First Home Guarantee Scheme 2026: Buy With Just 5% Deposit, No LMI
Everything you need to know about the First Home Guarantee Scheme (FHGS) in 2026. Covers eligibility, income caps, property price caps by state, how to apply, and comparison with FHOG and Help to Buy.
How the First Home Guarantee Scheme works
The First Home Guarantee Scheme (FHGS), administered by Housing Australia, allows eligible first home buyers to purchase a property with a deposit as low as 5% without paying Lenders Mortgage Insurance (LMI). Normally, if you borrow more than 80% of the property value, lenders require you to pay LMI — a premium that can cost $8,000 to $30,000 depending on the loan size and LVR. Under the FHGS, the Australian Government guarantees the difference between your deposit (minimum 5%) and the standard 20% threshold. This means the bank treats your loan as if you had a 20% deposit, eliminating the LMI requirement. It is important to understand that the government does not give you money or lend you money — it simply guarantees a portion of your loan to the lender. You still borrow the full amount from a participating lender and make all repayments yourself. If you default on the loan, the government's guarantee may be called upon, but this does not change your obligations — you remain fully liable for the debt. The scheme has supported tens of thousands of first home buyers since its launch, making homeownership accessible years earlier than would otherwise be possible.
Eligibility criteria: income caps and requirements
To qualify for the FHGS in 2026, you must meet several criteria. Income caps: your taxable income must not exceed $125,000 per year for singles or $200,000 per year for couples (based on the previous financial year's tax return or Notice of Assessment). You must be an Australian citizen aged 18 or over — permanent residents are not eligible for the standard FHGS (though they may be eligible for other Housing Australia schemes). You must be a first home buyer who has not previously owned property in Australia, whether as a sole owner, joint owner, or through a company or trust. If purchasing as a couple, both applicants must be first home buyers. You must intend to live in the property as your principal place of residence — the scheme is not available for investment properties. You must have a minimum 5% deposit saved genuinely (not borrowed or gifted, though some lenders accept gifted deposits under certain conditions). The scheme is delivered through participating lenders — not all banks and brokers offer it. Housing Australia's website lists participating lenders, which include the major banks and a range of smaller lenders and credit unions. Places are limited each financial year, so applying early is advisable.
Property price caps by state and region
The FHGS applies property price caps that vary by location, designed to target the scheme toward modest first homes rather than premium properties. As of 2026, capital city and major regional centre caps are: Sydney $900,000, Melbourne $800,000, Brisbane $700,000, Perth $600,000, Adelaide $600,000, Canberra $750,000, Hobart $600,000, and Darwin $600,000. Regional area caps are lower: rest of NSW $750,000, rest of Victoria $650,000, rest of Queensland $550,000, and similar reductions in other states. These caps are reviewed annually and may have been adjusted — check the Housing Australia website for the latest figures. The caps include the total purchase price of the property, including any fixtures and fittings included in the contract. If the property you want exceeds the cap for your area, you are not eligible for the FHGS on that purchase, though you may still be eligible for other support such as the First Home Owner Grant or state-based stamp duty exemptions. The caps can be a challenge in expensive markets like Sydney, where $900,000 limits you to apartments or houses in outer suburbs — but they ensure the scheme targets buyers who genuinely need the assistance.
How to apply for the First Home Guarantee Scheme
Applying for the FHGS is done through a participating lender — you cannot apply directly through Housing Australia. The process works as follows. First, confirm your eligibility by checking the income caps, property price caps, and other criteria on the Housing Australia website. Second, choose a participating lender — you can find the current list on housingaustralia.gov.au. Major banks (Commonwealth Bank, NAB, Westpac, ANZ) participate alongside numerous smaller lenders and credit unions. Third, speak with the lender or your mortgage broker about applying for a home loan with the FHGS guarantee. The lender will assess your loan application using their standard lending criteria and separately apply for a FHGS place on your behalf. Fourth, the lender submits a reservation to Housing Australia, which checks your eligibility and reserves a place if available. Places are allocated on a first-come, first-served basis each financial year. Fifth, proceed with your property purchase knowing that LMI will not be charged. The guarantee is attached to the specific loan and lender — if you refinance to a different lender later, you will lose the guarantee and may need to pay LMI on the new loan if your LVR is still above 80%. Wait until you have built sufficient equity (20% or more) before considering refinancing.
FHGS vs FHOG vs Help to Buy: which scheme should you use?
Australia has multiple schemes supporting first home buyers, and understanding the differences helps you choose the right one — or combine them for maximum benefit. The First Home Guarantee Scheme (FHGS) eliminates LMI on purchases with 5% to 19.99% deposit — it does not provide cash but saves you $8,000 to $30,000 in LMI costs. It is available for both new and existing properties. The First Home Owner Grant (FHOG) is a state-administered cash grant (typically $10,000 to $30,000 depending on the state) available for purchasing or building a new home — it is not available for established (existing) properties in most states. The grant can be used towards your deposit or other purchase costs. The Help to Buy scheme (if legislated) would be a shared equity arrangement where the government contributes up to 40% of a new home's price or 30% of an existing home's price, reducing both your deposit requirement and your mortgage. You would eventually need to repay the government's share. These schemes can often be combined — for example, you could use the FHGS to avoid LMI, the FHOG to boost your deposit on a new build, and state stamp duty exemptions to reduce upfront costs. Use our First Home Buyer Grant Calculator to see exactly which grants and concessions you are eligible for based on your state, property type, and purchase price.
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General information and estimates only — not financial, tax, or legal advice. Always verify with a licensed adviser or the ATO.
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