owned property in Australia for at least 10 years.
Intention to live in the home: You (and any co-applicant) must live in the property as your main place of residence.
Loan type: Standard home loans must be ‘principal and interest’ (not ‘interest only’), unless buying vacant land to build a home.
Other requirements: Have extra funds available for stamp duty, legal fees, and other purchase costs. Also, a good credit history will help you qualify.

What Are the Main Advantages?

The First Home Guarantee delivers several game-changing benefits:

Buy with only 5% deposit—no need to save for years.
No LMI—save thousands and reduce upfront costs.
Faster access to the market—get in before prices go up even more.
No more income limits—high earners are welcome from October 2025.
Unlimited places—all eligible buyers can now apply, with no annual limit.
Flexible applicants—apply on your own or with anyone you trust.
Lenders are protected with a government guarantee—more confidence to approve your loan.

How to Apply for the First Home Guarantee

Applying is straightforward, but you can’t apply directly to Housing Australia. Here’s how it works:

Choose how to apply—work with a participating lender or partner with a qualified mortgage broker.
Get assessed—the lender or broker checks your eligibility and reviews your finances.
Reserve your spot—your broker or lender reserves your scheme place for 14 days (not extendable), giving you time to apply.
Complete the application within that window for pre-approval. Once pre-approved, you have 90 days to find and buy your home, with possible extensions if needed.
Submit your signed contract once you find your property, then finalise your home loan paperwork.

Mortgage brokers who participate in the scheme can make the process easier, from checking your eligibility to managing paperwork.

Final Thoughts: Is It Worth It?

The 2025 updates to the First Home Guarantee open the door for many more Australians to buy a home—with less money saved and less hassle. If the deposit hurdle, LMI costs, or income limits have kept you on the sidelines, this could be your chance. Check your eligibility, plan for the extra costs, and consider working with a mortgage professional to help guide you through the process. Now, the path to homeownership is faster, less stressful, and within reach—so it might be the best time yet to make your property dream happen. Call us at 0403 803 470 to speak to our mortgage experts and see if you can qualify to buy sooner with a smaller deposit.

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First Home Guarantee Scheme 2025: Buy Your First Home with Just a 5% Deposit