First Home Guarantee Scheme 2026: 5% Deposit, No LMI Explained
The First Home Guarantee scheme is one of the most valuable tools available to first home buyers in 2026 — letting eligible buyers purchase with just a 5% deposit while completely avoiding Lenders Mortgage Insurance. Here's exactly how it works, who qualifies, and how to apply.
Important: This article is general information only and does not take into account your personal circumstances. First Home Guarantee eligibility, price caps and places are set by the Australian Government and Housing Australia, and are subject to change. Please confirm current details with a qualified mortgage broker before applying.
What Is the First Home Guarantee Scheme?
The First Home Guarantee scheme (formerly the First Home Loan Deposit Scheme) is a federal government initiative administered by Housing Australia. Instead of lending you money directly, the government guarantees up to 15% of your property's value to your lender — which means you can borrow up to 95% of the purchase price without paying Lenders Mortgage Insurance (LMI).
Key takeaway: Normally, borrowing more than 80% of a property's value means paying LMI — often thousands of dollars. The First Home Guarantee scheme removes that cost entirely for eligible buyers with just a 5% deposit.
How Does the First Home Guarantee Scheme Work?
Under a standard home loan, if your deposit is below 20%, lenders typically require LMI to protect themselves against the higher risk. The First Home Guarantee scheme replaces that insurance with a government guarantee — the government effectively underwrites the gap between your 5% deposit and the usual 20% requirement.
You still borrow from a normal lender, at normal interest rates, and you still need to meet the lender's usual serviceability and credit criteria. The scheme simply removes the LMI cost — it isn't a grant, and it doesn't reduce how much you need to repay.
First Home Guarantee Scheme Eligibility
| Requirement | Detail |
|---|---|
| Deposit | Minimum 5% |
| Income cap | None — removed October 2025 |
| Citizenship | Australian citizen or permanent resident |
| Property use | Must be your principal place of residence |
| Price cap (Melbourne & Geelong) | $950,000 |
| Price cap (rest of Victoria) | $650,000 |
Source: Housing Australia. Price caps and conditions are reviewed periodically.
Important: The removal of income caps in October 2025 significantly widened access to the First Home Guarantee scheme. Previously, singles earning over $125,000 or couples over $200,000 were excluded — this is no longer the case.
How to Apply for the First Home Guarantee Scheme
- Check property price against the cap — Melbourne/Geelong buyers have a higher cap than regional Victoria.
- Apply through a participating lender — you cannot apply directly to Housing Australia. Not every lender participates, and place availability can be limited, so timing matters.
- Get pre-approved — your lender will assess your borrowing capacity as part of a normal loan application, alongside your Guarantee eligibility.
- Settlement — the guarantee is applied at settlement; there's no separate payment or grant to receive.
First Home Guarantee vs Help to Buy
These two federal schemes are often confused, but they solve different problems:
| First Home Guarantee | Help to Buy | |
|---|---|---|
| Deposit needed | 5% | As little as 2% |
| Government equity | None — you own 100% | Up to 30–40% government equity share |
| Income cap | None | $100k single / $160k couple |
| Best for | Buyers with a modest deposit who want full ownership | Buyers with a very small deposit, willing to share equity |
Can You Combine the First Home Guarantee With Other Schemes?
Yes. The First Home Guarantee scheme can generally be combined with the First Home Owners Grant and Victoria's stamp duty concessions, since they operate independently. A buyer purchasing a new home under $600,000 could potentially combine all three — a 5% deposit with no LMI, a $10,000 grant, and a full stamp duty exemption.
How Be Smart Finance Can Help
Not every lender participates in the First Home Guarantee scheme, and places can be limited — timing and lender choice matter. We can help you:
- Confirm your eligibility and how much you could borrow
- Identify which participating lenders suit your situation
- Apply for the Guarantee alongside your loan and any other schemes you're eligible for
- Avoid missing out due to price cap or place availability issues
Frequently Asked Questions
Do I need to pay LMI under the First Home Guarantee scheme?
No. That's the core benefit — the government guarantee replaces the need for Lenders Mortgage Insurance for eligible buyers with a 5% deposit.
Is there an income cap for the First Home Guarantee scheme?
No. Income caps were removed in October 2025, making the scheme available to a much wider range of buyers.
Can I apply for the First Home Guarantee directly through the government?
No. You apply through a participating lender as part of your home loan application — not directly through Housing Australia.
What happens if the property is above the price cap?
You won't be eligible for the scheme on that property. Price caps are $950,000 for Melbourne and Geelong, and $650,000 for the rest of Victoria.
Want to Know What You Could Borrow?
Book Your Free First Home Buyer Review and find out if the First Home Guarantee scheme is right for you.
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