Last updated: March 2026

First Home Guarantee 2026: Buy With Just 5% Deposit and No LMI

Saving a 20% deposit is the single biggest barrier to home ownership in Australia. On a median-priced house in Sydney, that means putting aside roughly $220,000 before you even get the keys. The First Home Guarantee (FHG) — formerly the First Home Loan Deposit Scheme — slashes that requirement to just 5%, and you won’t pay a cent in Lenders Mortgage Insurance (LMI). If you’ve been wondering how to break into the property market in 2026, this scheme could save you tens of thousands of dollars.

In this comprehensive guide we’ll explain exactly how the First Home Guarantee works after the landmark October 2025 changes, walk through the updated property price caps state by state, show you worked examples comparing buying with and without the scheme, and detail step-by-step how to apply. Let’s get into it.

What Is the First Home Guarantee?

The First Home Guarantee is an Australian Government initiative administered by Housing Australia (formerly the National Housing Finance and Investment Corporation). Under the scheme, the Government acts as a guarantor for up to 15% of the property’s value. That means you only need a 5% deposit and your lender won’t charge you LMI — because the Government guarantee covers the gap between your deposit and the usual 20% threshold.

Crucially, the Government does not give you money and does not own a share of your home. It simply guarantees a portion of your loan. You still make all repayments yourself, and if you sell the property later, every dollar of profit (or loss) is yours.

October 2025 Changes: What’s New?

The Federal Government made sweeping reforms to the First Home Guarantee from 1 October 2025. These changes represent the most significant expansion of the scheme since it launched in January 2020. Here’s what changed:

No more income caps: Previously, singles earning above $125,000 and couples above $200,000 were locked out. Those income limits have been completely removed. Whether you earn $60,000 or $260,000, you can now apply.
Unlimited places: The old annual cap of 35,000 places per financial year is gone. The scheme is now open-ended, meaning eligible buyers no longer have to race to secure a spot before places run out.
Updated property price caps: Price thresholds have been lifted in most regions to better reflect current market values (see the full table below).
Broader lender panel: More banks and non-bank lenders have joined the scheme, giving buyers greater choice and competitive interest rates.

These changes are a game-changer. Under the old rules, many middle-income earners — particularly dual-income couples in capital cities — were excluded despite genuinely struggling to save a 20% deposit. The removal of income caps and place limits means the scheme is now accessible to virtually all first home buyers who meet the other eligibility criteria.

How Does the First Home Guarantee Work?

Here’s a simplified step-by-step overview of how the scheme works in practice:

Save a minimum 5% deposit (genuine savings — gifts from family are generally acceptable but check with your lender).
Apply through a participating lender — not Housing Australia directly. Your lender assesses your home loan application and your eligibility for the Guarantee simultaneously.
Housing Australia issues a guarantee to your lender covering up to 15% of the property value. This sits behind your 5% deposit, effectively giving the lender 20% security.
Your lender waives LMI because the Government guarantee removes their risk exposure.
You buy your home and make repayments as normal. The guarantee does not add to your loan balance or your repayments.

It’s worth emphasising: the guarantee is not a cash payment and it is not a second mortgage. It simply removes the LMI cost and lets you enter the market sooner with a smaller deposit.

Property Price Caps by State and Territory (2026)

The property you purchase must fall within the price cap for your area. These caps were updated as part of the October 2025 reforms and are reviewed periodically. The table below reflects the current thresholds as at March 2026:

State / Territory	Capital City & Regional Centres	Rest of State
New South Wales	$1,000,000	$750,000
Victoria	$900,000	$650,000
Queensland	$850,000	$650,000
Western Australia	$800,000	$550,000
South Australia	$750,000	$550,000
Tasmania	$700,000	$550,000
ACT	$900,000	N/A
Northern Territory	$650,000	$550,000

Note: “Regional centres” include major population hubs like Newcastle, Geelong, Gold Coast, and Wollongong. Check the Housing Australia website for the full list of postcodes classified as capital city or regional centre areas.

