First Home Guarantee

By Andrew Paterson

Buy your first home with 5% deposit instead of 20%.

The First Home Guarantee lets the government act as your guarantor, so you don’t need to ask family for help. It also means you skip Lenders Mortgage Insurance altogether. That alone saves most buyers tens of thousands of dollars.

But the scheme changed significantly in October 2025, so most of what you’ll find online is already out of date.

First, let’s cover the basics

If you already understand deposits, LMI and how home loans work, skip to “Here’s what actually changed.” But if you’re starting from scratch, this section explains why the First Home Guarantee matters.

Why do banks want a 20% deposit?

When you buy a home, the bank lends you most of the money. But they want protection in case you can’t repay – if they need to sell your house to recover their money, they want a buffer in case property values have dropped.

That buffer is your deposit. If you put in 20%, the bank figures even if prices fall 15%, they can still sell the property and get their money back.

On a $800,000 home, 20% means $160,000. For most people, saving that much takes years – often 5 to 10 years of aggressive saving while rents keep rising and property prices keep moving.

What is Lenders Mortgage Insurance (LMI)?

If you don’t have 20%, banks will still lend to you – but they charge you for insurance that protects them (not you) if you default. This is called Lenders Mortgage Insurance.

LMI is expensive. On a $800,000 property with a 5% deposit, you’d pay roughly $30,000 – $35,000 in LMI. That’s often added to your loan, so you’re paying interest on it for 30 years.

The less deposit you have, the more LMI costs. It’s a penalty for not having wealthy parents or a decade of savings.

What does “government acts as guarantor” mean?

A guarantor is someone who promises to cover your debt if you can’t pay. Normally, this might be a parent who puts their own home on the line to help you get a loan.

Under the First Home Guarantee, the government plays that role instead. Housing Australia (a government body) tells the bank: “If this buyer defaults and you lose money, we’ll cover up to 15% of the property value.”

That 15% guarantee plus your 5% deposit equals 20% – so the bank has their security buffer without charging you LMI.

Important: This doesn’t mean the government gives you money or pays part of your loan. You still borrow the full amount and make all the repayments. The guarantee just removes the LMI cost and lets you buy sooner.

How do home loan repayments work?

When you borrow money to buy a home, you pay it back over a long period – usually 30 years. Each repayment has two parts:

Principal – The actual amount you borrowed. Every principal payment reduces what you owe.

Interest – The bank’s fee for lending you money. This is calculated as a percentage of what you still owe, so it’s highest at the start and decreases over time.

On a $760,000 loan at 6% interest over 30 years, your monthly repayments would be around $4,560. In the first year, roughly $3,800 of each monthly payment goes to interest and only $760 goes to principal. That ratio slowly shifts over time.

Use our mortgage repayment calculator to see what different loan amounts would actually cost you.

Here’s what actually changed in October 2025

Three big restrictions are gone:

No more income caps. Previously, singles earning over $125,000 or couples over $200,000 couldn’t use the scheme. That limit is gone. A couple earning $300,000 can now apply.

No more place limits. The scheme used to have 35,000 spots per year, allocated on 1 July. People would race to apply, spots would run out within months, and everyone else had to wait until next financial year. Now there’s no cap – if you qualify, you can apply.

Higher property price caps. The maximum property value you can buy under the scheme increased significantly. Melbourne and Geelong both jumped to $950,000.

Victorian price caps from October 2025

Location	Maximum Property Price
Melbourne	$950,000
Geelong (regional centre)	$950,000
Other regional Victoria	$650,000

Geelong gets the same cap as Melbourne because it’s classified as a “regional centre” – one of only three in the country alongside Newcastle and the Gold Coast.

This matters because Ballarat, Bendigo, Bacchus Marsh and everywhere else in regional Victoria stays at $650,000. The boundaries aren’t always intuitive either – more on that below.

A real example: buying in Geelong

Let’s say you’re buying an $850,000 townhouse in Belmont. Here’s how it works with and without the First Home Guarantee:

Without the scheme

	Amount
Property price	$850,000
20% deposit needed	$170,000
Loan amount	$680,000
LMI (if only 5% deposit)	~$35,000
Stamp duty (first home buyer)	~$20,000
Total cash needed upfront	~$190,000

With First Home Guarantee

	Amount
Property price	$850,000
5% deposit needed	$42,500
Loan amount	$807,500
LMI	$0
Stamp duty (first home buyer)	~$20,000
Total cash needed upfront	~$62,500

You’re buying with $62,500 instead of $190,000. That’s $127,500 you didn’t have to save.

