First Home Guarantee Scheme: buy your first home with a 5% deposit and no LMI

Buying your first home can feel impossible when property prices keep moving faster than your savings. The good news is that the Australian Government 5% Deposit Scheme can help eligible first home buyers purchase sooner with a minimum 5% deposit and no Lenders Mortgage Insurance (LMI). The First Home Guarantee Scheme is how many people search for this support — it is the same family of support described in the government's materials.

This matters because LMI can add a significant upfront cost or increase your loan if it is capitalised. By removing that extra hurdle, the Scheme can help some first home buyers get into the market years earlier than they otherwise could.

General information only. This article does not consider your objectives or situation. Speak with a mortgage broker or qualified adviser before acting.

Scheme rules, caps, and lender participation change. Confirm the latest fact sheet and tools via Housing Australia (and your participating lender) before you rely on any figure in this guide.

What is the First Home Guarantee Scheme?

The Australian Government 5% Deposit Scheme helps eligible buyers purchase a home with a lower deposit by providing a government guarantee to a participating lender. For first home buyers, the minimum deposit is 5%, while eligible single parents or legal guardians may be able to buy with a minimum 2% deposit.

The guarantee allows participating lenders to lend up to 95% of the home's value for eligible first home buyers, or up to 98% for eligible single parents or legal guardians, without charging LMI. The Scheme is designed to reduce upfront costs and make home ownership more achievable for eligible Australians.

Why this scheme is attracting attention

One of the biggest practical benefits is that the Scheme now operates with no income caps, no waitlists, and no LMI, according to the October 2025 Australian Government fact sheet. That is a major shift from earlier versions of the scheme that had tighter access settings and limited annual places.

The Scheme is also broader than many buyers expect. Eligible home buyers can choose from existing homes, new homes, townhouses, apartments, house and land packages, off-the-plan purchases, or vacant land with a building contract, provided the purchase fits within the relevant location price cap.

Who may be eligible

The First Home Guarantee Scheme has separate rules for first home buyers and for eligible single parents or legal guardians, but there are core requirements that apply to all applicants. Applicants must generally be at least 18 years old, be an Australian citizen or permanent resident, buy a property in Australia at or below the relevant price cap, and live in the property as an owner-occupier rather than an investor.

Applicants also need to apply for an owner-occupier home loan with principal and interest repayments through a participating lender. The fact sheet states loan terms can be up to 30 years, plus up to three years to build a new home where relevant.

First home buyer requirements

To qualify as a first home buyer under the Scheme, the fact sheet says you must have saved at least a 5% deposit. You must also be a first home buyer, or not have owned a home or land in Australia in the last 10 years.

First home buyers can apply alone or jointly with one other person, which may include a partner, friend, or family member. That flexibility can help buyers who need a second income on the application while still wanting to use the Scheme.

Single parent or legal guardian requirements

Eligible single parents or legal guardians may be able to buy with a minimum 2% deposit. They must apply on their own rather than jointly, and they cannot own another home or hold any property interest once the new home settles.

How the scheme works in practice

In simple terms, the home buyer meets the eligibility criteria, saves the minimum deposit, applies through a participating lender, and then the Australian Government provides a guarantee to that lender. The lender still provides the home loan and still applies its own credit assessment and loan approval criteria.

That last point is important. Even if you are eligible for the Scheme itself, you may still be declined for the loan if you do not meet the lender's credit policy, serviceability rules, or documentation requirements.

Property types you may be able to buy

The fact sheet says the Scheme can be used for a wide range of property types. That includes houses, townhouses, apartments, house and land packages, off-the-plan purchases, and vacant land with a building contract.

That flexibility is useful because first home buyers do not all follow the same path. Some want an established apartment close to work, while others are looking at a new house and land package in a growth corridor or regional market.

Updated property price caps

The October 2025 fact sheet includes the following price caps. Both the purchase price and the home's value as assessed by the participating lender must be at or below the relevant cap. For vacant land with a separate build contract, the total land price plus build costs also need to stay under the cap.

The fact sheet notes that regional centres include Illawarra, Newcastle and Lake Macquarie in New South Wales, Geelong in Victoria, and the Gold Coast and Sunshine Coast in Queensland. Buyers should confirm the exact cap that applies to the specific suburb or location they are targeting before signing a contract.

What buyers often misunderstand

Thinking a 5% deposit covers everything

A lot of first home buyers hear “5% deposit” and assume that means they only need 5% of the purchase price in total. In reality, buyers still need to plan for additional costs such as conveyancing, building and pest inspections, government charges, and sometimes stamp duty depending on the state, price, and eligibility for concessions. Our first home buyer costs beyond the deposit checklist helps map the full ledger.

Assuming scheme eligibility means approval

Another common misunderstanding is assuming scheme eligibility guarantees loan approval. It does not. The participating lender still needs to be satisfied with your income, employment, liabilities, living expenses, credit history, and overall borrowing position.

Advantages of the Scheme

• Lower deposit path: can take years off the time needed to buy compared with saving a full 20% deposit in some cases.
• No LMI: avoids that premium for eligible buyers under the Scheme rules — see our LMI overview for context on what you are skipping.
• Government-backed support structure with participating lenders, as described in the fact sheet.
• Unlimited spots and no waiting list, according to the October 2025 materials — still confirm at application time.

For some buyers, that can be the difference between continuing to rent while trying to save a 20% deposit and entering the market sooner with a sensible plan linked to a realistic deposit and repayment plan.

Things to think carefully about

A smaller deposit means a larger loan relative to the property value, so repayments can be higher than if you had waited and contributed more equity upfront. Buyers should think beyond eligibility and ask whether the repayment remains comfortable if interest rates, living costs, or family circumstances change.

It is also worth thinking about property choice. Just because a property fits under the cap does not automatically make it the right property, the right suburb, or the right long-term financial decision.

How to apply

1. Check your eligibility using the official online eligibility tool.
2. Contact a participating lender to discuss your options and start the application process.
3. Once approved, use the property price caps tool to confirm the relevant cap for your target location, then find and buy your home.

In practice, it is wise to speak with a broker or participating lender before you start making offers. That helps you understand your real borrowing limit, the likely repayments, and whether your documents and deposit are in the right shape before you commit to a property search. Azure Home Loans can coordinate with participating lenders and keep your file coherent.

Is the First Home Guarantee Scheme right for you?

The First Home Guarantee Scheme can be an excellent option if you have a solid income, a genuine deposit, and the ability to comfortably manage repayments, but you do not want to wait years to save a full 20% deposit. It may be especially useful if avoiding LMI helps keep your overall purchase costs more manageable — a common reason people explore a no LMI home loan for first home buyers under the Australian Government 5% Deposit Scheme.

At the same time, the best decision is not always the fastest one. A lower deposit should be part of a broader strategy that looks at cash flow, buffers, location, future plans, and the quality of the property you are buying.

Practical next steps

Before moving forward, gather your deposit evidence, income documents, identification, and a clear picture of your monthly budget. Then compare borrowing capacity, likely repayments, and location-specific price caps before committing to a search range.

If structured properly, the First Home Guarantee Scheme can be a smart way to buy a home with a 5% deposit without paying LMI. The key is making sure the loan still fits your life comfortably after settlement, not just getting approved on paper.