First Home Guarantee Scheme 2026: the 5% deposit, no-LMI path explained

The First Home Guarantee lets eligible first-home buyers settle with a 5% deposit and skip Lenders Mortgage Insurance entirely. The federal government effectively underwrites the missing 15%. Done right, the saving is $20,000 to $35,000 on a typical capital-city purchase. Done wrong, the buyer trades LMI savings for a less competitive interest rate and worse refinancing options down the track.

The scheme is one of three federal levers aimed at first buyers, and the three are routinely confused. The First Home Guarantee (FHBG) is a lender-side guarantee administered by Housing Australia. The First Home Owner Grant (FHOG) is a state-level cash grant, usually restricted to new builds. The First Home Super Saver (FHSS) scheme lets a buyer pull voluntary super contributions out for a deposit. They stack. Most buyers who do their homework use two of the three, and a few use all three.

What the First Home Guarantee actually is

The FHBG replaced the older First Home Loan Deposit Scheme branding in 2022 and has been administered by Housing Australia (formerly the National Housing Finance and Investment Corporation) since. The mechanic is simple. A buyer with at least a 5% deposit applies through a participating lender. The lender approves the loan in the usual way, but with the loan-to-value ratio running up to 95%. The Commonwealth guarantees the slice of the loan between 80% and the actual LVR, so the lender does not require LMI on top.

The guarantee is not a loan, not a grant, and not a deposit top-up. The buyer still needs the 5% in cash, plus stamp duty if applicable, plus settlement costs. The government does not lend anything and does not pay anything unless the borrower defaults and the property is sold for less than the outstanding balance. The buyer carries the same mortgage they would have carried with LMI; they just avoid the LMI premium.

Eligibility, in plain terms

• Citizenship: Australian citizen or permanent resident at the time of application.
• First buyer status: a genuine first buyer, or someone who has not owned residential property in Australia in the past ten years. The ten-year reset is a 2024 change and it is generous; it covers people who have been out of the market through divorce, sickness, or a long stint overseas.
• Income caps: $125,000 taxable income for singles, $200,000 combined for couples, measured against the most recent Notice of Assessment.
• Owner-occupier only: investment purchases do not qualify. The buyer must move in within the timeframe specified by the lender, typically six months from settlement, and live there for a defined period.
• Deposit: at least 5% from genuine savings, with the standard exceptions for gifts and inheritance documented under lender policy.

Couples buying together must both qualify. Joint applications where one party has owned property within the ten-year window disqualify the application even if the other party is a genuine first buyer. Reading the fine print on this matters.

Price caps by capital city

The caps are set by Housing Australia and reset annually, typically on 1 July. The 2026 figures below are indicative; verify against Housing Australia's current schedule before relying on them.

• Sydney and NSW major regional centres: around $900,000.
• Melbourne and Geelong: around $800,000.
• Brisbane, Gold Coast, Sunshine Coast: around $700,000.
• Perth: around $600,000.
• Adelaide: around $600,000.
• Hobart: around $600,000.
• Darwin: around $600,000.
• Canberra: around $750,000.
• Regional postcodes: lower bands, typically $450,000 to $550,000 depending on state.

The cap is on the contract price, not the loan amount. Buying at $920,000 in Sydney puts the buyer over the cap and out of the scheme, even if they only need a 95% loan. The caps are firm and there is no negotiation.

How it works mechanically

A buyer applies through one of the 28 participating panel lenders. The panel includes the four majors, Macquarie, most second-tier banks, and a rotating list of credit unions and customer-owned banks. The lender runs its usual credit assessment: serviceability at the published rate plus the APRA buffer, income verification, expense verification, deposit history. If the loan would be approved at 80% LVR, it will generally be approved under the guarantee at 95% LVR. The guarantee covers the lender for the LMI exposure, not the borrower for the credit risk.

Approval through the scheme reserves one of the annual spots. The reservation is held for a set window, usually 90 days, while contracts go unconditional and settlement is scheduled. If the deal falls over inside that window, the spot returns to the pool. After settlement, the loan runs as an ordinary mortgage. Repayments, redraw, offset, and refinancing all work the way they normally do.

The trade-offs nobody mentions in the marketing

Panel lenders do not always carry the most competitive variable rate on the market. A non-panel lender might be 20 to 40 basis points cheaper on the same loan size. The LMI saving usually swamps that gap in year one, but the gap compounds across the life of the loan. Run the scenario both ways before assuming the scheme is the cheaper path.

