Saving a huge deposit is often the toughest part of becoming a homeowner in Australia. With house prices rising, reaching that 20% deposit mark can take years.
The good news? 20% isn’t always required. Eligible buyers can buy their first home with as little as a 5% down payment and without paying pricey Lenders Mortgage Insurance (LMI) because of the First Home Guarantee (FHBG).
Even better, from 1 October 2025, the scheme is expanding, giving more Australians a real chance to get into the market sooner.
What Exactly Is the First Home Guarantee?
The FHBG is an initiative run by Housing Australia under the Home Guarantee Scheme. Here’s the simple terms:
- Usually, banks want a 20% deposit, or they charge you LMI.`
- The government guarantees up to 15% of the property value under this scheme.
- This means you only need to save 5%, but the bank still treats it like you’ve got the complete 20%.
Better mortgage first home buyer loans, less deposit, no LMI.
What’s Changing from October 2025?
| Feature | Before | From Oct 2025 |
| Places available | 35,000 annually | Unlimited |
| Income caps | $125k (single), $200k (couple) | Removed |
| Price caps | Lower | Higher to reflect real market prices |
| Eligible applicants | Mostly singles & couples | Friends, siblings & family allowed |
The updates make this the best mortgage first time buyer option Australia has ever offered.
How the 5% Deposit Works (Example)
Imagine you’re buying a home worth $800,000:
- Your deposit (5%) = $40,000
- Normal deposit needed (20%) = $160,000
- Government guarantee = $120,000
- LMI you avoid = around $27,000+
So instead of waiting years to save a full deposit, you can get in with less and save thousands in fees.
How Much Could You Save on LMI?
| Property Price | 95% Loan | Approx. LMI Without FHBG |
| $1,500,000 | $1,425,000 | $63,500 |
| $1,000,000 | $950,000 | $34,300 |
| $850,000 | $807,500 | $27,800 |
| $750,000 | $712,500 | $24,100 |
You can use that money for remodelling, furniture, or moving.
Who is eligible to apply for the First Home Guarantee Scheme?
Starting in October 2025, the scheme will have greater flexibility than before. To apply, you must:
- Be an Australian citizen or permanent resident, 18+
- You’ll need 5% of the property price saved from your own genuine savings.
- The home must be your place to live. You can’t use it as a rental.
- Apply solo or with a partner, family member, or friend
- Be a first-time home buyer loan applicant (or not have owned property in the last 10 years)
- Apply for a principal-and-interest loan
Remember: You’ll still need extra cash for stamp duty, legal fees, and inspections.
Updated Property Price Caps (Effective 1 October 2025)
| Location | Current Cap | New Cap (from 1 Oct 2025) |
| NSW – Capital city & regional centres (Sydney, Newcastle, Illawarra) | $900,000 | $1,500,000 |
| NSW – Other regional areas | $750,000 | $800,000 |
| VIC – Capital city & regional centre (Melbourne, Geelong) | $800,000 | $950,000 |
| VIC – Other regional areas | $650,000 | $650,000 (unchanged) |
| QLD – Capital & regional centres (Brisbane, Gold Coast, Sunshine Coast) | $700,000 | $1,000,000 |
| QLD – Other regional areas | $550,000 | $700,000 |
| WA – Capital city (Perth) | $600,000 | $850,000 |
| WA – Other regional areas | $450,000 | $600,000 |
| SA – Capital city (Adelaide) | $600,000 | $900,000 |
| SA – Other regional areas | $450,000 | $500,000 |
| TAS – Capital city (Hobart) | $600,000 | $700,000 |
| TAS – Other regional areas | $450,000 | $550,000 |
| ACT (Canberra) | $750,000 | $1,000,000 |
| NT (Northern Territory) | $600,000 | $600,000 (unchanged) |
| Jervis Bay & Norfolk Island | $550,000 | $550,000 (unchanged) |
| Christmas Island & Cocos (Keeling) Islands | $400,000 | $400,000 (unchanged) |
Note: These changes will only take effect from 1 October 2025. The Home Guarantee Scheme is still available right now under the current eligibility rules and price caps.
To read the official Australian Government announcement, click here.
Considerations for Applying for the First Home Guarantee
- Talk to a first home buyer broker – They’ll help compare lenders that offer the scheme.
- Check eligibility – Make sure you meet deposit, residency, and credit requirements.
- Reserve your spot – Your broker or lender will hold a place for 14 days.
- Apply for the loan – Submit all your documents for approval.
- Finalise settlement – You’ll have up to 90 days to sign a contract, then 30 more to settle.
Why It’s Exciting for First-Time Homebuyers?
- Enter the market with a small deposit
- Save thousands in LMI costs
- No income restrictions (after Oct 2025)
- Broader eligibility – buy with friends/family
- More homes covered with updated price caps
Makes the dream of owning a home sooner achievable
Ready to Buy Your First Home?
At Credit Hub, we specialise in helping first-home buyers find the right first home buyer loan, secure a spot under the First Home Guarantee, and step into the property market with confidence.
Talk to our first home buyer brokers team today and let us guide you towards your first home with the right support and expert advice.
Final Word
If you’re tired of waiting years to save a massive deposit, the mortgage loans for first-time home buyers could be your golden ticket. With a 5% deposit, no LMI, and expanded rules from October 2025, it’s the most supportive scheme yet for Australians.
FAQ’s
Q1. What kind of loans are allowed under the scheme?
Only principal-and-interest home loans are eligible. You can only get interest-only loans if you buy land and construct a house.
Q2. Can I use the First Home Guarantee with friends or family?
Yes! From October 2025, the scheme will allow siblings, friends, and family members to buy together, not just couples.
Q3. Do I need to pay stamp duty under the First Home Guarantee scheme?
Yes. The scheme doesn’t remove stamp duty costs. However, some states offer first-home buyer concessions or exemptions that you can combine with the FHBG.
Disclaimer:
The information provided by Credit Hub and its affiliates is for general informational purposes only. While we strive for accuracy, readers should verify any details before making financial decisions. Credit Hub accepts no liability for errors, omissions, or actions taken based on this content.