The trade-off: Your loan is $127,500 larger, so your repayments are higher. At 6% interest over 30 years:

• $680,000 loan = ~$4,080/month
• $807,500 loan = ~$4,840/month

That’s an extra $760/month, or about $9,100 per year. Over 30 years, you’ll pay more in total interest. But you’re also in the market now, building equity, instead of renting for another 5-7 years while prices potentially keep rising.

What about stamp duty?

Stamp duty is a state government tax on property purchases. In Victoria, first home buyers get significant concessions:

• Properties up to $600,000: No stamp duty (full exemption)
• Properties $600,001 – $750,000: Sliding scale concession
• Properties above $750,000: Standard rates apply

On our $850,000 example, you’d pay stamp duty because it’s above the concession threshold. But the First Home Guarantee and stamp duty concessions are separate schemes – you can use whatever you qualify for.

What about the First Home Owner Grant?

The First Home Owner Grant (FHOG) is a $10,000 cash payment for buying or building a new home (never lived in before) valued up to $750,000.

You can use the First Home Guarantee AND claim the FHOG if you’re buying a new property under $750,000. They stack.

But FHOG doesn’t apply to established homes or properties over $750,000. Our $850,000 Belmont townhouse wouldn’t qualify for FHOG regardless of whether it’s new or established.

Who can use the First Home Guarantee?

Basic eligibility

To qualify, you must:

• Be an Australian citizen or permanent resident – At least one applicant. If you’re on a temporary visa, you can apply jointly with a citizen/PR partner, but not alone.
• Be at least 18 years old
• Not have owned residential property in Australia in the past 10 years – This includes houses, units, townhouses, vacant land, or any ownership interest (even if you never lived there).
• Intend to live in the property as your principal residence – You need to move in and stay. This isn’t for investment properties.
• Have a genuine 5% deposit – More on what “genuine” means below.
• Meet your lender’s normal borrowing criteria – The government guarantee helps with the deposit, but you still need to prove you can afford the repayments.

What counts as “genuine savings”?

Banks want to see that your deposit came from actual savings, not a last-minute gift or loan. Generally, you need:

• Three months of savings history – Money sitting in your account that you’ve accumulated over time
• Regular deposits – A pattern of adding to your savings, not just a lump sum appearing

What counts:

• Salary deposited and accumulated over time
• Tax returns saved
• Inheritance (if received more than 3 months ago)
• Sale of shares or other assets you’ve held
• First Home Super Saver Scheme withdrawals

What doesn’t count (or needs explanation):

• Gift from parents received last week
• Personal loan used as deposit
• Gambling winnings
• Large unexplained deposits

If part of your deposit is a gift, some lenders will accept it, but they’ll want to see you’ve saved at least some portion yourself. Rules vary between lenders.

The 10-year property ownership rule

“First home buyer” is stricter than you might think. You don’t qualify if, in the past 10 years, you’ve:

• Owned a house, unit, townhouse or apartment (anywhere in Australia)
• Owned vacant residential land
• Owned a share in a property (even 1%)
• Been on the title of a parent’s property
• Inherited property and held it briefly before selling

Common surprises:

• “My parents put me on their title for estate planning reasons” – That counts as ownership
• “I inherited my grandmother’s house but sold it within a month” – Still counts
• “I owned an investment property but never lived in it” – Still counts
• “I owned property 11 years ago” – You’re fine (it’s outside the 10-year window)

If you previously owned property but it’s been more than 10 years, you’re treated as a first home buyer again.

Couples and the partner problem

If you’re applying with a partner (married, de facto, or otherwise), both of you must meet the eligibility criteria.

This creates problems when:

One partner previously owned property: If your partner owned an apartment in a previous relationship 8 years ago, neither of you can use the scheme as a couple. Your only option is applying solo – one income, one name on the loan.

One partner is on a temporary visa: The citizen/PR partner can apply alone, but again – one income only.

One partner has bad credit: The scheme doesn’t check credit, but the lender does. If your partner has defaults, you might need to apply solo to get approved.

Applying solo dramatically affects your borrowing power. A couple earning $150,000 combined can borrow far more than an individual earning $100,000. Use our borrowing power calculator to see the difference.

