For years the biggest wall between renters and a place of their own has been the deposit. You can pay rent on time for a decade and still watch the 20% target drift further away as prices climb.
The First Home Guarantee 2026 knocks a fair chunk of that wall down. You can buy with a 5% deposit and pay no Lenders Mortgage Insurance, because the government stands behind part of your loan. What used to be a hard-to-win lottery is now, on paper, open to almost every eligible first home buyer. As of 1 October 2025 the income test is gone and the cap on places is gone too. Here is how the scheme actually works, what it costs you, and where the catches are hiding.
What is the First Home Guarantee 2026?
Scheme name: Housing Australia refers to the expanded scheme as the Australian Government 5% Deposit Scheme. Most buyers, brokers and lenders still call it the First Home Guarantee, part of the broader Home Guarantee Scheme. What it does: lets eligible first home buyers purchase a home with as little as a 5% deposit and pay no Lenders Mortgage Insurance. Who runs it: Housing Australia, the federal body that administers the scheme. You apply through a participating lender, not Housing Australia directly. Why no LMI: Housing Australia guarantees up to 15% of the property value to your lender, so the bank treats your loan as if you had put down a 20% deposit.
Normally, if you borrow more than 80% of a property's value, lenders charge Lenders Mortgage Insurance to protect themselves if you default. On a typical purchase that premium can run into the tens of thousands, and you usually pay it. The guarantee removes that cost entirely.
It is not a grant and not a loan. No money lands in your account. The government simply promises your lender that it will cover part of the loan if things go wrong, which is enough to wave away the insurance.
What changed on 1 October 2025: no income caps and unlimited places
This is the part that turns a niche scheme into a mainstream one. Two long-standing barriers were dropped at once on 1 October 2025.
Income test removed: higher earners can now apply
Until late 2025 you had to earn under a set income threshold to qualify. That income cap has been removed. A couple on a strong combined salary who simply had not saved a 20% deposit can now use the guarantee. The test is no longer "how much do you earn", it is "have you owned property before and can you service the loan".
Place limit removed: no more racing for a spot
The old scheme was capped at roughly 35,000 places a year. Spots opened on set dates and were gone within weeks, which forced buyers to rush a purchase to grab a place before they ran out. That cap is now removed, so places are effectively unlimited. You no longer have to time your purchase around a release date or gamble on stock running out.
The same scheme, a new name
The expanded scheme is now referred to by Housing Australia as the Australian Government 5% Deposit Scheme. The name on the official paperwork reads differently, but most buyers, brokers and lenders still say "First Home Guarantee", so do not be thrown if you see both. It is offered through a range of participating lenders, which covers most of the major banks and a long list of smaller ones.
How the guarantee replaces LMI
Here is the mechanism in plain terms. Lenders price risk on how much skin you have in the game. Put down less than 20% and you are deemed higher risk, so they bolt on Lenders Mortgage Insurance.
Under the scheme, Housing Australia guarantees up to 15% of the property value to your lender. Add your own 5% deposit and the lender is covered for the full 20% gap it would normally insure against. From the bank's point of view the loan now looks like a standard 80% lend, so the LMI premium disappears. You still borrow the same amount, you just skip the insurance bill, and that can be a five-figure saving on a city purchase.
Property price caps for 2026, by location
Removing income and place limits did not remove the price caps. You can only use the guarantee on a home that sits at or under the cap for its location, and those caps rose on 1 October 2025 to reflect what homes actually cost now.
The table below shows the headline 2026 caps for the major capital cities and their associated regional centres.
| Location | 2026 price cap |
|---|---|
| Sydney and NSW regional centres | $1,500,000 |
| Brisbane, Gold Coast and Sunshine Coast | $1,000,000 |
| Melbourne and Geelong | $950,000 |
| Perth | $850,000 |
Other states and territories, including South Australia, Tasmania, the ACT and the Northern Territory, have their own caps set by location. Those figures are not listed here because they change from time to time, and the Northern Territory in particular has its own arrangements worth confirming. Look up the current cap for your exact area on firsthomebuyers.gov.au rather than assuming a figure.
How to check the cap for your suburb before you sign
Do not assume the capital city figure applies to where you are buying. Regions outside the listed centres sit under separate, lower caps that vary by state. One suburb can even straddle two postcodes with different thresholds.
So before you sign anything, run your exact suburb and postcode through the official price cap search on firsthomebuyers.gov.au. A property a few thousand dollars over the cap is simply not eligible, and you do not want to discover that after you have made an offer.
Who is eligible?
This is where the detail matters, because the eligibility rules are stricter than the headline "5% deposit" suggests. To use the guarantee you must:
- Be 18 or over and an Australian citizen or permanent resident. Confirm the current residency wording when you apply.
- Not have owned residential property in Australia in the past 10 years. This is a 10-year prior-ownership test, not a strict "never owned" rule. If you owned a home a decade ago and have rented since, you may qualify again.
- Use the home as your principal place of residence. This is an owner-occupier scheme. Pure investors are out.
- Move in within 6 months of settlement and keep living there while the guarantee is active.
After your lender gives pre-approval under the scheme, you have a set window to find a home and sign a contract. That window is separate from the 6-month move-in rule, which kicks in after settlement. Confirm the current pre-approval timeframe with your lender or on firsthomebuyers.gov.au, and do not confuse the two.
