First Home Guarantee 2026: 5% Deposit, No LMI. Do You Qualify?
Key Takeaways
• The First Home Guarantee is now called the Australian Government 5% Deposit Scheme. It lets eligible buyers purchase with a 5% deposit, or 2% for single parents, and avoid LMI.
• Since 1 October 2025, the income caps have been removed, and places are unlimited, so far more people qualify than before.
• The main rules are straightforward: be an Australian citizen or permanent resident, be 18 or over, be a genuine first home buyer or not have owned property for 10 years, buy under the price cap for your area, and live in the home.
• A smaller deposit means a bigger loan and higher repayments, so it is worth weighing up alongside the savings on LMI.
If a 20% deposit feels out of reach, the First Home Guarantee could be the fastest way into your first home. It lets eligible buyers purchase with as little as a 5% deposit and skip the lender's mortgage insurance, which can save many thousands of dollars. And in 2026, after a big shake-up, more people qualify than ever.
The first thing to know is that the name has changed. What most people still call the First Home Guarantee is now officially the Australian Government 5% Deposit Scheme. It is the same idea, just bigger and more open. Here is exactly how it works, and how to tell whether you qualify, in plain English.
Not sure whether you tick all the boxes? The simplest way to find out is to ask. You can check your eligibility with us at Loan Street Finance in a quick, no-pressure chat, and we will tell you honestly where you stand.
What the First Home Guarantee Actually Is
Before the eligibility checklist, it helps to understand what the scheme does, because it is often misunderstood.
The scheme is a government guarantee, not a cash grant or a loan. Normally, if you borrow with less than a 20% deposit, your lender makes you pay lenders' mortgage insurance (LMI) to protect themselves. Under the scheme, the government guarantees part of your loan instead, up to 15% of the property value for first home buyers, so the lender waives LMI. You still take out a normal home loan and make full repayments; the government simply stands behind part of it. The headline benefit is that you get in with a 5% deposit and pay no LMI.
Who Qualifies: The Main Rules
The eligibility rules are more generous in 2026 than they have ever been. Here are the core requirements for the first-home buyer stream.
Citizenship, Residency and Age
You need to be an Australian citizen or a permanent resident, and at least 18 years old. Permanent residents are now included alongside citizens, which widened the pool of people who can apply.
The First Home Buyer Test
You must be a genuine first home buyer, or at least someone who has not owned property or land in Australia in the past 10 years. That 10-year rule means people who owned a home long ago and then sold it can sometimes qualify again.
The Deposit Requirement
You need a deposit of at least 5% of the purchase price. If you have saved more, that is fine; you simply contribute it, but 5% is the minimum that unlocks the guarantee. Single parents and eligible guardians can qualify with as little as 2%, which we cover below.
Owner-Occupier and Loan Type
The home must be one you intend to live in, not an investment, and you generally need a principal-and-interest loan. The loan term can run up to 30 years, with extra time allowed to complete a new build.
The Property Price Cap
The property must sit at or below the price cap for its location. The caps were increased in October 2025 and differ between capital cities, regional centres and other areas, so it is worth checking the current cap for the postcode you are buying in.
No Income Cap
Here is one of the biggest changes. The income caps that previously applied were removed on 1 October 2025, so there is no longer an income test for the first home buyer stream. There is also no waitlist, because the number of places is now unlimited.
The Single Parent Stream
Alongside the mainstream, there is dedicated support for single parents and guardians, with even gentler deposit rules.
If you are a single parent or legal guardian with at least one dependent child, you may qualify with a deposit of as little as 2%, with the government guaranteeing a larger share. This stream is not limited to first home buyers, so you may be eligible even if you have owned a home before, provided you do not own property at the time your new home settles. It is for single applicants only, and you need to be genuinely single when you apply.
What You Can Buy
The scheme is flexible in the type of home it covers, which suits a range of buyers.
You can use it for a wide range of properties: an existing house, townhouse, or apartment, a house-and-land package, an off-the-plan home, or vacant land with a contract to build. The key conditions are that the property is within the price cap and that you will live in it. Both new and established homes are included.
