The short answer
Buy with a 5% deposit and skip lenders mortgage insurance. Since October 2025 there are no income caps and no limit on places.
It's the single biggest shortcut into the market available right now, and most people I speak to either have not heard of it or have an out of date version of it in their head. If the last time you looked there were income caps and a queue, everything you know is wrong. Here's the current version, 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. On a $350,000 purchase with 5% down, the insurer's own estimator puts the upfront premium at about $8,830 including GST: the real number, and what a 5% deposit does to the maths. What LMI actually costs, and the three ways around it, has its own page.
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. That matters more than it sounds, because the 20% goalpost is set against today's prices. In a rising market it keeps moving away from you while you save. Pay LMI now or keep saving for 20%? walks through that maths.
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, and that is the one that trips couples up. If your partner has owned before, the joint application generally fails the test. A few lenders will let the eligible one of you buy alone and be assessed as single, provided the other is financially independent. My partner owned a house before. Am I still eligible? covers when that works.
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. Buy an investment first and you give the scheme up for good, along with the stamp duty concessions. Sometimes that is still the right call, but it has to be a deliberate one.
Two things the brochure leaves out. The 5% generally has to be genuine savings, money you saved rather than a gift or a windfall, and some lenders want to see it sitting in your account for three months first. And not every lender offers the scheme. A couple of well-known names have pulled out of it, one big bank's version is not available through brokers at all, and a few of the lenders that do participate cap how much cash you can keep in the bank after settlement. Which lender you go to is part of the job, not an afterthought.
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. The same 80% rule is why the usual live-in-it-for-a-year trick for the stamp duty exemption does not apply under the scheme: is it worth living in the property first?
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.
- It does not stack with a guarantor. People ask about using a small parental guarantee to top up a scheme spot. Every lender that documents both treats a loan with a guarantor as ineligible under the scheme. It is one structure or the other, and which one wins depends on your deposit and the property.
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. One more thing it is not: the stamp duty exemption. That is a separate state concession with its own price table, and plenty of first home buyers still pay some.
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 flip side is the question every 5% buyer quietly asks: what if prices fall? Then you sit in negative equity for a while. The lender does not come knocking for cash and does not sell the house from under you. You keep paying, growth does the rest, and the guarantee just stays on longer. The full answer on prices falling after a 5% purchase.
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.
Deposit problem or capacity problem?
Half an hour tells you which one you've actually got, and whether the guarantee is the answer. It costs you nothing, because I get to charge the bank for the work that I do, not you.
No application, no credit check, nothing on your file. Just the numbers.
Common questions about the First Home Guarantee
Do I still need to earn under $125,000?+
No. The income caps, $125,000 for a single applicant and $200,000 combined for a couple, were removed from 1 October 2025. Eligibility no longer depends on what you earn.
Are places still limited?+
No. The annual cap on the number of guarantees was removed from 1 October 2025. There is no queue, no quota, and no waiting for the next financial year's allocation.
Can I use it if I owned a property years ago?+
Possibly. The requirement is that you are a first home buyer, or that you have not owned property in Australia in the last 10 years. On a joint application it applies to both of you. A long time out of the market can put you back in scope.
Does it let me borrow more?+
No, and this is the most common misunderstanding of the lot. The guarantee changes the deposit you need and removes the insurance premium. It does not change how much a lender will advance you. Serviceability is assessed exactly as it otherwise would be.
How is this different from the Family Home Guarantee?+
The First Home Guarantee is for first home buyers with a 5% deposit. The Family Home Guarantee is aimed at single parents and single legal guardians with at least one dependent child, and allows a deposit as low as 2%. Two streams of the same Home Guarantee Scheme, with different tests, and you do not need to be a first home buyer for the single parent version. The 2% deposit, explained.
Can I use it together with a guarantor?+
No. At every lender that documents both, a loan with a guarantor is ineligible under the scheme. The guarantee is standing in for your missing deposit, and the lender will not hold a family guarantee alongside it. You choose one structure, and that choice decides which lenders are open to you. How does a guarantor home loan actually work?
Next question
Can I rent out my First Home Guarantee place?The owner occupier rule, and the 80% way out.
Go deeper
Guarantor loan or the government 5% scheme: which one is best? How does a guarantor home loan actually work? I'm a single parent. Can I really buy with a 2% deposit? My partner owned a house before. Am I still eligible for first home buyer benefits? What happens if prices fall after I buy with a 5% deposit? Do first home buyers still pay stamp duty? Is it worth living in the property first to get the stamp duty exemption? If I buy an investment property first, do I lose my first home buyer benefits? Should I pay LMI or keep saving for 20%? What is lenders mortgage insurance, what does it cost, and can I add it to my loan? Can I buy a property with a $0 deposit?The full guides
You don't need a 20% deposit any more: what changed, and what LMI was costing How to buy your first home: every pathway explained Why is my borrowing power so low? Why did the bank say no to my home loan?Got a question this page didn't answer? Send it to me and it goes on the list.