Can friends or siblings buy together?

Yes – as of 2025, you can apply jointly with friends, siblings, or other family members. This is a newer option designed to help people pool resources.

All applicants must meet the eligibility criteria individually, and you’ll all be on the loan together. Think carefully about the legal and financial implications of co-owning property with someone you’re not in a relationship with.

The Family Home Guarantee: 2% deposit for single parents

If you’re a single parent or single legal guardian with at least one dependent child, there’s a separate scheme called the Family Home Guarantee that requires only a 2% deposit.

Same concept – the government guarantees the difference so you don’t pay LMI – but with an even lower entry point.

On an $800,000 home, that’s $16,000 deposit instead of $160,000.

You don’t need to be a first home buyer to use the Family Home Guarantee. If you owned property previously but don’t currently own anything, you may still qualify.

The property price caps are the same as the First Home Guarantee.

Things that trip people up every week

The scheme looks simple on paper. In practice, it gets complicated fast.

Not all lenders participate

About 30 lenders offer the First Home Guarantee, including most major banks – but ANZ doesn’t participate at all.

Among participating lenders, policies vary significantly:

• Some have stricter credit scoring than others
• Some won’t do construction loans under the scheme
• Some have longer processing times
• Some offer better interest rates than others

The lender you pick matters more than most people realise. Going direct to your bank means you only see their products. Working with a broker lets you compare options across multiple participating lenders.

Price cap boundaries aren’t always obvious

Geelong gets the $950,000 cap, but “Geelong” means the Greater Geelong local government area specifically.

Torquay? That’s Surf Coast Shire – $650,000 cap. Ocean Grove? Greater Geelong – $950,000 cap. Lara? Greater Geelong – $950,000 cap. Bannockburn? Golden Plains Shire – $650,000 cap.

A few kilometres can make a $300,000 difference in what you can buy under the scheme. Always check the specific suburb.

The refinancing restriction

Once you’re in the scheme, you can only refinance to another participating lender until your loan-to-value ratio (LVR) drops below 80%.

That means:

• The attractive rate from a non-bank lender? Off limits.
• The cashback refinance offer you saw advertised? Probably not available to you.
• Stuck with higher rates at your current lender? Your only option is switching to another participating lender.

Your LVR drops below 80% when you’ve paid down enough of your loan – but this is calculated on scheduled repayments only. If your property value increases, that doesn’t count. If you make extra repayments into a redraw facility, that doesn’t count either.

On a $807,500 loan for an $850,000 property (LVR of 95%), getting to 80% LVR means paying down to $680,000 – reducing your loan by $127,500. With scheduled repayments only, that takes roughly 8-10 years.

If you refinance to a non-participating lender before hitting 80% LVR, you’ll likely have to pay LMI at that point – potentially tens of thousands of dollars.

The occupancy requirement

The property must be your principal place of residence. That means:

You must live there. Not rent it out. Not use it as a holiday house. Actually live there as your main home.

If you rent it out while above 80% LVR: The guarantee ends. Your lender may require you to pay LMI retrospectively.

If you rent it out after reaching 80% LVR: The guarantee has already naturally ended, but your lender will likely reclassify your loan as an investment loan – which typically comes with a higher interest rate.

What about renting out a room? Generally fine – you’re still living there as your principal residence. Taking in a housemate to help with repayments is usually allowed. Taking in an Airbnb guest occasionally is greyer territory – check with your lender.

What about working from home? No issue at all. Running a business from a home office doesn’t affect your occupancy status.

What about travelling for work? Short-term travel is fine. If your job requires you to relocate interstate for 12 months, that’s a conversation to have with your lender. The rules allow for some exemptions, but you need to discuss it in advance.

Construction complications

If you’re buying land and building, or doing a house-and-land package, extra rules apply:

Fixed-price contracts only. The builder must quote a fixed price for the construction. Cost-plus contracts (where you pay whatever it actually costs) aren’t allowed.

Total must stay under the cap. Land price + construction cost + any variations must not exceed the price cap. If you’re building in Geelong with a $950,000 cap, and your land was $400,000, your build can’t exceed $550,000.

Cost blowouts are on you. If the build runs over budget (variations, site costs, upgrades you decide to add), you need to fund the difference yourself. And if the total goes over the price cap, you lose the scheme entirely.