How Much the No-LMI Benefit Is Worth
The savings are the whole point, so it helps to see them in rough terms.
LMI is charged when you borrow with a deposit under 20%, and the smaller your deposit, the more it costs. On a typical purchase with a 5% deposit, LMI could easily run to $15,000 or more, often added to your loan so you pay interest on it too. By removing that cost, the guarantee can save you a significant sum and let you buy years sooner than if you wait to reach a full 20%.
A Real-World Example: Buying With a 5% Deposit
Here is an illustration with rounded figures showing how it stacks up. Treat it as a guide, since LMI and rates vary.
Say you are buying your first home for $540,000. A 20% deposit would be $108,000. Under the scheme, you buy with a 5% deposit of $27,000 instead, and the government guarantee means you pay no LMI, which, on that loan, could have cost you around $16,000.
You borrow the remaining $513,000. At 6.10% over 30 years, the repayment is about $3,109 a month. Because you are borrowing more than you would with a 20% deposit, your repayments and total interest are higher, which is the trade-off for getting in sooner without LMI.
For many buyers, entering the market years earlier and saving on LMI outweighs the higher repayments. For others, saving a larger deposit first makes more sense. Neither is wrong; it depends on your goals.
How to Check and Apply
If the rules look like they fit, here is how to move from "maybe" to "approved".
• Confirm the basics first: residency, age, the first home or 10-year test, and that the home will be your residence.
• Check the price cap for the postcode you are buying in, since it sets your ceiling.
• Make sure you can comfortably service the larger loan that comes with a smaller deposit.
• Apply through a participating lender or a broker, who reserves your place in the scheme.
• Once approved, you generally have 90 days to find and buy, so it helps to be close to ready.
A broker can check your eligibility across participating lenders and handle the application, usually at no cost to you.
Where to Read More
For the official rules, current price caps, and the list of participating lenders, the Australian Government's First Home Buyers website provides full details of the 5% Deposit Scheme. It is the authoritative source, so it is the best place to confirm the fine detail for your own situation.
Frequently Asked Questions (FAQs)
Is the First Home Guarantee the same as the 5% Deposit Scheme?
Yes. The First Home Guarantee was renamed the Australian Government 5% Deposit Scheme on 1 October 2025. Many people, and even some lenders, still use the old name, but it is the same program, just expanded with no income caps and unlimited places.
Do I really pay no lenders mortgage insurance?
Yes, that is the main benefit. With a deposit under 20%, you would normally pay LMI, but under the scheme, the government guarantees part of your loan, so the lender waives it. You still repay your full home loan, but the LMI cost is removed.
Is there an income limit to qualify in 2026?
No. The income caps that used to apply to the first home buyer stream were removed on 1 October 2025, so there is no income test. There is also no waitlist, because places are now unlimited.
Can I qualify if I owned a home years ago?
Possibly. The first home buyer stream also accepts people who have not owned property or land in Australia in the past 10 years. So if you owned a home long ago and have not owned one since, you may be able to apply as a first home buyer again.
Can two friends apply together?
Yes. The mainstream now allows up to two eligible applicants who do not have to be a couple, so friends or family members can apply together, provided each of you meets the criteria. The single parent stream, by contrast, is for single applicants only.
Does a smaller deposit cost me more in the long run?
It can. A smaller deposit means a larger loan, so your repayments and the total interest you pay over the life of the loan are higher than with a 20% deposit. Saving the LMI and getting in sooner often makes it worthwhile, but it is a trade-off worth weighing up.
The Bottom Line
The First Home Guarantee, now the Australian Government 5% Deposit Scheme, is one of the most useful tools available to first home buyers in 2026. It lets eligible buyers in with a 5% deposit, or 2% for single parents, and removes the cost of LMI. The 2025 changes mean there is no longer an income test or a waitlist. For many buyers, that is the difference between buying now and waiting years.
The main thing to get right is whether you qualify and whether the larger loan suits your budget. Check the basics, confirm the price cap for your area, and make sure the repayments sit comfortably. If you would like us to check your eligibility and walk you through the application, we would be glad to help you find out if this is your way in.