For first home buyers
First Home Guarantee: buy with 5% down and no LMI, and why applications get refused
You want to buy your first home without saving for years to reach 20%. The First Home Guarantee, now called the Australian Government 5% Deposit Scheme, lets you buy with a 5% deposit and no lenders mortgage insurance (LMI), with no income cap and no limit on places. But it has a price cap where you buy, a 10-year ownership test and a ceiling on your savings, and the lender still has to approve your loan. Each of those is a place an application can fail.
5% deposit with no LMI, because Housing Australia guarantees the lender instead [1]
No cap on income, and no limit on places or waiting list [1][2]
About $30,000 of LMI not charged on a $700,000 home bought with 5% down, on one insurer's rate card [6][9]
The First Home Guarantee guide
Twenty-eight questions first home buyers ask about the 5% Deposit Scheme, answered from Housing Australia's own guide and the scheme's rules.
What is the First Home Guarantee?
The First Home Guarantee is the government scheme that lets a first home buyer purchase with a 5% deposit and no lenders mortgage insurance. It is now called the Australian Government 5% Deposit Scheme, and before that it was the Home Guarantee Scheme [1][2]. Many people still search for it by its old name, so both names are used on this page.
LMI is insurance a lender takes out when you borrow more than 80% of a home's value, and you pay for it. Under the scheme, Housing Australia, a government agency, guarantees the lender in place of that insurance, so you don't pay it [1].
The government doesn't lend you money and doesn't give you money. The lender still lends, and you still owe the whole loan [1]. See how lenders mortgage insurance works.
How does the 5% Deposit Scheme work?
The 5% Deposit Scheme works through your lender. You apply for a home loan with a lender on the scheme's panel, and the lender applies for the guarantee as part of your loan application. You can't apply to Housing Australia directly [2].
Two tests run side by side. The scheme checks that you're eligible: who you are, what you've owned, your deposit and the price. The lender checks that you can afford the loan, as it would for anyone else. You need to pass both [1].
What this means for you: the guarantee protects the lender, not you. If you can't make the repayments, you're in the same position as any other borrower. The scheme lowers the cost of getting in; it doesn't lower the loan.
Is the First Home Guarantee still available, and what changed?
Yes, under its new name. The scheme was reshaped when it was renamed, and four changes matter most:
No income cap: the scheme used to be means-tested. It isn't any more [1][2].
No limit on places, and no waiting list: it used to have a set number of places each year, split between first home buyers, regional buyers and single parents [2].
The Family Home Guarantee is now part of it: single parents and legal guardians buy from a 2% deposit within the scheme (part 22) [1].
Regional buyers use the main scheme: there's no separate regional guarantee in the scheme's current guide (part 23) [1].
Older pages that still talk about income caps or places running out describe the scheme as it used to be.
Who is eligible for the 5% Deposit Scheme?
Housing Australia's guide sets out the tests. You need to pass every one:
Age and residency: you're 18 or older and an Australian citizen or permanent resident [1].
Not a recent owner: you haven't owned property in Australia in the last 10 years, and the test is wider than it sounds (part 5) [1].
Alone or with one other person: a joint application is exactly two people (part 6) [1].
A deposit of at least 5%, and less than 20%: after purchase costs; 2% for single parents and legal guardians (parts 9 and 10) [1].
A home to live in: you move in and keep living there while the guarantee is in place (part 19) [1].
Under the price cap: for where you're buying (part 7) [1].
There's no income test and no job test. A nurse, a tradie and a casual worker face the same scheme rules; the lender's rules are where your job matters.
What counts as owning property in the last 10 years?
Owning property, for the scheme's 10-year test, means holding any interest in real property in Australia in that time: a freehold interest, including land, a lease of 50 years or more, or a company title interest [1].
It counts whether the property was residential or commercial, an investment or a home, whether or not you ever lived in it, and whether you held it alone or with a former partner [1]. Inherited land counts. So does a share of a commercial unit bought during a past relationship.
What this means for you: "I've never owned a home" isn't the test. If you've held anything on a title in the last 10 years, check it before you count on the scheme. State duty concessions and the First Home Super Saver Scheme each have their own rules (part 26), so passing one doesn't tell you that you pass the others.
Can you use the scheme with a partner, a friend or family?
Yes, with one other person. A joint application under the 5% Deposit Scheme is exactly two people, and they don't have to be a couple: partners, friends or family members can apply together [1].
