The First Home Guarantee: Buy With a 5% Deposit (Without Selling a Kidney)

Updated October 2026 · Written for Victorian first home buyers, but the federal rules apply Australia-wide.

Saving a 20% deposit in Melbourne can feel like training for a marathon where someone keeps moving the finish line. The First Home Guarantee (FHBG) is the government's attempt to shorten the course. Here's how it works, who qualifies, what it won't do, and a checklist so you don't trip at the starting block.

What is the First Home Guarantee?

It's part of the Australian Government's Home Guarantee Scheme, run by Housing Australia. If you have a 5% deposit, the government guarantees up to 15% of the property value to your lender. That brings the lender's risk down to a level where they can lend you 95% without charging Lenders Mortgage Insurance (LMI). You don't deal with Housing Australia directly: you apply through a participating lender (over 30 banks, credit unions and other lenders), and they lodge the application for you.

What changed on 1 October 2025?

Housing Australia confirmed three big changes, all of which apply now:

• Unlimited places. The old yearly cap of 35,000 places is gone, so there's no race to be "first in".
• No income caps. Previously singles had to earn under $125,000 and couples under $200,000. Not anymore.
• Higher property price caps. In Victoria, the cap is $950,000 for Melbourne, Geelong and regional centres, and $650,000 for the rest of Victoria. (It used to be $800,000 and $650,000.)

The Regional First Home Buyer Guarantee was folded into the main scheme. The Family Home Guarantee (for eligible single parents, 2% deposit) continues separately.

Are you eligible? Checklist

Check these off, then confirm the details with your lender, because Housing Australia's rules are the final word:

• I'm a first home buyer, or haven't owned property in Australia in the last 10 years
• I'm buying on my own, or with one other person (partner, friend or relative), and we both meet the criteria
• I'm an Australian citizen aged 18 or over (check Housing Australia's eligibility tool for the current rule on residency)
• I have a 5% deposit of the property value as assessed by the lender (not just the contract price)
• Both the purchase price and the lender's valuation are under the price cap for that location
• I'm buying a new or existing residential property to live in (owner-occupier, not an investment)
• I'm applying through a participating lender

A worked example

Say you're buying a $750,000 home in Melbourne. A 5% deposit is $37,500 and the loan is $712,500. Without the scheme, a 5% deposit would normally mean LMI, often tens of thousands of dollars depending on the lender and your circumstances. With the Guarantee, that LMI cost is avoided. You still pay stamp duty (unless you qualify for a Victorian exemption, which applies to first homes up to $600,000), conveyancing, and other costs. We cover those in our other blogs.

What the Guarantee does not do

• It's not a grant. You still borrow 95% and repay every cent. A higher loan-to-value ratio generally means a higher interest rate and more interest over time.
• It doesn't cover stamp duty or other costs. Budget for those separately.
• It may push prices up. Some economists, including analysts at Lateral Economics, have forecast that the expanded scheme could add several percentage points to home prices in the segments buyers target. That's a forecast, not a certainty, but it's a good reason to shop carefully and not stretch past what you can afford.
• It's not forever. Housing Australia lists when the guarantee ends. These include: you sell the home, rent it out, stop living in it without an approved exemption, refinance to a lender that isn't a participating lender, borrow extra funds from the same lender, or your loan balance falls to 80% or less of the property's value on scheduled repayments (at which point you wouldn't need LMI anyway).

How to apply: step by step

1. Check your eligibility with Housing Australia's online eligibility tool and the postcode price-cap search.
2. Talk to a participating lender or a mortgage broker who can compare lenders on the panel (rates and fees vary).
3. Get pre-approval. Your lender submits your application to Housing Australia and reserves a place for you.
4. Find a property under the price cap and sign the contract within the pre-approval window (historically 90 days from pre-approval; confirm your lender's current timeframe).
5. Formal approval and settlement. The guarantee is issued and you settle as normal.

Documents to have ready

• Full name and date of birth for each applicant
• Medicare number (including your position on the card)
• A completed Home Buyer Declaration (from your lender or Housing Australia)
• Standard lender documents: 100 points of ID, payslips or tax returns, bank statements, and details of debts
• Evidence of your 5% deposit and savings history

Your lender will confirm anything extra, because requirements can change.

Combining it with other help

The Guarantee works alongside Victoria's First Home Buyer duty exemption/concession (stamp duty relief for homes up to $750,000) and, for a new home up to $750,000, the First Home Owner Grant of $10,000. Together, these can make a big dent in your upfront costs. We cover both in separate blogs. There's also the separate federal Help to Buy shared-equity scheme, which needs a 2% deposit but has its own income and price limits, so ask your broker if it suits you better.

A final word (and a small joke)

The Guarantee is a fantastic tool, but it is still a mortgage, and your bank will happily take your repayments for the next 30 years. Treat the 95% LVR with respect, build a buffer, and keep your emergency fund. A house is a lot easier to enjoy when you aren't eating two-minute noodles to pay for it.

Official links

• Housing Australia, First Home Guarantee: https://www.housingaustralia.gov.au/first-home-guarantee-faqs
• Housing Australia, FAQs and key terms: https://www.housingaustralia.gov.au/faqs-and-key-terms
• Housing Australia, October 2025 changes: https://www.housingaustralia.gov.au/media/unlimited-places-higher-property-price-caps-first-homebuyers-1-october-2025
• State Revenue Office Victoria: https://www.sro.vic.gov.au
• MoneySmart (ASIC): https://moneysmart.gov.au

Disclosure and Disclaimer

This article is general information only and is not financial, credit, legal, tax or investment advice. It does not consider your objectives, financial situation or needs. Government schemes, price caps, eligibility rules and lender policies change often and may be out of date by the time you read this. Please do your own research and obtain independent advice from a licensed financial adviser, mortgage broker, accountant and conveyancer or solicitor before making any decision. Loan approvals are subject to lender criteria. To the maximum extent permitted by law, our business, its directors, employees and brokers accept no liability for any loss or damage arising from reliance on this article.