The single parent and guardian variation
There is a related guarantee aimed at single parents and legal guardians that allows a smaller deposit again. The rules differ, so if you are raising children on a single income it is worth asking your lender or broker whether you fit the criteria, and confirming the current deposit requirement on the official site.
The catch: you still borrow about 95%
Avoiding LMI is genuinely valuable, but it does not change the size of your loan. A 5% deposit means you still borrow about 95% of the purchase price. That has two consequences.
First, your repayments and the total interest you pay over the life of the loan are higher than they would be with a bigger deposit, simply because you are borrowing more. Second, you start with very little equity, so if prices dip you could find yourself owing close to what the home is worth. The benefit is real, getting in sooner and skipping the insurance bill, but it is a trade, not a free lunch.
This is general information only, not financial, legal or tax advice. Talk to a licensed mortgage broker or financial adviser, or check the official source, before you commit.
A worked example: 5% vs 20% deposit on the same home
The numbers below are illustrative only, not scheme figures or a price-cap reference. Take a hypothetical $700,000 home to see the difference.
| 5% deposit (guarantee) | 20% deposit | |
|---|---|---|
| Deposit | $35,000 | $140,000 |
| Amount borrowed | $665,000 | $560,000 |
| Lenders Mortgage Insurance | $0 (covered by guarantee) | $0 (deposit already meets the 80% threshold) |
The 5% buyer is in the door with a quarter of the cash and no insurance premium. The 20% buyer borrows $105,000 less, so their repayments are lower and they pay less interest over time. Notice the two zeros in the LMI row are not the same mechanism: the 5% buyer avoids LMI because the guarantee covers the gap, while the 20% buyer avoids it by clearing the 80% threshold the normal way. Neither path is "right". It depends on whether your priority is getting in now or borrowing less. If saving the gap feels impossible, our look at the $168,000 deposit reality shows why a 5% path appeals to so many buyers.
How to apply through a participating lender, step by step
You cannot apply to Housing Australia directly. The guarantee is bolted onto a normal home loan application with a participating lender. The rough path looks like this:
- Check your eligibility and the price cap for your suburb on firsthomebuyers.gov.au.
- Pick a participating lender. A range of lenders take part, so you have plenty of choice. A mortgage broker can compare them for you and flag which ones offer the guarantee on the loan you want.
- Get pre-approval under the scheme through that lender. Your lender reserves a guarantee place as part of this.
- Find a home at or under the cap and sign a contract within the window your lender sets out.
- Settle, then move in within 6 months and live there while the guarantee applies.
A broker is doing the heavy lifting at steps two and three, since not every lender prices a 95% loan the same way even with the LMI removed.
First Home Guarantee 2026 FAQ
Can I combine it with first home owner grants and stamp duty concessions? Often yes, but it varies by state. The First Home Guarantee is federal. First Home Owner Grants, stamp duty concessions and shared-equity schemes are run by the states and territories, each with its own thresholds and rules. There is no blanket national "yes". Check your own state revenue office, and see how stamp duty concessions stack on top for a state-by-state breakdown.
What counts as prior ownership? The test is whether you have owned residential property in Australia in the past 10 years. That includes an investment property, not just a home you lived in. Owned a place 11 years ago and rented since? You may still qualify. Confirm the fine print with your lender.
What if I move out? The home has to stay your principal place of residence while the guarantee is active. If your circumstances change, tell your lender, because moving out or turning the property into a rental can affect your guarantee.
Is it really no LMI, or is the cost hidden somewhere? There is genuinely no LMI premium. The cost the government avoids is covered by its guarantee. You still pay normal loan interest and fees, and you still borrow about 95%, but the insurance line is zero.
Is the First Home Guarantee right for you?
For a lot of first home buyers in 2026, the maths is simple. If you can comfortably service a loan but cannot wait the extra years it takes to save 20%, the guarantee gets you in sooner and saves you the LMI bill. With income caps and place limits gone, far more people now clear the bar.
It is not the only path. If borrowing 95% feels like a stretch, a government shared equity scheme like Help to Buy can lower the amount you borrow by taking a stake in the home, and co-buying with friends or family pools deposits and borrowing power. Each suits a different situation, and the cheapest headline deposit is not always the best long-term call.
Where this gets genuinely tricky is competing for the right property under the cap, in a market where prices and caps both keep moving. A buyer's agent through GoMatch can hunt down homes that sit under your cap, run the numbers on a 95% loan, and stop you overpaying for the privilege of getting in early. Pair that with a sharp mortgage broker and you have the two people who actually move the needle on a first purchase.
Figures here were confirmed against primary sources in June 2026, but caps and rules are reviewed periodically. Before you rely on any number, check the current details at firsthomebuyers.gov.au and housingaustralia.gov.au, and treat any state-specific or time-sensitive figure as worth re-confirming on the day.
Sources
- firsthomebuyers.gov.au (Australian Government First Home Buyers site), Australian Government 5% Deposit Scheme and eligibility, June 2026.
- Housing Australia, "Expanded Australian Government 5% Deposit Scheme to support more Australians into home ownership" (unlimited places, higher property price caps from 1 October 2025), October 2025.
- firsthomebuyers.gov.au, Property Price Caps, June 2026.
- Parliamentary Budget Office, "Delivering 100,000 homes and 5% deposits for all first home buyers", 2025.
