First Home Guarantee Income Cap: What Changed in October 2025

By Andrew Paterson

If you looked into the First Home Guarantee before October 2025 and were told you earned too much, that rule no longer exists.

The First Home Guarantee income cap was removed entirely when the scheme expanded on 1 October 2025.

Singles earning over $125,000 and couples earning over $200,000 were previously excluded, even when they met every other eligibility requirement.

But removing the income cap doesn’t mean income no longer matters. Your lender still assesses what you can afford to borrow, and for many buyers that assessment is now the main barrier rather than scheme eligibility.

What changed on 1 October 2025

The October expansion removed the First Home Guarantee income cap along with two other restrictions:

• Income cap removed. The $125,000 single and $200,000 couple thresholds no longer apply.
• Place limits removed. The scheme used to allocate 35,000 spots per financial year, and they often ran out within months. If you qualify, you can apply any time.
• Property price caps increased. Melbourne and Geelong both moved from $800,000 to $950,000, giving buyers access to a wider range of properties under the scheme.

How the old First Home Guarantee income cap worked

The scheme assessed your previous financial year’s taxable income using your ATO Notice of Assessment. That single number determined eligibility, with no room for context.

Overtime, bonuses and rental income all counted because they flow through to taxable income.

A nurse on a $105,000 base salary who picked up $25,000 in overtime would have shown $130,000 in taxable income and been locked out of the scheme entirely.

Salary sacrifice into superannuation lowered the figure because it reduced taxable income. Negative gearing deductions could bring it down further.

The cap also applied to combined income for couples. A household where one partner earned $180,000 and the other earned $30,000 exceeded the $200,000 threshold by $10,000.

None of this applies any more.

How your lender assesses income now

Housing Australia checks whether you qualify for the scheme. Your lender checks whether you can afford the loan. These are separate assessments, and qualifying for one doesn’t guarantee the other.

When you apply for a home loan, your lender adds a buffer of around 3 percentage points to the current interest rate and tests whether you can manage repayments at that higher rate.

On a $760,000 loan at 6.5%, the lender would assess your capacity to repay at roughly 9.5%. That buffer significantly reduces what most buyers can actually borrow compared to what they might expect based on income alone.

In practice, this means a couple earning $200,000 who previously couldn’t access the scheme because of the income cap might now qualify but find their lender will only approve them for $650,000 rather than the $900,000 property they had in mind. The scheme’s eligibility barrier is gone, but the lender’s affordability assessment hasn’t changed.

Documentation and lender differences

• ATO Notice of Assessment (NOA). The scheme no longer needs it for eligibility, but most lenders require it to verify your income as part of their serviceability assessment.
• NOA timing gap. If you’re applying between 1 July and 31 August and your latest NOA isn’t available yet, lenders can proceed to pre-approval, but the guarantee itself can’t be issued until the NOA is provided.
• Self-employed and variable income. Most lenders want two years of tax returns and business financials, and they’ll typically average your income across those years rather than using the higher figure. Commission-based earners and contractors go through a similar process.
• Serviceability varies between lenders. Two participating lenders can look at the same income and debts and arrive at different borrowing figures. Because your refinancing options are limited to the participating panel while the guarantee is active, the lender you start with matters more than it would otherwise.

Whether the removal changes your decision

For buyers who were previously just above the old First Home Guarantee income cap, the change is straightforward. You now qualify for a scheme you couldn’t access before, and the rest of the process works the same way.

For higher-income buyers who are newly eligible, the trade-off is worth thinking through. Buying with a 5% deposit means a larger loan and more interest over its life.

Whether the Lenders Mortgage Insurance savings outweigh that depends on your timeline and how quickly you expect to build equity.

It’s also worth noting that while the First Home Guarantee no longer has income caps, Help to Buy still does at $100,000 for singles and $160,000 for couples.

If your income sits above those thresholds, the First Home Guarantee is likely your main option for government-backed support.

Want to talk it through?

For more on how the First Home Guarantee works alongside other benefits like Help to Buy, see our complete guide to Geelong grants and schemes.

A 15-minute chat will tell you where you stand on eligibility, what your realistic borrowing capacity looks like and which participating lenders suit your situation.

No cost, no pressure, no paperwork until you’re ready.

Schedule a free chat or call us on (03) 5222 7453.