Progress payments get complicated. Construction loans work differently to standard home loans – you draw down funds in stages as the build progresses. Not all participating lenders handle construction loans well. Some have minimum loan amounts, some have longer processing times for progress payments.

If you’re planning to build, this is definitely worth discussing with a broker who understands construction finance.

The questions you’re googling at midnight

These aren’t on the government website. But they come up constantly:

What if my partner owned property overseas – does that count? No – the 10-year rule only applies to Australian property. Overseas property ownership doesn’t disqualify you.

What if I’m on a bridging visa and my partner is a citizen? Your partner can apply as the sole applicant (citizenship requirement met), but you likely won’t be able to be on the loan at all – most lenders won’t include a bridging visa holder as a borrower. That means one income only.

What happens if I need to move for work after 12 months? Talk to your lender before you move. There are hardship provisions and exemptions for genuine work relocations, but you need to arrange it in advance – not after you’ve already rented the property out.

What if I want to rent out a room to help with repayments? Usually fine. You’re still living there as your principal residence. Just don’t rent out the whole property.

What if I got made redundant between approval and settlement? This is a problem. Your lender will likely re-verify your employment before settlement. If you’ve lost your job, they may not proceed with the loan. Talk to your broker immediately – there may be options depending on your circumstances.

What if I bought land 5 years ago but never built on it? That counts as property ownership. You don’t qualify for the First Home Guarantee.

What if my name was on my parents’ property but I never lived there? Still counts as ownership. The exemption is only for living in property someone else owns – not being on the title yourself.

What if I break up with my partner after we buy? The loan and guarantee continue as normal. You’ll need to work out between yourselves (and potentially lawyers) what happens to the property. One person buying out the other is possible, but it’s a refinance situation with all the usual rules.

These are the scenarios that don’t appear in government summaries. They appear in declined applications and stressed phone calls from buyers who thought they qualified.

How to apply: the full process

Step 1: Check if you actually qualify

Before anything else, honestly assess your eligibility:

• Property ownership in the past 10 years?
• Partner’s property ownership history?
• Citizenship/residency status?
• Have you actually saved a deposit (not just received a recent gift)?

If there’s any doubt, talk to a broker before you fall in love with a property you can’t actually buy.

Step 2: Get your documents together

You’ll need to provide:

Identity documents:

• Passport or birth certificate
• Driver’s licence
• Medicare card

Income evidence:

• Last 2-3 payslips
• Employment contract or letter from employer
• Last 2 tax returns and notices of assessment (especially if self-employed or have variable income)
• Any other income evidence (rental income, dividends, etc.)

Financial position:

• Last 3-6 months of bank statements (all accounts)
• Details of any debts (credit cards, personal loans, HECS, car loans)
• Superannuation statements
• Evidence of deposit savings

If you’re self-employed:

• Last 2 years of business tax returns
• Last 2 years of business financials
• Accountant’s letter confirming income

Step 3: Get pre-approved

Pre-approval (also called conditional approval) means a lender has reviewed your finances and agreed in principle to lend you a certain amount, subject to finding a suitable property.

This involves:

1. Submitting your application and documents to a lender
2. The lender assessing your borrowing capacity
3. The lender reserving a First Home Guarantee place with Housing Australia
4. Receiving a pre-approval letter stating how much you can borrow

The 14-day deadline: Once a lender makes a reservation with Housing Australia, they have 14 days to submit your full application. Make sure you have all your documents ready before starting this process.

Pre-approval typically lasts 90 days. You can usually get one 90-day extension if needed.

Step 4: Find a property

With pre-approval in hand, you know your budget. Now you can house-hunt with confidence.

Remember:

• Both the purchase price AND the bank’s valuation must be under the price cap
• The property must be suitable for you to live in (not a commercial property, not uninhabitable)
• New homes, established homes, townhouses, units, house-and-land packages are all eligible

Step 5: Make an offer and sign a contract

Once you find a property:

1. Make an offer (usually through a real estate agent)
2. Negotiate the price
3. Sign the contract of sale
4. Pay the deposit to the agent (usually 10%, held in trust)

Important: Make sure your contract includes a “subject to finance” clause. This gives you an out if your loan isn’t formally approved. Without this clause, you could lose your deposit if finance falls through.

