First Home Guarantee Explained: How to Buy With a 5% Deposit

The First Home Guarantee (formerly the First Home Loan Deposit Scheme) is one of the most powerful tools available to first home buyers in Australia today - but many people don't fully understand how it works or whether they qualify.

What Is the First Home Guarantee?

The First Home Guarantee is a federal government initiative that allows eligible first home buyers to purchase a property with as little as a 5% deposit, without paying Lenders Mortgage Insurance (LMI). The government acts as guarantor for up to 15% of the loan, bridging the gap to the standard 20% deposit threshold that lenders typically require to waive LMI.

This doesn't mean the government is giving you money. It means they're guaranteeing the loan, so the lender takes on less risk - and passes that benefit directly to you by waiving LMI.

LMI can cost anywhere from $8,000 to $35,000 on a typical first home purchase. The First Home Guarantee eliminates that cost entirely for eligible buyers.

Who Is Eligible?

To access the First Home Guarantee, you must meet the following criteria:

Citizenship: You must be an Australian citizen or permanent resident.

First home buyer status: You must not have previously owned a residential property in Australia. There are some exceptions for previous property owners who've experienced a relationship breakdown - check with us if this applies to you.

Income caps: For single applicants, your taxable income must be $125,000 or less in the previous financial year. For couples, the combined income cap is $200,000.

Property price caps: The property you're purchasing must be below the price cap for your state or territory. These caps are updated periodically, but as a general guide:

• NSW Metro: $900,000
• VIC Metro: $800,000
• QLD Metro: $700,000
• ACT: $750,000
• SA Metro: $600,000
• WA Metro: $450,000
• TAS Metro: $450,000
• NT: $500,000

Owner-occupier: You must intend to live in the property as your principal place of residence, not purchase it as an investment.

How Does the Government Guarantee Actually Work?

When you purchase with a 5% deposit at an 80%+ LVR, lenders normally require LMI as protection if you default. Under the First Home Guarantee, the federal government's NHFIC (National Housing Finance and Investment Corporation) acts as the guarantor - so the lender is protected without you needing to pay LMI.

Here's a practical example:

Property purchase price: $600,000 Your deposit (5%): $30,000 Loan amount: $570,000 LVR: 95% LMI without guarantee: approx. $18,500 LMI with guarantee: $0

That $18,500 stays in your pocket - or more accurately, it never needs to leave your account in the first place.

How Many Places Are Available?

The federal government releases a set number of guarantee places each financial year. For 2024–25, 35,000 First Home Guarantee places are available. Places are offered on a first-come, first-served basis through approved participating lenders.

Places don't always run out - but they can in popular categories. The new financial year (1 July) is when new allocations open up, so if you're close to being ready, timing your application matters.

Common Misconceptions

"It's a cash grant." No - it's a government guarantee that removes the need for LMI. You're still borrowing 95% of the purchase price and must have a genuine 5% deposit.

"It lowers your interest rate." The guarantee doesn't affect your interest rate. You'll still be assessed by the lender on standard criteria, and the rate will reflect your loan profile.

"You can use it for investment properties." No. The First Home Guarantee is for owner-occupiers only.

"Any lender can offer it." Only approved participating lenders can offer the guarantee. The list of participating lenders changes - some offer it, some don't. We work with lenders who participate, so we'll always check availability.

"It's only for new properties." Both new and existing properties are eligible under the standard First Home Guarantee, subject to the price caps.

How Do I Apply?

You don't apply to the government directly. Instead, you apply through an approved participating lender (or through a broker, like us, who works with those lenders). The process looks like this:

1. Book a consultation with us - we'll confirm your eligibility and assess your borrowing capacity.
2. We identify the right participating lender - not all offer the same rates, so we compare.
3. We lodge your pre-approval application - typically processed in 3–5 business days.
4. You find a property and make an offer - with pre-approval, you're in a strong position.
5. We submit the formal application - the lender reserves a guarantee place at this stage.
6. Settlement - you're a homeowner, with no LMI to pay.

The First Home Guarantee is one of the best opportunities available to first buyers in Australia right now. If you think you might qualify - or you're not sure - book a free consultation with us and we'll walk through the numbers with you.