Both of you must pass every test, including the 10-year test. One ineligible applicant rules out the pair, and three or more buyers can't use the scheme at all [1]. Single parents and legal guardians on the 2% deposit apply on their own [1].
If a parent wants to help with their own home's equity instead, that's a family guarantee, a different arrangement. See guarantor home loans.
What are the 5% Deposit Scheme price caps?
The price cap for the 5% Deposit Scheme depends on the state and on whether you buy in the capital city and its listed regional centres or in the rest of the state [1]. The ACT has one cap for all areas.
Both the price you pay and the lender's valuation have to be at or under the cap. For vacant land with a separate building contract, the land and the build together count [1].
| State or territory | Capital city and regional centres | Rest of the state |
|---|---|---|
| New South Wales | $1,500,000 | $800,000 |
| Victoria | $950,000 | $650,000 |
| Queensland | $1,000,000 | $700,000 |
| Western Australia | $850,000 | $600,000 |
| South Australia | $900,000 | $500,000 |
| Tasmania | $700,000 | $550,000 |
| Australian Capital Territory | $1,000,000 | — |
| Northern Territory | $750,000 | $600,000 |
The guide also sets caps for the external territories: $550,000 for Jervis Bay Territory and Norfolk Island, and $400,000 for Christmas Island and the Cocos (Keeling) Islands [1].
For what each state adds in grants and stamp duty help, see first home buyer grants by state.
Which areas get the higher regional cap?
The regional centres that share the capital-city cap are a short list. In New South Wales: the Central Coast, Coffs Harbour–Grafton, the Illawarra, the Mid North Coast, Richmond–Tweed, and Newcastle and Lake Macquarie. In Victoria: Geelong. In Queensland: the Gold Coast and the Sunshine Coast [1].
Nowhere else outside a capital city gets the higher number. A buyer in Ballarat, Bendigo, Townsville or Cairns is on the rest-of-state cap [1].
What this means for you: in Victoria and Queensland the gap between the two caps is $300,000 [1][9]. A home that fits the scheme in Geelong or on the Gold Coast can sit well over the cap at the same price an hour inland. Check the cap for the exact area before you fall for a house.
How much deposit do you need for the First Home Guarantee?
The First Home Guarantee needs a deposit of at least 5% of the price, or 2% for single parents and legal guardians [1]. Here's what that looks like at four prices, each at or under a capital-city cap.
| Home price | Deposit (5%) | Loan (95%) | Savings ceiling (20%) |
|---|---|---|---|
| $500,000 | $25,000 | $475,000 | $100,000 |
| $700,000 | $35,000 | $665,000 | $140,000 |
| $1,000,000 | $50,000 | $950,000 | $200,000 |
| $1,500,000 | $75,000 | $1,425,000 | $300,000 |
An illustration, not a client file: a $700,000 home in Brisbane is under the Queensland capital-city cap. A 5% deposit is $35,000, and the loan is $665,000 with no mortgage insurance [1][9].
The deposit isn't the only cash you need. Stamp duty, legal fees and other purchase costs come on top, and the scheme's 20% ceiling is measured after them (part 10) [1]. Several states cut or remove stamp duty for first home buyers; see the stamp duty calculator.
Can you have too much deposit for the scheme?
Yes. The 5% Deposit Scheme has a ceiling as well as a floor. If you have 20% or more saved after purchase costs such as stamp duty and legal fees, your loan isn't eligible [1]. On a $700,000 home, that's $140,000 [9].
The guide also says that moving cash or assets to someone else to get under the limit goes against the scheme's intent [1].
What this means for you: if you're close to 20%, the scheme may not be your route at all, and at 20% there's no LMI to avoid. Your savings are counted after costs, so the same balance can be in or out depending on the price and the state.
Do you pay LMI on a 5% deposit?
On an ordinary loan, yes: a 5% deposit means a 95% loan, and LMI is charged. Under the 5% Deposit Scheme, it isn't, because Housing Australia's guarantee takes the insurance's place [1].
Here's what LMI would cost on a 95% loan for a first home buyer, from one insurer's published rate card [6]. These are illustrations from one card, not quotes; your premium depends on the insurer, the loan and the lender.
| Home price | Loan (95%) | LMI, about |
|---|---|---|
| $500,000 | $475,000 | $15,960 |
| $700,000 | $665,000 | $29,992 |
| $1,000,000 | $950,000 | $42,845 |
| $1,500,000 | $1,425,000 | $70,680 |
What this means for you: on a $700,000 home the scheme is worth about $30,000 on the day you buy, and at the Sydney cap of $1,500,000 it's worth more than $70,000 [6][9]. That's money you either don't pay or don't add to your loan.