Step 6: Formal approval and settlement

After you’ve signed a contract:

1. Your lender orders a valuation of the property
2. Your lender completes their final checks
3. You receive formal (unconditional) approval
4. Settlement is scheduled (usually 30-90 days after contract signing)
5. Your solicitor or conveyancer handles the legal transfer
6. On settlement day, the loan funds are transferred, the title transfers to you, and you get the keys

The whole process from pre-approval to settlement typically takes 2-4 months, depending on how quickly you find a property and how long the settlement period is.

What to expect with repayments

Once you settle, you’ll start making repayments – usually monthly, though some lenders offer fortnightly or weekly options.

Sample repayment scenarios

Based on a 30-year loan at 6.5% interest:

Loan Amount	Monthly Repayment	Annual Repayment
$500,000	$3,160	$37,920
$600,000	$3,792	$45,504
$700,000	$4,424	$53,088
$800,000	$5,056	$60,672
$900,000	$5,688	$68,256

These are principal and interest repayments. Your actual rate will vary depending on your lender and the market at the time.

Use our mortgage repayment calculator to model your specific scenario.

What affects your borrowing power?

Just because the price cap is $950,000 doesn’t mean you can borrow $950,000. Lenders assess whether you can actually afford the repayments based on:

• Your income (after tax)
• Your existing debts (credit cards, car loans, HECS/HELP, personal loans)
• Your living expenses
• The interest rate (lenders stress-test at a higher rate than you’ll actually pay)
• The loan term

A rough rule of thumb: most people can borrow around 5-6 times their annual gross income, less any existing debts. But this varies significantly based on individual circumstances.

Our borrowing power calculator gives you a more accurate estimate.

First Home Guarantee vs Help to Buy

Since Help to Buy launched in December 2025, this is the question we get most often.

Both schemes help first home buyers get into the market sooner. But they work very differently.

	First Home Guarantee	Help to Buy
What it is	Government guarantees your loan so you skip LMI	Government buys part of your home with you
Deposit needed	5%	2%
Government ownership	None – you own 100%	30% (existing) or 40% (new homes)
Your loan size	Full purchase price minus your deposit	Reduced by government’s contribution
Income caps	None	$100k single / $160k couple
Repayments	Higher (bigger loan)	Lower (smaller loan)
Capital gains	All yours	Shared with government proportionally
Refinancing	Participating lenders only until 80% LVR	Participating lenders only
Geelong price cap	$950,000	$800,000
Can use with FHOG?	Yes	Yes
Can use together?	No – it’s one or the other	No – it’s one or the other

When First Home Guarantee makes more sense

• You earn a good income and can handle higher repayments
• You want to own 100% of your home from day one
• You want all the capital growth for yourself
• The property you want is between $800,000 and $950,000 (above Help to Buy’s cap)

When Help to Buy makes more sense

• You’re on a lower income and need smaller repayments
• You’re comfortable with the government owning part of your home
• You have very little saved (2% is easier than 5%)
• The property you want is under $800,000

The ownership trade-off

With the First Home Guarantee, you own 100% of your home. If it increases in value by $200,000 over 10 years, that’s all yours.

With Help to Buy, if the government contributed 30% and your home increases by $200,000, the government gets $60,000 of that gain when you eventually repay their share.

This is a genuine trade-off. Lower repayments now vs. keeping all the growth later. Neither is universally better – it depends on your priorities and financial situation.

For a full comparison of everything available, see our grants and schemes guide.

What if you don’t qualify?

If you don’t meet the First Home Guarantee criteria, you still have options:

Help to Buy – Different eligibility rules. Has income caps but allows previous property owners (if you don’t currently own).

Guarantor loan – If a family member is willing to use their property as additional security, you may be able to borrow with a smaller deposit without using the government scheme.

Save for a larger deposit – Not exciting, but 10% deposit significantly reduces LMI costs compared to 5%. And at 20%, you avoid LMI entirely.

Lenders Mortgage Insurance – If you can afford the LMI cost, you can still buy with less than 20% deposit. Some lenders offer LMI discounts for certain professions (doctors, lawyers, accountants).

Wait for circumstances to change – If you’re excluded because of a partner’s property history, waiting until the 10-year window passes might make sense. If you’re on a temporary visa, getting PR opens up options.

Talk to someone who deals with this every week

A 15-minute chat with one of our brokers will tell you exactly where you stand.

We’ll cover:

• Whether you actually qualify (including the edge cases)
• What the scheme means for your specific situation
• How much you could realistically borrow
• Which participating lenders suit your circumstances
• What to do next – whether that’s now or six months from now

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