First Home Guarantee 2025: Buy Your First Home with Just a 5% Deposit

Dreaming of owning your first home but feeling overwhelmed by hefty deposit requirements? You are not alone. The path to homeownership often feels daunting, particularly when traditional deposits of 20 percent are out of reach.

Fortunately, the First Home Guarantee is here to change the game. From 1 October 2025, the scheme becomes even more powerful, giving aspiring homeowners a genuine opportunity to secure their first property with just a 5 percent deposit. What makes this round of changes even bigger is that income thresholds are being scrapped, spots will no longer be limited, and property price caps are increasing across Australia. For example, Sydney’s cap will rise from $900,000 to $1.5 million. These reforms will set a lot of activity into the market and create new opportunities for first-home buyers.

Imagine unlocking the door to your very own home without the burden of saving for years. In this article, we will explore how the First Home Guarantee works, its benefits, who is eligible, and practical steps to get started. Whether you are a young professional, a couple planning a family, or anyone ready to make the leap, this guide will give you the knowledge you need to act with confidence.

Understanding the 5 Percent Deposit Requirement

Traditionally, lenders required a 20 percent deposit to secure a mortgage, which has been a major barrier for first-time buyers. The First Home Guarantee allows eligible buyers to purchase with only a 5 percent deposit, dramatically lowering the upfront cost.

If you are looking at a $500,000 property, you would need just $25,000 instead of the usual $100,000. This reduction accelerates your path to ownership and bridges the gap between renting and buying. The government provides a guarantee for the remaining 15 percent, which reassures lenders and removes the need for Lenders Mortgage Insurance (LMI). That means a smoother approval process and thousands saved in fees.

What’s New From 1 October 2025

The scheme is being expanded in several key ways:

• Income testing removed. Until now, singles had to earn under $125,000 and couples under $200,000 to qualify. From October, there are no income limits.
• Unlimited spaces. Previously, the scheme had capped places each year that disappeared quickly. From October, spaces will be open to all eligible first-home buyers nationwide.
• Higher property price caps. These changes better reflect today’s market. In Sydney, the cap is increasing from $900,000 to $1.5 million. Other cities and regional areas are also seeing sharp increases, giving buyers access to homes that align with current property values.

These updates remove some of the biggest hurdles that buyers have faced for years and make the scheme far more accessible.

Eligibility Criteria for the First Home Guarantee

To take advantage of the program you still need to be a genuine first-home buyer. This means you cannot have owned property in Australia or overseas. You must also have at least 5 percent in genuine savings ready to contribute.

Property price caps apply depending on where you buy. With the new increases, far more options will be available across the country, but it is still important to check the exact limit for your area.

Benefits of the First Home Guarantee

The most obvious benefit is that you can buy sooner without needing to save a 20 percent deposit. By putting down 5 percent, you save years of waiting and thousands of dollars in LMI.

There are other benefits too:

• Enter the market before prices rise further.
• Secure more choice in suburbs and property types thanks to higher price caps.
• Gain certainty with unlimited spots, no longer worrying about missing out.

With government backing, lenders are more confident and may offer stronger loan terms. That could mean lower repayments and a more manageable path to full ownership.

How the Scheme Works

Here is the process in practice:

1. Check that you are eligible as a first-home buyer.
2. Find a participating lender. Many major banks and smaller lenders are involved.
3. Apply with your lender, providing income details, savings records, and identification.
4. Once approved, the government guarantee covers the 15 percent shortfall.
5. You can then proceed with your home purchase and settlement.

This structure creates confidence for lenders while making it easier for buyers to secure finance.

Common Myths About the First Home Guarantee

There are several misconceptions about the program:

• It is only for low-income earners. Not true. With the October changes, income testing is removed entirely.
• It only applies to new builds. False. You can buy an established property as well.
• It damages your credit score. Incorrect. If you manage your repayments responsibly, it can actually build your credit history.

Financial Planning Tips for First-Time Buyers

Getting your finances right is critical. Start with a clear budget that maps your income, expenses, and savings. Factor in upfront costs such as stamp duty, legal fees, and moving expenses. Set aside a buffer for surprises.

Seek advice from a mortgage broker who understands the scheme. A broker can help compare lenders, guide you through the process, and give you the best chance of approval.

Real-Life Success Stories

Many Australians have already benefited from the First Home Guarantee.

• Sarah and John, a couple in Sydney, struggled to save while renting. With the scheme, they purchased a townhouse with just 5 percent down and avoided LMI, saving tens of thousands.
• Michael, a single professional in Melbourne, used the program to buy a one-bedroom apartment near work. The scheme made a deposit achievable and cut years off his savings plan.

From October 2025, with higher property price caps and unlimited spaces, stories like these will multiply across the country.

Final Thoughts

The First Home Guarantee has already helped thousands step into the property market. From 1 October 2025, it becomes one of the most powerful tools ever offered to first-home buyers.

With no income thresholds, unlimited spaces, and higher property caps, the scheme will transform how Australians approach their first purchase. If you have been dreaming of buying but felt locked out, now is the time to prepare.

At Mortgages Plus we specialise in guiding buyers through this process. We will help you compare lenders, secure pre-approval, and use the First Home Guarantee to your full advantage.

Your dream home may be closer than you think.

Talk to us now about your eligibility

Frequently Asked Questions About the First Home Guarantee

1. Do I still need to pay stamp duty if I use the First Home Guarantee?

Yes, stamp duty still applies unless you are eligible for a separate state or territory exemption. Each state and territory sets its own rules, and in some places first-home buyers do not pay stamp duty up to a certain property value. It is important to check your local thresholds and factor this into your budget.

2. Can I use the First Home Guarantee for an investment property?

No. The scheme is only available for people buying their first home to live in as their principal place of residence. You cannot use it to buy an investment property or holiday home.

3. Do I need to be an Australian citizen to qualify?

Yes, applicants must be Australian citizens. Permanent residents are not currently eligible under the scheme. If you are buying with a partner, both of you need to be citizens and at least one of you must meet the first-home buyer requirement.

4. How much can I borrow with the First Home Guarantee?

The amount you can borrow depends on your income, savings, existing debts, and the lender’s assessment of your ability to repay the loan. From 1 October 2025, property price caps will be significantly higher — for example, up to $1.5 million in Sydney — which means buyers will have more borrowing capacity under the scheme. A mortgage broker can help you understand exactly how much you may be approved for.

5. How do I apply for the First Home Guarantee?

You apply through a participating lender, not directly with the government. The process is the same as applying for a standard home loan, but with additional checks to confirm your eligibility. Working with a broker simplifies this step, as they know which lenders are part of the scheme and how to prepare your application for the best chance of approval.