First home buyer loans
Concessions, grants and the loans that suit a first purchase.
The 5% Deposit Scheme (First Home Guarantee), Explained
Buy with a small deposit and pay no Lenders Mortgage Insurance, because the government guarantees the shortfall instead. Here is how it works and who it actually suits.
Under the First Home Guarantee, the federal government guarantees part of your loan so that an eligible first home buyer can purchase with a small deposit without paying Lenders Mortgage Insurance. You still borrow the full amount and repay it in the normal way — the guarantee removes the insurance requirement, not the debt. Since 1 October 2025 there are no income caps and no limit on places, but property price caps still apply by location, so confirm the cap for your area before you rely on it.
The scheme now runs as the Australian Government 5% Deposit Scheme. This page deliberately contains no price cap figures. Caps are set by location and reviewed, and a page quoting last year’s numbers is worse than no page at all. What does not change is how the scheme works and how to judge whether it suits you — which is what follows.
For current caps and eligibility, use Housing Australia, which administers the scheme. We can also confirm your position against the current rules when you get in touch.
What the guarantee actually does
Normally, borrowing more than 80% of a property’s value means paying Lenders Mortgage Insurance — a premium that protects the lender, not you. See what LMI is and how to avoid it.
Under the guarantee, the government agrees to cover part of the lender’s risk. The lender no longer needs the insurance, so you do not pay the premium.
Three things it does not do. It is not a grant — no money is given to you. It does not reduce the amount you borrow. And it does not increase how much you can borrow, because your capacity is still assessed on income and commitments in the usual way.
What it does is remove one specific cost, which on a low-deposit purchase is a substantial one.
How it compares with the alternatives
If you have a small deposit, you have three realistic routes. They are not equivalent.
| What it costs | Main constraint | |
|---|---|---|
| First Home Guarantee | No LMI premium | Price caps and eligibility rules |
| Pay LMI | Premium, usually capitalised | None beyond normal lending criteria |
| Guarantor | No LMI premium | Puts a family member’s property at risk |
The guarantee is usually the cheapest of the three when you qualify. Its limits are the price cap for your area and the eligibility rules, not cost. A guarantor arrangement carries real risk to someone else. Paying LMI has no family exposure, but costs money.
Who it genuinely suits
- You have a deposit but not 20%, and saving the rest would take years.
- You are buying within the price caps for your area — which in Sydney is the binding constraint for many buyers.
- You meet the first home buyer definition the scheme uses.
- You intend to live in the property. These schemes are for owner-occupiers, not investors.
- You have at least a 5% deposit, or 2% if you are a single parent or legal guardian.
Where it does not suit, and the honest warnings
The price cap can push you into the wrong property. This is the risk worth naming. If the cap sits below what you need for a home that suits you, buying a lesser property to fit the scheme is a poor trade. The premium you save is one-off; living somewhere unsuitable is not.
A small deposit is still a small deposit. Avoiding LMI does not change the fact that you are borrowing a high proportion of the value, which means larger repayments and less buffer if rates move or your income changes. See how much can I borrow.
You still need cash beyond the deposit. Transfer duty, conveyancing and inspections are paid separately, and mostly cannot be added to the loan. Total the real figure with the purchase costs calculator.
Not every lender participates, and participating lenders do not all price the same. A scheme place at an uncompetitive rate can cost more over time than paying the premium elsewhere.
First home buyers in NSW have a second lever
Worth knowing, because the two are separate and can sometimes be used together.
The NSW First Home Buyers Assistance Scheme reduces or removes transfer duty for eligible first home buyers, and NSW also offers a First Home Owner Grant for qualifying new homes. Those are state concessions on duty; the First Home Guarantee is a federal arrangement about LMI. Different schemes, different rules, different administrators.
Our NSW stamp duty calculator runs the current Revenue NSW brackets including the first home buyer concession, and how much is stamp duty in NSW explains the thresholds and the taper.
How to actually use it
1
Check the current rules
Price caps are set by location and reviewed. Check the cap for your area at firsthomebuyers.gov.au; we can confirm against it.
2
Work out your total cash need
Deposit plus duty plus costs. The scheme removes LMI, not everything else.
3
Go to a participating lender
And compare their pricing, because participation does not guarantee a competitive rate.
4
Be ready to move
There is no waiting list any more, but pre-approval and documents in order still decide how fast you can act.
Common questions
No. Nothing is paid to you. The government guarantees part of the loan so the lender does not require Lenders Mortgage Insurance. You borrow and repay the full amount as normal.
No. Borrowing capacity is still assessed on your income, debts and expenses in the usual way. The scheme removes an insurance cost, not a lending limit.
Since 1 October 2025 there are no income limits. Price caps vary by location and are reviewed periodically, so this page deliberately does not quote them. Check Housing Australia for the current figures, or ask us and we will confirm your position against the rules in force.
No. The scheme is for owner-occupiers. You must intend to live in the property, and conditions apply about moving in and remaining there.
Then the scheme does not apply to that purchase. Paying LMI or using a guarantor remain available, so it is worth pricing all three before you set your budget.
They are separate schemes with separate rules, administered by different bodies, and eligibility for one does not decide the other. Both are worth checking, and we can work through your position on each.
Find out whether you qualify, and whether it is your best option
We will check your position against the current rules, and price the guarantee against paying LMI or using a guarantor so you can see all three.
Related
What is LMI?
The premium the guarantee removes, explained.
Guarantor home loans
The other route to avoiding LMI, and its risks.