More buyers eligible under 5%-deposit scheme
From 1 October 2025, the Australian Government is dramatically expanding the First Home Guarantee (FHG)—part of its Home Guarantee Scheme—to help more Australians buy with just a 5% deposit.
In this article, we’ll explore what’s changing, how the FHG works, who’s eligible, and how to make the most of it as a first home buyer.
What is the First Home Guarantee?
The First Home Guarantee helps first home buyers purchase a home with as little as 5% deposit while avoiding Lenders Mortgage Insurance (LMI), by having the Government act as guarantor for a portion of the loan.
In effect, Housing Australia gives participating lenders a guarantee so they don’t require you to pay LMI (which protects the lender, not you).
Prior to the expansion, the scheme had limits on places, income thresholds, and property price caps. From 1 October 2025, many of those restrictions will be removed or loosened.
What is changing from 1 October 2025?
Here’s a breakdown of the key updates under the expanded FHG:
| Feature | Before 1 Oct 2025 | After Oct 1 2025 |
|---|---|---|
|
Number of places |
Capped (annual quota) |
Unlimited places (no cap on how many can join) |
|
Income limits |
Singles <$125,000, couples <$200,000 |
No income caps |
|
Property price caps |
Lower caps by region |
Higher price caps in each state/territory to reflect market prices |
|
Regional guarantee scheme |
Separate Regional First Home Buyer Guarantee |
The regional scheme will merge into the single FHG scheme |
|
Access & eligibility |
Restricted via quota and income |
Simplified access—if you meet eligibility, you can apply through participating lender |
Example new property caps (effective from 1 October):
• Adelaide: from $600,000 → $900,000
• Melbourne: from $800,000 → $950,000
• Brisbane: from $700,000 → $1,000,000
Note: Other states have respective increases; check your local area’s updated caps
These changes open the scheme up to far more buyers and more suburbs. According to housing data, the expanded caps will nearly double the number of house and unit markets eligible under the scheme.
How the expanded FHG scheme works
1. Save your deposit
You’ll still need a minimum of 5% genuine savings (or more) to qualify.
2. Apply through a participating lender
You don’t apply directly to the Government—your broker or lender submits your application under the FHG.
3. Government guarantee kicks in
Housing Australia guarantees up to 15% of the property value (depending on your deposit amount and scheme rules), so the lender forgives the requirement for LMI.
4. You still pay your loan
You’ll repay your full loan as usual. The guarantee doesn’t relieve you of repayments, it simply reduces your upfront costs.
5. Other costs still apply
Stamp duty, legal fees, inspections, valuations, etc., remain your responsibility (though you may still qualify for state grants or concessions).
6. Owner-occupier requirement
The home must be your principal place of residence under the guarantee rules while it remains under the FHG.
Who is eligible under the expanded FHG?
With the 2025 changes, more first home buyers will qualify. Below are the general eligibility criteria:
• Be at least 18 years old
• Be an Australian citizen or permanent resident
• Be a first home buyer (not having owned residential property in Australia in the past 10 years)
• Use the property as your primary residence
• Meet the lender’s own credit and serviceability criteria
• The property purchase price must be within the updated property price caps for your area
Also note:
• The scheme is not available for investment properties under the guarantee period.
• Even with the expanded scheme, not all lenders may participate—check with your broker which lenders support the FHG.
Benefits and caveats of the expanded FHG
Benefits
• Lower upfront cost barrier — Avoid LMI, which can often run into tens of thousands.
• Faster entry to home ownership — Less time needed to save 20% deposit.
• Increased choice — Higher caps mean you can access more suburbs and property types.
• Greater fairness — Removing income caps spreads access to higher-earning first home buyers.
Caveats & risks
• Higher competition — With more buyers eligible, demand may rise, pushing up prices in certain suburbs.
• Greater borrowing risk — A low deposit loan means you're more exposed to property price falls.
• Stricter lending criteria still apply — Guarantee doesn’t override the lender’s assessment of income, expenses, credit history.
• Refinancing limitations — Some lenders may restrict moving your loan to a non-participating lender.
• Cost of other fees remains — You still pay stamp duty, legal, valuation, and maintenance costs.
How to prepare now
To get ready for the expanded scheme on 1 October 2025:
• Save more than the minimum 5% to build buffer
• Improve your credit score and reduce debt
• Get pre-approval from a lender participating in FHG
• Stay informed about your local property price cap
• Work with a broker who understands the expanded scheme
Key takeaways
The FHG expansion starting 1 October 2025 is one of the most substantial changes for first home buyer policy in years. It offers:
• Unlimited access (no place limits)
• No income caps
• Higher property caps
• Avoiding LMI with a 5% deposit
If you meet the eligibility criteria, it could dramatically reduce the time, cost, and barrier to entering the property market.
At FMD Financial, we specialise in helping first home buyers navigate government schemes, structure their loans, and make confident decisions. If you're planning to purchase in late 2025 or early 2026, now is the time to align your savings, credit, and strategy—so you can hit the ground running when the new rules kick in.
Ready to prepare? Book a free consultation with an FMD advisor & lending specialist today and let’s plan your path to home ownership.
Ready to take the next step?
If your adult children have already got that deposit together and they want to get the right loan with plenty of support along the way to help them succeed, they can book a chat with me.
General advice disclaimer: This article has been prepared by FMD Financial and is intended to be a general overview of the subject matter. The information in this article is not intended to be comprehensive and should not be relied upon as such. In preparing this article we have not taken into account the individual objectives or circumstances of any person. Legal, financial and other professional advice should be sought prior to applying the information contained on this article to particular circumstances. FMD Financial, its officers and employees will not be liable for any loss or damage sustained by any person acting in reliance on the information contained on this article. FMD Group Pty Ltd ABN 99 103 115 591 trading as FMD Financial is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977. The FMD advisers are Authorised Representatives of FMD Advisory Services Pty Ltd AFSL 232977. Rev Invest Pty Ltd is a Corporate Authorised Representative of FMD Advisory Services Pty Ltd AFSL 232977.