Eligibility Criteria

To qualify for the First Home Guarantee in 2026, you must meet the following requirements:

Australian citizen or permanent resident: You must be at least 18 years old and hold Australian citizenship or permanent residency at the time of entering the loan.
First home buyer: You must not have previously owned or held an interest in a residential property in Australia (including investment properties).
Owner-occupier: You must intend to live in the property as your principal place of residence. Investment purchases are not eligible.
Individual or joint applicants: You can apply as a single buyer or as a couple (married, de facto, or otherwise). Both applicants must individually meet the first home buyer criteria.
No income cap: As of October 2025, there is no income limit for applicants.
Minimum 5% deposit: You need at least 5% of the property purchase price saved (up to a maximum of 20%).
Property within price cap: The property must not exceed the price cap for the relevant area (see table above).
Eligible property types: Existing houses, townhouses, apartments, house-and-land packages, off-the-plan apartments, and new builds are all eligible.

How to Apply for the First Home Guarantee

You cannot apply to Housing Australia directly. Instead, you apply through one of the participating lenders. Here’s how the process typically works:

Check your eligibility: Review the criteria above and use the eligibility checker on the Housing Australia website.
Choose a participating lender: Pick a lender from the panel (see below) and speak to them about your borrowing capacity. Many lenders have dedicated First Home Guarantee teams.
Get pre-approved: Your lender will assess your financials and provide conditional approval, including the Guarantee.
Find a property: With your budget confirmed, you can start house hunting. Remember the property must be within the price cap for your area.
Finalise your loan: Once you’ve had an offer accepted, your lender will complete the full loan assessment and confirm the Guarantee with Housing Australia.
Settle and move in: The Guarantee is noted on your loan, LMI is waived, and you settle on your new home.

Participating Lenders

As of March 2026, there are over 30 participating lenders on the First Home Guarantee panel, including major banks and smaller lenders. Some of the most prominent include:

Commonwealth Bank of Australia (CBA)
National Australia Bank (NAB)
Westpac (and subsidiaries St.George, Bank of Melbourne, BankSA)
ANZ
Bendigo and Adelaide Bank
Bank Australia
ING
Macquarie Bank
ME Bank
Teachers Mutual Bank
Heritage Bank
Various credit unions and mutual banks

The full and up-to-date list is available on the Housing Australia website. Not every lender offers exactly the same interest rates or loan features, so it’s worth comparing a few options.

Worked Examples: With vs Without the First Home Guarantee

Let’s look at two realistic scenarios to show the tangible savings the scheme delivers.

Example 1: Buying a $750,000 Unit in Melbourne

Without the First Home Guarantee:

Purchase price: $750,000
Deposit saved: 5% = $37,500
Loan amount: $712,500 (95% LVR)
Estimated LMI: $24,000 – $30,000 (can be capitalised onto the loan)
Total effective loan: ~$740,000+

With the First Home Guarantee:

Purchase price: $750,000
Deposit saved: 5% = $37,500
Loan amount: $712,500 (95% LVR)
LMI: $0 (waived thanks to Government guarantee)
Total effective loan: $712,500
Saving: $24,000 – $30,000

Example 2: Buying a $600,000 House in Brisbane

Without the First Home Guarantee:

Purchase price: $600,000
Deposit saved: 5% = $30,000
Loan amount: $570,000
Estimated LMI: $16,000 – $20,000

With the First Home Guarantee:

Purchase price: $600,000
Deposit saved: 5% = $30,000
Loan amount: $570,000
LMI: $0
Saving: $16,000 – $20,000

In both cases, the buyer enters the market at the same time with the same deposit — but the Guarantee buyer avoids a five-figure LMI bill. Over the life of a 30-year loan, that can translate to even greater savings when you factor in the interest you’d pay on capitalised LMI.

