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), now branded on the government site as the Australian Government 5% Deposit Scheme, is a separate program from Help to Buy. 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.

Can first home buyers buy with a 5% deposit?

Yes, some first home buyers in Australia can buy with a 5% deposit through the First Home Guarantee, which lets eligible borrowers avoid LMI because the government guarantees part of the loan. Eligibility rules, property caps, and lender participation still apply.

If you want the full upfront-cost picture, compare deposit sizes, stamp duty, and affordability.

As of 2026, more than 300, 000 Australians have been supported through the government's home buyer support programs. Here's exactly how this 5% deposit pathway 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 runs $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: None from 1 October 2025
• Property use: Must be owner-occupied (no investment properties)
• Property price caps: Vary by region and postcode under Housing Australia's updated cap table
• Loan type: Must be a principal and interest loan with a participating lender

The scheme is administered by Housing Australia. 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 is under the cap for your region. Caps aren't the same across Australia, capital city markets have higher caps than regional areas:

Note: Housing Australia's current 5% Deposit Scheme caps are postcode-based. The headline ranges above are a guide only, always confirm the exact suburb/postcode cap with your participating lender or the Housing Australia tool before signing a contract.

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 use the scheme AND get stamp duty exemptions or concessions from your state government simultaneously.

These stack in 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 significant 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've 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 owner-occupier rules and the postcode price cap with Housing Australia or your lender.
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 / Australian Government 5% Deposit Scheme. They'll handle the Housing Australia allocation part.
5. Find a property under the price cap. This is 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 you fit the scheme rules, 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 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% is not a gifted deposit in most cases, lenders like to see it built up over time)

What it comes down to

The First 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've 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.