Understanding the First Home Guarantee and the New 5% Deposit Rule
For many Australians, saving for a home deposit can feel like the biggest obstacle to entering the property market. Rising living costs and increasing property prices mean it often takes years to put aside the traditional 20% deposit. From October, new changes under the First Home Guarantee scheme will make it easier for first-time buyers to get their foot in the door with just a 5% deposit.
What Is the First Home Guarantee?
The First Home Guarantee (previously known as the First Home Loan Deposit Scheme) is an Australian Government initiative designed to help eligible first-home buyers enter the property market sooner.
Under the scheme:
Buyers only need a minimum 5% deposit.
The Government acts as a guarantor for up to 15% of the loan, removing the need for costly Lenders Mortgage Insurance (LMI).
The scheme is administered by Housing Australia and offered through participating lenders.
This initiative is designed to reduce the upfront savings hurdle while still ensuring buyers can access competitive home loan rates.
How the 5% Deposit Works
Traditionally, a 20% deposit has been the benchmark for home loans. Without it, buyers are usually required to pay LMI, which can cost thousands of dollars and add no value to the property.
With the First Home Guarantee:
Eligible buyers can contribute just 5% of the property’s value as a deposit.
The Government provides a guarantee for the remaining 15%, so lenders treat the loan as though the buyer has already met the 20% deposit threshold.
This allows buyers to avoid LMI and save money upfront.
For example, if a property costs $600,000:
Standard deposit (20%) = $120,000.
With the scheme (5%) = $30,000.
Who Is Eligible?
Not every buyer will qualify. To be eligible for the First Home Guarantee, applicants generally must:
Be an Australian citizen or permanent resident.
Be at least 18 years old.
Intend to live in the property (not purchase it as an investment).
There is no income cap.
Be a genuine first-home buyer (or have not owned property in Australia in the last 10 years under some updated rules).
Property price caps also apply and vary by location, ensuring the scheme supports modest home purchases rather than high-end investments.
How to Apply
Below are the steps to apply for the Home Guarantee Scheme after 1 October 2025:
Check your eligibility with the Home Guarantee Scheme Eligibility Tool here. A new Eligibility Tool will be available from 1 October 2025.
Check the new property price caps for your area.
Contact a Participating Lender and apply.
Lenders will submit eligible applications to Housing Australia and process pre-approval.
Why This Matters for Families
Many parents and grandparents want to help the next generation into the property market but don’t always have the ability to gift large sums or go guarantor on a loan. The new 5% deposit rules under the First Home Guarantee provide a way for younger Australians to buy sooner without placing extra financial pressure on their family.
If you have children or grandchildren who have been struggling to save a 20% deposit, this scheme could make all the difference. Instead of waiting years to build savings, they could enter the market with a much smaller deposit while still avoiding unnecessary costs like LMI.
Why Professional Guidance Helps
Buying a first home can feel overwhelming, especially with so many loan products, eligibility criteria, and government schemes to navigate. Having expert support ensures buyers don’t miss out on opportunities like the First Home Guarantee.
We work closely with our trusted partner, Presidio Group, who specialise in home loans and can guide first-home buyers through the entire process. With their help, families can feel confident that their children or grandchildren are making informed financial decisions.
Conclusion
The introduction of the 5% deposit rule under the First Home Guarantee is a game-changer for first-time buyers. It lowers the barriers to entering the property market, saves thousands in upfront costs, and helps young Australians start building wealth sooner.
If you know someone preparing to buy their first home, it may be the perfect time to explore this opportunity. With expert support from partners like Presidio Group, the path to home ownership has never been clearer.
Sources
Home Guarantee Scheme https://www.housingaustralia.gov.au/home-guarantee-scheme
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