What kinds of property can you buy with the scheme?
The 5% Deposit Scheme covers four kinds of purchase: an existing house, townhouse or apartment; a house and land package; vacant land with a separate contract to build a home; and an off-the-plan apartment or townhouse [1].
Whichever you choose, the price cap applies, and for land with a building contract the land and the build count together [1]. New builds and off-the-plan purchases add timing rules of their own (part 13).
Can you use the First Home Guarantee to build a home?
Yes, but a build has more rules than a purchase, and this is where house-and-land buyers can come unstuck:
Timing: the building contract must be signed within 6 months of the loan settling, building must start within 12 months and finish within 36 months, and you move in within 6 months of the occupancy certificate [1].
The builder: owner-builder contracts aren't eligible. The builder must be licensed and registered, insured and at arm's length, on a fixed-price contract [1].
The land must be titled first: the guarantee can't be issued until the land is titled, and that has to happen inside the 90-day pre-approval window [1].
Land you already own: if you own vacant land before you get a place in the scheme and want a new loan to build on it, you're not eligible [1].
Off the plan: the contract is signed before the loan settles, settlement is within 90 days of the home loan date, and you move in within 6 months of settlement [1].
A land title that arrives late can cost you the scheme without you doing anything wrong. See [construction loans](/construction-loans/).
Why do First Home Guarantee applications get refused?
Places don't run out any more, so these are the reasons left. Each one comes straight from the scheme's rules or the lender's:
The 10-year test catches you: inherited land, a commercial property or a property held with a former partner all count as owning (part 5) [1].
Too much saved: 20% or more after purchase costs puts you outside the scheme (part 10) [1].
Over the cap: the price, or the lender's valuation, comes in above the cap for that area (part 7) [1].
One of two applicants doesn't qualify: one ineligible applicant rules out the pair (part 6) [1].
The lender says no: the scheme's checks pass, but the lender's assessment of your income, debts and spending doesn't (part 15).
Land and building timing: the land isn't titled inside the 90-day pre-approval window, you already own the land, or the contract is owner-builder (part 13) [1].
Wrong plans for the home: the home is meant to be rented out, or you won't move in within 6 months (part 19) [1].
Many of these can be checked before you sign a contract, which is the cheapest time to find them.
Does the scheme mean the bank will approve your loan?
No. The 5% Deposit Scheme doesn't approve your loan. The lender still assesses your income, your debts, your living costs and your credit history as it would for any loan [1].
Banks also check that you could still make the repayments if rates were at least 3 percentage points higher than the rate you're charged, the buffer APRA expects them to use [7]. On a 95% loan that test bites hard, because the loan is large against your deposit.
What this means for you: work out what lenders will lend you first, then fit the scheme to the price. Two lenders can give the same buyer quite different answers, because each counts income and spending its own way. See how much can I borrow.
Which lenders offer the First Home Guarantee?
The First Home Guarantee is offered through Participating Lenders, the lenders Housing Australia has authorised for the scheme. There are more than 30 of them, and ANZ, Commonwealth Bank, National Australia Bank and Westpac are on the list [3].
The list changes from time to time, and the full, current list is on the scheme's website [3]. Each lender on it still runs its own credit policy, so being on the panel doesn't mean every lender treats your income or your deposit the same way.
Money Brain checks which panel lenders fit your income, your deposit and the home before anything is lodged, because each lender's own credit policy still applies on top of the scheme's own rules (part 15).
How do you apply for the 5% Deposit Scheme?
You apply for the 5% Deposit Scheme through a Participating Lender, as part of your home loan application, not to the government [2]. The lender reserves a place for you in the scheme, and you then have 14 days to complete the application [1].
Once you're pre-approved, you have 90 days to find a home and sign a contract of sale [1][2].
You also sign a declaration that you're eligible. It's a Commonwealth statutory declaration, so a false one is a criminal offence that can carry up to four years in prison, and Housing Australia checks it against council records and property title information [1].
What if you don't find a home in time, or the purchase falls through?
