The First Home Guarantee, explained

The First Home Guarantee is the single biggest shortcut into the market available to Australians right now, and most people I speak to either have not heard of it or have an out of date version of it in their head.

It got substantially bigger in October 2025. If the last time you looked at it there were income caps and a queue for places, everything you know is wrong. Here is the current version, in plain English, including the parts nobody puts in the brochure.

What the guarantee actually does

Normally, if you turn up to a lender with less than a 20% deposit, they make you buy lenders mortgage insurance. That is an insurance policy that protects the lender, paid for by you, and on a typical purchase it runs into the tens of thousands of dollars.

Under the First Home Guarantee, the government guarantees the gap instead. You bring 5%, the government stands behind a chunk of the rest, and the lender is comfortable enough to write the loan without insurance. You are not being given money and you are not borrowing from the government. Nothing is added to your loan. The guarantee simply sits behind it.

The practical effect is that a deposit which would have taken another four or five years to save becomes a deposit you might already have.

What changed on 1 October 2025

Three things, and all three matter.

The income caps are gone. It used to be $125,000 for a single applicant and $200,000 combined for a couple. Plenty of people were locked out for earning slightly too much while still being nowhere near a 20% deposit. That test no longer exists.

The limit on places is gone. There used to be a fixed number of guarantees each financial year. They ran out, and people who were ready to buy got told to wait for July. There is no quota now and no queue.

The property price caps went up, a lot. They vary by state and by whether you are in a capital, a regional centre or a regional area. In New South Wales the cap for capital city and regional centre purchases went to $1.5 million. The caps get reviewed and moved, so check the current figure for your area rather than trusting a number in an article, this one included.

One more structural change worth knowing: the Regional First Home Buyer Guarantee has been folded into the First Home Guarantee. If you were looking for the regional version, this is now it.

Who can use it

The core requirements are straightforward. You need to be an Australian citizen or permanent resident, at least 18, with a deposit of at least 5% of the property value. You need to be a first home buyer, or someone who has not owned property in Australia in the last 10 years. On a joint application that applies to both of you.

That 10 year rule catches people by surprise in a good way. If you owned a place a long time ago, went through a separation or a business failure or simply sold up and rented for a decade, you can be eligible even though you would never describe yourself as a first home buyer.

And the one that matters most: you have to buy a home to live in. Investment properties are not eligible, and that is not just a rule at application. It continues for as long as the guarantee is attached to your loan.

The condition people forget three years later

Because the scheme is owner occupier only, you have to keep living in the property while the guarantee is in place. Nobody finds that difficult on settlement day. They find it difficult when a job comes up interstate, or a relationship changes, or the rental return on the place starts looking better than the mortgage.

Move tenants in without dealing with it properly and your lender can take the guarantee off, which can mean lenders mortgage insurance and other costs landing back on you. There is a clean way out, and it turns on getting your loan to 80% of the property's current value. I've answered that one in full here, with a short video and the numbers.

What the guarantee does not do

This is the section that gets left out, and it is the one that saves people the most disappointment.

It does not increase your borrowing power. Not by a dollar. The guarantee changes the deposit you need and removes the insurance premium. It does not change how a lender assesses whether you can afford the repayments. If serviceability is your constraint, the guarantee does not touch it.

It does not make your repayments smaller. A 95% loan is a bigger loan than an 80% loan, and you pay interest on all of it. What you save is the insurance premium and the years of saving, not the monthly cost.

It does not guarantee approval. Normal lending criteria still apply in full. Your income, your existing debts and your credit history are all assessed exactly as they would be otherwise.

None of that makes it a bad deal. It is a very good deal. But it is a deposit solution, not an affordability solution, and knowing which of those two problems you actually have is the whole game.

How the guarantee ends

It is not permanent, which surprises people. Once your loan balance is 80% or less of what the property is worth, the guarantee has nothing left to support and comes off. It also ends if you refinance away or sell.

Between the loan going down each month and the property value moving, most people get there without doing anything deliberate. Plenty are already there and have no idea, because they are measuring their loan against what they paid rather than what the place is worth now.

The one move to make

Work out whether your problem is the deposit or the borrowing capacity. If it is the deposit, this scheme is very likely the answer and it is more open than it has ever been. If it is capacity, the guarantee will not help and you need a different conversation entirely.

That takes about half an hour to establish properly, and it saves people months of saving toward a target that was never the real obstacle.