First Home Guarantee Explained: How Australia's 5% Deposit Scheme Works
How the Australian Government 5% Deposit Scheme may let eligible first home buyers purchase with a 5% deposit and no Lenders Mortgage Insurance, with the current price caps for every state and territory.
Saving a 20% deposit is one of the biggest hurdles to buying a first home in Australia. The First Home Guarantee, now part of the Australian Government 5% Deposit Scheme, gives eligible first home buyers a way to buy sooner, with a deposit of as little as 5% and potentially no Lenders Mortgage Insurance (LMI). This guide explains who can use it, how the guarantee works, the current property price caps, and what the numbers look like on a real purchase.
What the First Home Guarantee is
The scheme is run by Housing Australia, and it was formerly known as the Home Guarantee Scheme. Instead of giving you cash, the government provides a guarantee to your lender. Under the scheme's Information Guide, the guarantee covers up to 15% of the property value, which lets you borrow up to 95% of the property value with a deposit of at least 5%.
You do not apply to Housing Australia directly. You apply through a Participating Lender, which also confirms your eligibility.
How the guarantee may remove LMI
Lenders usually charge LMI when you borrow more than 80% of a property's value, because a smaller deposit leaves them with less protection. Under the 5% Deposit Scheme, the government guarantee fills that gap instead. From 1 October 2025, the scheme has operated with no income caps and no waitlists, and it may remove the need for Lenders Mortgage Insurance for eligible buyers.
Think of the purchase in three parts:
- Your deposit: at least 5% of the property value.
- The government guarantee: up to 15% of the property value, given to the lender, not to you.
- Your loan: up to 95% of the property value.
The guarantee depends on you continuing to meet the scheme's obligations, such as living in the home. If the guarantee stops applying while your loan is still above 80% of the property value, your lender may require LMI or other costs.
Who is eligible
According to firsthomebuyers.gov.au and the scheme's Information Guide, you need to:
- Be an Australian citizen or permanent resident, aged at least 18.
- Be a first home buyer, or not have owned property or land in Australia in the last 10 years. In a joint application, this applies to both of you.
- Apply on your own or jointly with one other person, such as a partner, friend or family member.
- Have saved a deposit of at least 5% of the property value.
- Buy a home priced at or below the price cap for its location.
- Live in the home as an owner-occupier. For an existing home, you need to move in within 6 months of settlement.
- Take an owner-occupier home loan with principal and interest repayments from a Participating Lender, for up to 30 years.
There is no income cap and no limit on the number of places. Once you are pre-approved, you have 90 days to find a home and sign a contract of sale. Single parents and legal guardians have their own version of the scheme, with a minimum deposit of 2%.
Current property price caps (checked 4 November 2026)
Both the purchase price and the property value must be at or below the cap for the property's location. These are the caps published on firsthomebuyers.gov.au and in the Information Guide dated 1 July 2026.
| State or territory | Capital city and regional centres | Rest of state or territory |
|---|---|---|
| New South Wales | A$1,500,000 | A$800,000 |
| Victoria | A$950,000 | A$650,000 |
| Queensland | A$1,000,000 | A$700,000 |
| Western Australia | A$850,000 | A$600,000 |
| South Australia | A$900,000 | A$500,000 |
| Tasmania | A$700,000 | A$550,000 |
| Australian Capital Territory | A$1,000,000 (all areas) | A$1,000,000 (all areas) |
| Northern Territory | A$750,000 (capital city) | A$600,000 |
| Jervis Bay Territory and Norfolk Island | A$550,000 (all areas) | A$550,000 (all areas) |
| Christmas Island and Cocos (Keeling) Islands | A$400,000 (all areas) | A$400,000 (all areas) |
The regional centres that share the higher cap are:
- New South Wales: Central Coast, Coffs Harbour and Grafton, Illawarra, Mid North Coast, Richmond and Tweed, and Newcastle and Lake Macquarie.
- Victoria: Geelong.
- Queensland: Gold Coast and Sunshine Coast.
Caps are set by postcode, and some suburbs have more than one postcode with different caps. Confirm the cap for a specific property with the Postcode Search Tool on firsthomebuyers.gov.au or with your Participating Lender.
A worked example
Here is a A$700,000 home in Melbourne, which sits under the Victorian capital city cap of A$950,000. These figures come from the Stresst First Home Guarantee and LMI Estimator calculators.
| Amount | |
|---|---|
| Your 5% deposit | A$35,000 |
| Government guarantee (15% of the price) | A$105,000 |
| Loan amount (95% of the price) | A$665,000 |
| Indicative LMI under the scheme | A$0 |
| Estimated LMI on the same loan without the scheme | A$19,238 |
Without the scheme, the same A$665,000 loan would attract LMI, which Stresst estimates at A$19,238 including stamp duty on the premium. If that premium were added to the loan, the balance would rise to A$684,238, or 97.75% of the property value. Under the scheme, the loan could stay at A$665,000.
To borrow without LMI the traditional way, you would need a 20% deposit of A$140,000. The scheme lets you start with A$35,000, which can bring your purchase forward by years of saving.
Stresst's LMI figure is an indicative estimate. Actual premiums depend on the lender, the insurer and your application.
Costs the scheme does not cover
The guarantee replaces part of the deposit, not your other buying costs. Stamp duty (called transfer duty in some states), legal and conveyancing fees, inspections and lender fees still need to be budgeted. Many states offer their own first home buyer duty concessions, which can sit alongside the 5% Deposit Scheme, so it is worth checking the rules for your state.
Run your own numbers in Stresst
Stresst's First Home Guarantee calculator checks a price against the cap for your state and location and shows the deposit, guarantee and loan split, while the LMI Estimator shows the premium the scheme may help you avoid; both are Premium calculators, and the Stamp Duty / Transfer Duty calculator for all eight states and territories is free.
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Sources
- First Home Buyers (Australian Government), Australian Government 5% Deposit Scheme, https://firsthomebuyers.gov.au/australian-government-5-percent-deposit-scheme, checked 4 November 2026
- First Home Buyers (Australian Government), For First Home Buyers (eligibility), https://firsthomebuyers.gov.au/node/69409, checked 4 November 2026
- First Home Buyers (Australian Government), Property Price Caps, https://firsthomebuyers.gov.au/australian-government-5-percent-deposit-scheme/property-price-caps, checked 4 November 2026
- Housing Australia, Australian Government 5% Deposit Scheme Information Guide (dated 1 July 2026), https://firsthomebuyers.gov.au/sites/default/files/2025-09/Australian%20Government%205%25%20Deposit%20Scheme%20Information%20Guide.pdf, checked 4 November 2026
- Housing Australia, Expanded Australian Government 5% Deposit Scheme to support more Australians into home ownership, https://www.housingaustralia.gov.au/media/expanded-australian-government-5-deposit-scheme-support-more-australians-home-ownership, checked 4 November 2026
This article is general information only and is not financial, tax or legal advice.