Combining the First Home Guarantee With Other Schemes

One of the best things about the First Home Guarantee is that it stacks with other government incentives. You can potentially combine it with:

First Home Owner Grant (FHOG): Most states offer $10,000–$30,000 for eligible new builds. You can use the FHOG to boost your deposit or cover upfront costs while using the Guarantee to avoid LMI.
Stamp duty exemptions and concessions: Depending on your state, you may pay zero stamp duty or receive a significant discount. This further reduces your upfront costs.
Help to Buy scheme: While you generally cannot use both the First Home Guarantee and Help to Buy on the same property (since Help to Buy involves shared equity and different lending arrangements), it’s worth understanding both schemes to decide which offers you the better deal.
First Home Super Saver Scheme (FHSSS): Withdraw voluntary super contributions (up to $50,000) to put towards your deposit. Combined with the Guarantee, you could potentially save your 5% deposit faster through tax-advantaged super savings. Read more in our deposit guide.

Things to Watch Out For

While the First Home Guarantee is an excellent scheme, there are a few things to keep in mind:

You still need to service the loan: The Guarantee waives LMI but doesn’t reduce your loan amount. You’re still borrowing 95% of the property price, so make sure your repayments are affordable.
Negative equity risk: With only 5% equity, a property price decline of more than 5% could leave you owing more than the home is worth. Consider whether you can hold the property long-term.
Refinancing limitations: If you refinance to a non-participating lender before you’ve built up 20% equity, you may need to pay LMI at that point. Some participating lenders offer competitive rates to help you avoid this.
Property price caps: In hot markets like Sydney, the $1,000,000 cap may still be restrictive. You’ll need to be realistic about what you can buy within the threshold.
Must be owner-occupied: If your circumstances change and you want to convert the property to an investment, you’ll need to discuss the implications with your lender and Housing Australia.

Frequently Asked Questions

Can I use the First Home Guarantee for an investment property?

No. The property must be your principal place of residence. You must move in within a reasonable timeframe (usually 6 months of settlement) and live there for as long as the Guarantee is in place.

Do I have to pay back the Government guarantee?

No. The guarantee is not a debt. You make your standard home loan repayments to your lender and that’s it. The Government guarantee simply sits in the background as security for the lender.

What happens if I sell the property?

When you sell, the guarantee is released. You keep any profit from the sale (minus the outstanding loan balance and selling costs). The Government does not take a share of your capital gains.

Can I use the scheme if I’ve owned an investment property?

No. You must never have owned or held an interest in any residential property in Australia — whether it was an investment property, inherited property, or your own home.

Is there still a cap on places available?

No. Since October 2025, the place cap has been removed entirely. You can apply at any time without worrying about missing out on a limited allocation.

Is the First Home Guarantee Worth It?

For the vast majority of first home buyers who don’t have a 20% deposit saved, the answer is a resounding yes. The scheme costs you nothing — there are no fees, no equity sharing, and no additional interest charges. It simply removes the LMI burden and lets you enter the market years earlier than you otherwise might.

The key question is whether you’re financially ready to take on a mortgage at 95% LVR. If your budget is tight and interest rates rise further, the higher loan amount could stretch your repayments. But if you’ve done your sums, have stable income, and are confident in your ability to service the loan, the First Home Guarantee is one of the most generous government programs available to Australian first home buyers.

Next Steps

Ready to take advantage of the First Home Guarantee in 2026? Here’s your action plan:

Work out your budget: Use online calculators to determine your borrowing capacity at current interest rates.
Check the price caps: Make sure the properties you’re looking at fall within the threshold for your area.
Explore stacking opportunities: See if you’re also eligible for the First Home Owner Grant, stamp duty exemptions, or the Help to Buy scheme.
Talk to a participating lender: Get pre-approved so you know exactly what you can afford.
Start house hunting: With the Guarantee in your pocket, you’re ready to make your move.

The Australian property market waits for no one. With unlimited places now available and no income caps to worry about, there’s never been a better time to use the First Home Guarantee to get your foot on the property ladder. For more on building your deposit, check out our guide on how much deposit you really need for your first home.