First Home Guarantee: Buy a House with Just 5% Deposit in 2026

Here's the cruel math of Australian property: you need a 20% deposit to avoid LMI, which on a $700,000 house means $140,000. That's not a deposit — that's a second mortgage. For most first home buyers, saving that much takes years, by which time the goalposts have moved again.

The First Home Guarantee (FHBG) — part of the Australian Government's Help to Buy scheme — is the direct answer to this problem. It lets you buy a home with as little as 5% deposit, with the government covering the lender's risk for the remaining 15%. No LMI. No jokes. Just a genuine leg-up onto the property ladder.

As of April 2026, over 150,000 Australians have used the scheme since it launched. Let's break down exactly how it works, who's eligible, and whether it's right for you.

How the First Home Guarantee works

Normally, if your deposit is under 20%, lenders charge you LMI — a one-off cost that protects them if you default. On a $700,000 property, LMI can run $20,000–$35,000. That's on top of your deposit, stamp duty, and all the other costs of buying.

The First Home Guarantee flips this. The government acts as guarantor — it covers the portion of your loan that would normally attract LMI (the gap between your 5% and 20%). You pay nothing extra for this guarantee. The lender wins because their risk is covered. You win because you don't pay LMI.

Here's the difference in real terms on a $650,000 property:

On a $650,000 property, you're $22,000 better off. That's a lot of furniture.

Am I eligible?

The First Home Guarantee has a few key eligibility rules:

• First home buyer: You (or any buyer on the application) must not have previously owned property in Australia
• Australian citizen or permanent resident: Must be at least one applicant
• Income caps: Singles under ~$125,000/year, couples under ~$200,000/year (based on most recent taxable income)
• Property use: Must be owner-occupied (no investment properties)
• Property price caps: Vary by region (~$700k–$900k depending on location)
• Loan type: Must be a principal and interest loan with a participating lender

The scheme is administered by the National Housing Finance and Investment Corporation (NHFIC). You don't apply through the government directly — you apply through a participating lender (most of the big banks and many smaller lenders participate).

The regional property price caps

This is where people get caught out. The property you're buying must be under the cap for your region. Caps aren't the same across Australia — capital city markets have higher caps than regional areas:

Note: These caps are approximate and reviewed annually. Always check nhfic.gov.au for the current applicable caps in your region before planning your purchase.

Regional First Home Buyer support (FHB in your state)

Here's the thing most first home buyers miss: the First Home Guarantee stacks with state-based first home buyer concessions. You can use the scheme AND get stamp duty exemptions or concessions from your state government simultaneously.

These stack in very useful ways. Example: as a Victorian FHB buying a $580,000 established property, you'd get:

• Stamp duty: $0 (FHB exemption up to $600k in VIC)
• First Home Guarantee: 5% deposit ($29,000) instead of 20% ($116,000)
• LMI: $0
• Upfront cost vs. standard path: ~$87,000 less out of pocket

This is genuinely transformative for people who thought they'd be renting forever.

What you still need to budget for

The First Home Guarantee removes LMI — but it doesn't wave a magic wand over all the other costs of buying. Here's what you're still up for:

• Stamp duty: Potentially $0 with FHB concessions, or a reduced rate depending on your state and property price
• Transfer/registration fees: $500–$1,500 depending on state
• Legal / conveyancing: $1,500–$3,000
• Building and pest inspection: $500–$1,000 per property
• Moving costs: $500–$3,000
• Council rates and home insurance: Budget $2,000–$4,000/year combined

The good news: with $87,000+ you were going to spend on a bigger deposit plus LMI now freed up, you have more than enough buffer for these costs.

How to use the First Home Guarantee

There's no special government application form to fill out. The process goes through your lender:

1. Get your finances sorted. Check your credit score, get a pre-approval, and confirm your deposit is real (saved for at least 3 months in a genuine savings account).
2. Confirm eligibility. Check the income caps and property price caps on nhfic.gov.au.
3. Choose a participating lender. Most major banks and a growing number of smaller lenders offer the scheme. Your broker will know which ones.
4. Apply through your lender. Tell them you want to use the First Home Guarantee. They'll handle the NHFIC application part.
5. Find a property under the price cap. This can be the hardest part in a hot market.
6. Settle and start repaying. You're on the ladder.

Is the First Home Guarantee worth it?

If you're a genuine first home buyer with 5% saved and within the income caps, the answer is almost always yes. Here's why:

• Removing LMI saves you $15,000–$40,000 upfront
• You need $87,000 less deposit on a $650,000 property vs going solo (compared to 20% deposit + LMI)
• The scheme has no ongoing fees or interest — it's just a guarantee, not a loan
• It stacks with virtually every state-based FHB grant and concession

The only real downsides are:

• Your loan is still 95% of the property value — your equity position is smaller, so you start with more debt
• If property prices fall, you're more exposed (negative equity risk)
• You still need genuine savings (the 5% can't be a gifted deposit in most cases — lenders like to see it built up over time)

The bottom line

The First Home Home Guarantee is one of the most genuinely useful policy interventions in Australian property. It doesn't hide behind complicated tax structures or require a finance degree to understand. You have a smaller deposit? The government backs you. You pay less. Simple.

If you've been putting off buying because saving $140,000 seemed impossible, the 5% deposit path — backed by the guarantee — makes homeownership achievable right now, not in seven years when you've finished saving.

The real question isn't whether the scheme is worth it. It's: what property can I afford within the price caps? That's a much more solvable problem.