The First Home Guarantee in 2026 — what the 5% deposit actually looks like

If you’ve spoken to any mortgage broker, real estate agent, or family-friend property “expert” in the last three years, you’ve heard about the First Home Guarantee. The pitch usually goes: “you only need 5% deposit, the government covers the rest, no LMI to pay.”

That’s roughly right. It’s also missing about half the picture.

Here’s what the First Home Guarantee actually does in 2026, who qualifies, what it saves you in dollars, and the four catches that come up at the broker meeting nobody warned you about.

What it is

The First Home Guarantee is a Federal scheme run through Housing Australia. It lets eligible first-home buyers purchase with a deposit as low as 5% without paying Lenders Mortgage Insurance (LMI).

Normally, if your deposit is less than 20%, lenders charge LMI to cover their downside risk if you default. On a $700,000 loan, LMI runs $15,000 to $30,000+ depending on the loan-to-value ratio. The government effectively underwrites that risk for eligible first-home buyers, so the lender doesn’t need the insurance.

That LMI saving is the headline number. It’s real money. For most first-home buyers, it’s the difference between buying this year and next year.

Who qualifies (the four tests)

The First Home Guarantee has hard eligibility rules. If you fail any one of them, you don’t qualify, regardless of how strong the rest of your application is.

1. Income cap.

• Single applicant: $125,000 in the most recent financial year
• Couple applicant: $200,000 combined

These are pre-tax figures. They use ATO Notices of Assessment, not your current pay slip. If you got a raise last quarter, your assessment for this year still shows the old number — sometimes that helps, sometimes it hurts.

2. Property price cap (varies by state and region).

The cap is based on where the property sits, not where you live. As of 2026, indicative caps are:

• NSW — $900,000 capital city / $750,000 regional
• VIC — $800,000 capital city / $650,000 regional
• QLD — $700,000 capital city / $550,000 regional
• WA — $600,000 capital city / $450,000 regional
• ACT — $750,000

(Caps are adjusted periodically by Housing Australia. Always check the current figure on the Housing Australia eligibility page before you sign anything.)

3. Citizenship & residency.

Australian citizen or permanent resident. PR is fine; bridging visas are not.

4. First-home (genuinely).

You can’t currently own property, and you can’t have owned residential property in Australia in the past 10 years. Joint applicants both need to pass.

What it saves you, in actual dollars

Let’s run the maths on a $650,000 turnkey package in regional NSW with a 5% deposit.

Line	Amount
Property price	$650,000
Your deposit (5%)	$32,500
Loan amount	$617,500
LMI you’d normally pay (≈85% LVR effective)	$14,000–$22,000
LMI under First Home Guarantee	$0

That’s an actual cost saving of roughly $18,000 — capital you keep in your offset rather than handing to an insurer.

Add stamp-duty concessions on top (some states give first-home buyers full or partial stamp duty waivers) and the deposit-equivalent saving on a $650K NSW package can be over $30,000.

The four catches nobody tells you upfront

1. Limited annual places

Housing Australia caps the number of places issued each financial year. 35,000 places for the First Home Guarantee, plus separate allocations for the Family Home Guarantee and Regional First Home Buyer Guarantee. Once that financial year’s allocation is gone, you wait for the next one (typically 1 July).

In practice, demand has historically exhausted the allocation before financial year-end. If you’re applying late in the year, you may be locked out until July.

2. Lender panel is restricted

The First Home Guarantee is only available through participating lenders. The panel includes major banks plus several smaller lenders, but not every lender. If your broker has a strong relationship with a non-panel lender, you can’t use the First Home Guarantee with them. You may need a different broker, or a different lender, to access it.

3. Owner-occupied only

The First Home Guarantee is for properties you’ll live in — not investment properties. There’s a 12-month occupancy requirement starting within 12 months of settlement. Buying with the First Home Guarantee then renting it out shortly after is a breach with consequences.

4. Property cap can shut you out of better packages

The price cap is brutal. A $720,000 package in metro QLD is just over the cap, even if your borrowing supports it. Buyers regularly pick a worse property to stay under the cap, then realise the alternative was a better long-term decision.

The other path: build a turnkey package that lands under the cap by design. We map our network to find packages that fit both your borrowing capacity AND the First Home Guarantee cap simultaneously, so you don’t have to compromise to qualify.

Other Federal schemes worth checking

The First Home Guarantee isn’t the only path. Depending on your situation, you may also qualify for:

• Regional First Home Buyer Guarantee — same 5% deposit / no-LMI structure for regional purchases (you must have lived in the relevant region for the past 12 months). Smaller annual allocation but less competitive than the metro First Home Guarantee.
• Family Home Guarantee — 2% deposit for single parents with at least one dependent child. Tighter income and property-cap rules but the lowest deposit threshold in any Federal scheme.
• First Home Super Saver Scheme — lets you contribute to super specifically to fund a first-home deposit, with concessional tax treatment. Best stacked alongside the First Home Guarantee, not as an alternative.

The honest bottom line

The First Home Guarantee genuinely changes the maths for buyers between 25 and 35 with a $50K–$80K deposit. If your borrowing supports a property under the state cap, and your income passes the test, it’s the single best Federal lever available.

It’s also not a magic wand. The income caps mean dual-professional couples in metro Sydney often don’t qualify. The property caps push buyers into specific corridors. And the lender panel restricts which products you can use.

What we do at NextKey is map the entire stack — Federal First Home Guarantee, state grants, stamp-duty concessions, lender panels, property caps — against your specific deposit and borrowing capacity, and tell you which combination actually works. If the First Home Guarantee fits your situation, we’ll use it. If it doesn’t, we’ll show you the alternative pathway.

Book a 30-minute first-home strategy call or email me directly at sean.l@nextkey.com.au. No buyer fee, no follow-up sales sequence, no obligation.

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General advice only. NextKey Property Strategists is not a licensed financial planner, mortgage broker, tax agent or solicitor. Eligibility criteria, price caps, income caps and annual allocations for the First Home Guarantee, Family Home Guarantee, Regional First Home Buyer Guarantee and First Home Super Saver Scheme change. For personalised eligibility, consult Housing Australia, the relevant state revenue office, your mortgage broker, and your accountant. Property investment and home ownership carry risk including loss of capital. Always seek independent financial, taxation and legal advice before making property decisions.

— Sean Lewis · Co-Director, NextKey Property Strategists