First Home Guarantee (the 5% deposit scheme) in 2026

The First Home Guarantee — often called the “5% deposit scheme” — helps eligible first home buyers buy a home with a deposit as low as 5%, without paying Lenders Mortgage Insurance (LMI). This guide explains, in plain English, how it works in 2026, who’s eligible, and the trade-offs to understand. These are general facts, not financial advice — the scheme and its rules change, and whether it suits your situation is a decision for you and a licensed professional. Always confirm current details at firsthomebuyers.gov.au.

What is the 5% deposit scheme?

The First Home Guarantee (FHBG) is a federal government scheme. It lets eligible first home buyers purchase a home with as little as a 5% deposit, while the government guarantees a portion of the loan to the lender (up to 15% of the property value). Because of that guarantee, eligible buyers avoid paying Lenders Mortgage Insurance (LMI) — a cost that can otherwise run into the tens of thousands of dollars on a high loan-to-value loan. Importantly, the guarantee is not a grant or cash payment: the government does not contribute to the purchase price. You still take out a loan for the rest of the value and are fully responsible for repaying it.

What changed in the 2026 scheme?

The scheme was significantly expanded from 1 October 2025. According to the scheme’s settings, from that date: income caps were removed (eligibility no longer depends on how much you earn), the annual limit on the number of places was abolished (previously capped at 35,000 per year), and the property price caps were raised. This made the scheme far more widely accessible than before. (Older figures — such as previous $125,000 single / $200,000 couple income caps — no longer apply. Always check the current rules.)

What are the property price caps?

The scheme only applies if the property price is at or under the cap for your region, and caps vary by state and between capital cities/regional centres and the rest of the state. As at the 1 October 2025 settings, examples include New South Wales (Sydney and regional centres) up to $1,500,000 and Queensland (Brisbane and key regional centres) up to $1,000,000. Other states and regions have their own caps. Because caps change and depend on exact location, confirm the current cap for your area at firsthomebuyers.gov.au.

Who is eligible?

Eligibility is set by the scheme, but generally you must: be an Australian citizen or permanent resident aged 18 or over; be a first home buyer (or not have owned residential property in Australia in the past 10 years); intend to live in the property as your home (owner-occupier); have at least a 5% deposit; and buy under the price cap for your region. Related streams exist too — such as a regional stream and a Family Home Guarantee for eligible single parents/guardians with a lower deposit — each with their own rules. Confirm your eligibility with a participating lender or at firsthomebuyers.gov.au.

How do you apply for the 5% deposit scheme?

You don’t apply to the government directly — you apply through a participating lender (or a broker on the panel), as part of your home loan application. The lender assesses both your loan and your eligibility for the guarantee. You still need to show you can service (repay) the larger loan under the lender’s assessment. If you’re eligible and approved, the guarantee is arranged with your loan.

The trade-offs to understand

Buying with a smaller deposit means a larger loan, and there are factual trade-offs worth understanding: a bigger loan generally means higher monthly repayments and more interest paid over the life of the loan; and a smaller deposit means less equity at the start, which increases the risk of “negative equity” (owing more than the property is worth) if property values fall. These are simply features of a higher loan-to-value loan. Whether the scheme suits your circumstances is a personal decision — speak to a licensed mortgage broker or financial adviser.

Can you combine it with other first home buyer help?

Often, yes. The First Home Guarantee is separate from state First Home Owner Grants and stamp duty concessions, and from the First Home Super Saver Scheme — and eligible buyers may be able to use them together. See our guides on first home owner grants and stamp duty (NSW / QLD) for those. Because these interact and change, confirm what applies to you with the relevant body or a licensed professional.

The bottom line

The First Home Guarantee lets eligible first home buyers buy with a 5% deposit and no LMI — and since October 2025 it’s the most accessible it’s been, with no income caps, no place limits, and higher price caps. But it’s a loan guarantee, not free money: you still borrow up to 95% and carry the full repayment responsibility and the risks of a higher loan-to-value loan.