Refinancing later loses the guarantee. That sounds worse than it is. By the time refinancing makes sense, the LVR has usually dropped below 80% through repayments and capital growth, so the guarantee was no longer doing any work. The honest framing is that the FHBG is a settlement tool, not a long-term feature of the loan.

The annual cap is real. Roughly 50,000 places per fiscal year nationally, with a chunk reserved for the regional and family-home variants. Spots fill fastest between April and June as the financial year closes. A buyer planning to settle in May is competing with everyone else with the same plan. Earlier in the financial year is cleaner.

Stacking with state grants and stamp-duty concessions

FHBG plus FHOG plus a state first-home stamp-duty exemption is the holy trinity for first-home buyers. The three operate on different parts of the transaction.

• FHBG: removes LMI on the loan.
• FHOG: cash grant, usually $10,000 to $30,000 depending on state, typically restricted to new builds. See the First Home Owner Grant by state guide for the current figures.
• State stamp-duty exemption or concession: full or partial waiver of transfer duty, set by each state on its own price thresholds.

FHSS sits alongside the three by topping up the deposit from voluntary super contributions. Walk through the mechanics on the FHSS explainer before deciding whether it fits the timeline.

A worked Sydney example

Take a NSW couple. One earns $110,000, the partner $80,000. Combined income $190,000, comfortably under the $200,000 cap. Neither has owned property before. They are buying a $720,000 apartment in inner-west Sydney, under the $900,000 Sydney FHBG cap and under the NSW first-home full stamp-duty exemption threshold of $800,000.

• Contract price: $720,000.
• 5% deposit: $36,000 cash. Loan amount $684,000 at 95% LVR.
• LMI avoided: on a $684,000 loan at 95% LVR, LMI typically runs around 4% of the loan, near $27,000. The FHBG removes it entirely.
• NSW stamp duty avoided: under the full-exemption threshold, the transfer duty on a $720,000 purchase would be roughly $30,500. The first-home exemption brings that to zero.

Combined saving versus the standard purchase path is about $57,500. The couple still need the $36,000 deposit, a few thousand for conveyancing and inspections, and a modest buffer for moving costs and lender fees. The FHBG's contribution to the bundle is the $27,000 LMI saving; the state exemption does the heavier lifting on the duty side. Both pieces matter, and missing either leaves money on the table. Run the numbers against your own scenario on the stamp-duty calculator and the mortgage calculator.

The three variants of the guarantee

• First Home Guarantee: the main scheme, 5% deposit, owner-occupier, eligible first buyers.
• Regional First Home Guarantee: same 5% deposit, restricted to regional postcodes with their own lower price caps. Useful for buyers in commutable-distance regional centres.
• Family Home Guarantee: 2% deposit, single parents only, separate annual cap. The income and price thresholds are slightly different and there is no requirement that the applicant be a first-time buyer.

The three variants share infrastructure but have separate annual quotas, so being shut out of one does not necessarily mean being shut out of the others.

How to decide whether to use the scheme

Four checks, in order.

• Eligibility: income, citizenship, and first-buyer status all clear. If not, the rest is moot.
• Price cap headroom: target purchase comfortably under the relevant cap, with margin for competitive bidding. Buying at the cap is risky in a rising market.
• Lender comparison: panel lender rate plus saved LMI versus non-panel lender rate plus LMI. The scheme usually wins, but not always.
• Serviceability check: at 95% LVR the loan is larger, and the repayments are larger to match. The borrowing power calculator will translate a deposit and income into a ceiling before the buyer falls in love with a property they cannot service.

What the scheme does not solve

The FHBG addresses the deposit gap and the LMI premium. It does not address serviceability, the price cap ceiling, the panel-lender constraint, or the annual quota. A buyer with a 5% deposit but borderline serviceability is still going to fail credit assessment. A buyer above the price cap in their target suburb has the wrong scheme for the situation, and the answer is usually a different suburb rather than a different product.

For the broader sequencing from saving to settlement, the first-home buyer guide walks the full journey. The FHBG is one stop on it, not the whole map. Read the eligibility carefully, model the numbers against your own purchase, and treat the scheme as a settlement tool rather than a strategy.