The scheme's clock starts at pre-approval. You have 90 days from then to find a home and sign a contract of sale, and a house-and-land purchase also needs the land titled inside those 90 days [1].
What happens to your place if a contract falls over isn't something to guess at. If a sale looks shaky, or settlement is slipping, talk to your lender before the 90 days run out, not after.
What this means for you: get pre-approved when you're ready to buy, not months early, so the 90 days are spent looking.
Do you have to live in the home, and can you rent it out?
Yes, you have to live in it. You move in within 6 months of settlement, or of the occupancy certificate for a new build, and keep living there while the guarantee is in place [1].
The home can't be rented out while it's guaranteed. The guide works through a buyer who moves in with a new partner and wants to rent out the old place, and the answer is no [1].
If a boarder or a rented room is part of how you'll pay the loan, ask before you choose the scheme: the guide's rule is about renting the home out, and how it treats part of it is a question to settle first.
What are the rules while the guarantee is in place?
The guarantee comes with rules for as long as it lasts:
You can't increase the loan: no topping up for a renovation or a car. Rate changes and switching products with the same lender are fine [1].
Refinancing has a catch: you can move to another Participating Lender and keep the guarantee, as long as you don't increase the loan or extend the term [1].
Leaving the panel ends it: refinance to a lender that isn't on the panel and the guarantee is lost [1]. If you still owe more than 80% of the value, that lender treats it as any other loan above 80%, which usually means LMI.
You keep living there: it can't be rented out while it's guaranteed (part 19) [1].
See [refinancing your home loan](/refinance-home-loan/) before you move lenders while the guarantee is on.
When does the First Home Guarantee end?
The guarantee ends on its own once your loan reaches 80% of the property's value on your scheduled repayments [1]. Extra repayments that you can redraw don't count toward getting there [1].
It also ends if you refinance to a lender that isn't on the scheme's panel (part 20) [1].
What this means for you: paying extra into a redraw is still good for your interest bill, but it won't bring the end of the guarantee forward. The rules in part 20 apply while the guarantee is in place, so they fall away when it ends.
What is the Family Home Guarantee now?
The Family Home Guarantee is no longer a separate scheme. Single parents and legal guardians are now a group inside the Australian Government 5% Deposit Scheme, buying from a 2% deposit and applying on their own, with no joint applications [1].
Housing Australia publishes a separate guide for single parents, so check its conditions as well as the ones on this page. See home loans for single parents.
The Family Home Guarantee isn't the same as a family guarantee, where a parent's home equity backs your loan. That's a private arrangement with a lender, covered on guarantor home loans.
What happened to the Regional First Home Buyer Guarantee?
Regional buyers now use the main 5% Deposit Scheme. There's no separate Regional First Home Buyer Guarantee in the scheme's current guide [1].
Every area of every state has a cap in the guide's own table, so a regional buyer is covered by the main scheme at the rest-of-state cap, or at the capital-city cap in a listed regional centre (part 8) [1].
Can you use the scheme with a state grant or stamp duty concession?
Housing Australia's guide says that getting the guarantee doesn't prevent you from using other housing help from the Australian Government or from a state or territory government. It asks you to check those programs with whoever runs them [1].
| Combination | Allowed? |
|---|---|
| 5% Deposit Scheme + state or territory help | The scheme doesn't prevent it; check each program's own rules [1] |
| 5% Deposit Scheme + Help to Buy | No [1] |
So a first home grant or a stamp duty concession is checked against its own rules, alongside the scheme. Each state's rules are on its own page: Queensland, New South Wales, Victoria, Western Australia, South Australia, Tasmania, the ACT and the Northern Territory.
The one firm exclusion: the 5% Deposit Scheme and Help to Buy can't be used together [1].
Is Help to Buy a better fit than the 5% Deposit Scheme?
Help to Buy suits a different buyer. It's shared equity: the government contributes part of the price, so you borrow less, and you own the home while sharing some of its value with the government [4].
| What differs | 5% Deposit Scheme | Help to Buy |
|---|---|---|
| Minimum deposit | 5%; 2% for single parents | 2% |
| How it helps | Housing Australia guarantees the lender in place of LMI | The government contributes up to 30% of an existing home, or 40% of a new one |
| Income limit | None | $103,000 single; $165,000 joint or single parent |
| Places | No limit | 10,000 a year |
| Who can apply | Citizens and permanent residents | All applicants Australian citizens |
You choose one or the other, because the two can't be combined [1]. A buyer on a higher income can't use Help to Buy, and a buyer who needs a smaller loan, not just a smaller deposit, may find the 5% Deposit Scheme doesn't go far enough.
