First Home Scheme with Just 5% Deposit: Government Support
Dreaming of owning your first home in Australia but struggling to save a hefty deposit? The First Home Guarantee- previously known as the First Home Loan Deposit Scheme- is designed to help you get the keys faster.
Backed by the Australian Government, this initiative lets eligible first-home buyers purchase a property with as little as 5% deposit, all while avoiding Lenders’ Mortgage Insurance (LMI).
With new updates rolling out for 2025, including broader access and relaxed criteria, now’s the perfect time to learn how the scheme works and how you can benefit. Here’s everything you need to know.
What Is the First Home Loan Guarantee Scheme?
The First Home Guarantee is an Australian Government initiative administered by Housing Australia under the broader Home Guarantee Scheme. It enables eligible first‑home buyers to purchase a new or existing home with a deposit as low as 5% of the property value, avoiding costly Lenders’ Mortgage Insurance (LMI) because the government provides a guarantee of up to 15% of the property value to the lender (not to the buyer).
Eligibility Criteria
To qualify, applicants must meet several requirements:
- Residency: Must be an Australian citizen or permanent resident aged 18+.
- First‑time buyer rule: No property ownership (or interest) in Australia for at least 10 years before loan signing.
- Income caps:
- Individual: taxable income ≤ $125,000 in the previous financial year
- Joint applicants: combined ≤ $200,000
- Deposit: Minimum 5%, using maximum available savings (but less than 20%).
- Owner‑occupier: Must live in the purchased home; investment properties are not eligible.
Additionally, the property must be within regional price caps, which vary by postcode and are confirmed via Housing Australia’s lookup tool.
Additional Scheme Variants
The Home Guarantee Scheme also includes two related guarantees:
- Regional First Home Buyer Guarantee (5% deposit, 15% government guarantee; 10,000 places annually) for eligible first‑home buyers in regional areas.
- Family Home Guarantee (as little as 2% deposit, 18% government guarantee; 5,000 places) for eligible single parents or guardians with at least one dependent child- even prior homeowners- if they don’t own property at settlement.
Recent Updates & Future Expansion of FHLS
- 2025/26 financial year: The government has allocated 35,000 places under the First Home Guarantee plan.
- From 1 July 2025, the scheme expands to all first‑home buyers nationally, with no income caps or limits on places, and higher property price thresholds.
- The Albanese Government is also investing $10 billion to build up to 100,000 homes reserved for first‑home buyers, with construction beginning in 2026‑27 and occupancy starting 2027‑28.
Benefits vs Risks
Advantages
- Avoid LMI, saving thousands of dollars upfront.
- Enter the property market sooner with just a 5% deposit, rather than waiting years to save 20%.
- Flexibility: Eligible for a range of property types- existing homes, new builds, vacant land, or off‑the‑plan purchases.
Risks and Disadvantages
- Higher long‑term interest costs due to larger loan sizes (95% LVR vs 80%).
- Increased housing demand may push up prices overall-economists argue the scheme fuels inflation in property costs rather than improving affordability.
- Future removal of income caps may shift benefits toward those less in need unless further targeting is applied; critics suggest support should be directed to essential workers or low-income households.
Step-by-Step: How to Apply
- Check eligibility using Housing Australia’s tool and confirm property price caps for your target area.
- Save at least a 5% deposit (making sure to plan for stamp duty, fees, and other purchase costs).
- Contact a participating lender, such as CBA, NAB, Teachers Mutual Bank, Bendigo Bank, or others.
- Submit loan application, providing proof of income (ATO NOA), citizenship/residency, and first-time buyer status.
- Once approved, you must secure the property within 90 days, complete settlement, and move in.
At A Glance
| Feature | Details |
|---|---|
| Deposit Required | Minimum 5% (First Home Guarantee); 2% (Family Guarantee) |
| Government Support | Up to 15% guarantee (First & Regional), 18% (Family) |
| Annual Places (2025/26) | 35,000 for First Home; 10,000 (Regional); 5,000 (Family) |
| Income Caps (currently) | $125k single, $200k joint (to be removed mid‑2026) |
| Eligibility Rule | Must not hold property in Australia for past 10 years |
| Property Types Supported | New or existing dwellings, off‑plan, vacant land, house & land |
| Price Caps | Varies by region (postcode‑based) |
| Application Deadline | ~90 days from conditional approval to purchase |
The First Home Guarantee delivers a potentially life-changing opportunity for first‑time buyers to enter the housing market with significantly reduced upfront costs. Its expansion from mid‑2025-removing income caps and increasing price thresholds, marks a landmark shift in housing policy.
However, the scheme is not a silver bullet. Without concurrent expansion of housing supply, experts warn increased demand may push prices higher, and broader access may dilute the benefit to those who need it most. For many buyers, even entering the market early with a small deposit can yield a real long‑term financial advantage, but it’s essential to weigh longer-term interest costs and market conditions carefully.
