Australia’s First Home Guarantee Explained: How to Buy Your First Home with Just 5% Deposit

The process of finding your first home brings excitement but it requires substantial financial resources. The First Home Guarantee (FHG) scheme in Australia provides first-time buyers with the chance to acquire property through a 5% deposit requirement and no lenders’ mortgage insurance costs. Under the scheme, the Australian Government provides a guarantee to participating lenders, helping eligible first-home buyers purchase a home with a lower deposit. Let’s explore how it works.

What Is the First Home Guarantee Scheme?

The First Home Guarantee scheme allows eligible first-home buyers to purchase a property with a minimum deposit of 5%, without paying Lenders’ Mortgage Insurance (LMI), subject to lender and scheme eligibility requirements. The government-backed program removes a significant obstacle which helps Australians achieve homeownership earlier.

The scheme is administered by Housing Australia and applications are made through participating lenders.

Key Features:

• 5% minimum deposit required
• No lender’s mortgage insurance needed (subject to eligibility and lender approval)
• Faster path to homeownership
• Government guarantee reduces lender risk

Eligibility Requirements:

1. First-home buyer: Never owned Australian residential property
2. Australian citizen/permanent resident: Must have legal residency status
3. Income limits: Income limits apply and vary depending on whether applicants apply as singles or couples and may change over time
4. Property price cap: Property price caps vary by location and are subject to change
5. Occupancy requirement: Must occupy property as primary residence

Recent Scheme Changes (October 2025)

Recent updates to the scheme have expanded accessibility. The program now offers new income limits and higher property value limits in specific areas. Buyers should check the latest government updates to ensure they understand current requirements.

Financial Advantages:

• Avoid LMI costs (often $15,000–$40,000+)
• Smaller upfront savings requirement
• Faster entry into property market
• Build equity sooner
• Practical Advantages:
• Access to participating lenders
• Flexible loan terms (subject to lender approval)
• Government guarantee reduces lender risk

Important Considerations:

Interest rates and loan terms vary depending on the lender and individual financial circumstances. Stamp duty, insurance and legal costs still apply. Scheme places are limited.