See Help to Buy for its own rules and limits.
Can you use your super for the deposit?
You can save part of a deposit inside your super under the First Home Super Saver Scheme. You put in voluntary contributions, up to $15,000 a year and $50,000 in total, then ask the Australian Taxation Office to release them, with deemed earnings, toward your first home [5].
Its ownership test is different from the 5% Deposit Scheme's: it asks whether you've ever owned property in Australia, including an investment, vacant land or commercial property, where the 5% Deposit Scheme looks back 10 years [1][5].
Whether released super and the 5% Deposit Scheme work together on one purchase, and how a lender treats released super as savings, are questions we check on your file rather than assume. See First Home Super Saver.
The scheme, a guarantor, a waiver or paying LMI?
The 5% Deposit Scheme isn't the only way to buy with less than 20%, and it isn't always the best one. A family guarantee, a professional LMI waiver or simply paying LMI can each come out ahead, depending on the price, the area and your plans.
| Way in | Deposit | LMI | Who carries the risk |
|---|---|---|---|
| 5% Deposit Scheme | From 5% | None | Housing Australia guarantees the lender; no family property at risk [1] |
| Family guarantee | Smaller than you'd otherwise need | Often none | A parent's home equity stands in for part of the deposit, with real risk to them |
| Professional LMI waiver | Up to 90% or 95% of the price, by job and lender | None | You, as on any loan; only some jobs qualify |
| Pay LMI | From 5% at some lenders | Yes | You, as on any loan; no scheme rules on where you buy |
Some lenders waive LMI for certain jobs. Bank First, for one, waives it to 90% for healthcare and education workers buying their first home, on loans up to $800,000, but not for building [8]. A waiver like that has no scheme price cap, but Bank First's needs a 10% deposit and has its own loan limit. See LMI waivers.
The full side-by-side of the scheme and a family guarantee is on 5% Deposit Scheme or a guarantor, and the other low-deposit options are on no deposit home loans.
When is the First Home Guarantee the wrong choice?
The scheme is strong, but it's built for one kind of buyer. It's usually the wrong tool when:
The home is over the cap: the price or the valuation is above the cap for the area (part 7) [1].
You've owned in the last 10 years: including land, a commercial property or an investment (part 5) [1].
You want to rent it out soon: the home can't be rented out while the guarantee is in place (part 19) [1].
You plan to borrow more for a renovation: the loan can't be increased while it's guaranteed (part 20) [1].
There are three of you buying: the scheme takes one or two applicants only (part 6) [1].
You're building as an owner-builder, or you already own the land: neither is eligible (part 13) [1].
You're near 20% already: at the ceiling you're out, and just below it the LMI you'd save is far smaller than on a 95% loan [6].
If one of these is you, the other routes in part 27 are where to look.
What does a broker cost you?
How a broker is paid, and the rule Money Brain holds against it, is set out in full on its own page: what a mortgage broker costs.
Your first move
You've read the rules. Now there's one question left: on the home you want, in the area you want, do you pass both the scheme's tests and a lender's, and is the scheme the best way in for you?
That depends on your price, your history, your savings and your pay, and it's what Money Brain works out before anything goes to a lender.
Four facts, and I'll do the checking
Tell me where you're looking, roughly what you'll pay, what you've saved and what you earn. I'll check you against the scheme's rules and a lender's, and tell you whether the scheme or another way in suits you better.
You'll hear back within the hour in business hours, and by 9am the next business day after hours.
First Home Guarantee questions
Yes, under a new name. It's now the Australian Government 5% Deposit Scheme, run by Housing Australia, with no income cap and no limit on places.
Sources
- 1
- 2
- 3
- 4
- 5
- 6
LMI premium: one insurer's published rate card, first home buyer rates. Checked 21 October 2026.
- 7
APRA: serviceability buffer of at least 3 percentage points, October 2021. Read 29 September 2026.
- 8
Bank First: LMI waiver for healthcare and education workers. Checked 21 October 2026.
- 9
Money Brain's arithmetic on notes 1 and 6: the deposits, loans and 20% ceilings at four prices, the gap between the two caps, and the LMI figures. Worked 22 October 2026.
Updated 3 October 2026