After years of soaring housing prices and seemingly impossible savings targets for deposits, the Australian Government has thrown would-be buyers a lifeline. From 1 October 2025, the First Home Guarantee scheme (previously known as the Home Guarantee Scheme) will let Australians enter the market with just a 5% lower deposit and avoid paying Lenders Mortgage Insurance (LMI).
By fast-tracking the scheme’s start date by three months, policymakers are signalling they know the deposit hurdle is a real barrier. The Home Guarantee Scheme allows eligible buyers to purchase a home with a deposit as low as 5% without paying Lenders Mortgage Insurance, cutting tens of thousands off the upfront cost. For example, aiming for a 20% deposit allows first home buyers to avoid Lenders Mortgage Insurance (LMI), but the scheme enables buyers to get into a home sooner with a lower deposit.
Still, the question remains: will this move genuinely help first-home buyers get ahead, or simply fuel more competition in an already overheated property market? With the scheme, many buyers may be able to achieve home ownership sooner.
Until now, the First Home Guarantee had plenty of roadblocks including tight income limits, price caps that left out most city homes, and a limited number of spots each year. From October, that’s all shifting:
To benefit from these changes, first home buyers must meet specific eligibility criteria and eligibility requirements. Applicants must be an Australian citizen or permanent resident, at least 18 years old, and must not have owned a residential property or land in Australia in the last 10 years. The property purchased must be a residential property in Australia and intended as the buyer’s principal place of residence.
Buyers must plan to live in the home as an owner-occupier and cannot use the scheme for investment properties. You must move into the property within one year of contracts signed and live there continuously for at least six months. Documentation to verify eligibility, including proof of identity and residency, is required. Applicants must not have previously received a first home owner grant in any state or territory of Australia, and must apply for the grant within 12 months of settlement or the completed construction date. Before starting the home buying process, check your eligibility for various assistance schemes to ensure you meet all requirements.
The 20% deposit hurdle has always been the biggest barrier for first-home buyers. Now with a 5% deposit and avoiding LMI you could save thousands. It won’t make homes cheaper, but it will cut some of the steepest upfront costs.
E.g. For a $1,000,000 home in Brisbane, you used to need $200,000 upfront. From October, it’s just $50,000. That’s a $150,000 difference. Add in savings on LMI (possibly $20,000+), and you’re looking at a huge cut to the cash barrier.
It’s important to stay realistic. The scheme helps with the deposit, but it doesn’t remove the financial responsibility of owning a home:
Buyers should ensure their monthly housing costs do not exceed 30% of their gross monthly income.
After considering repayments and equity risk, it is important for first home buyers to manage their budget effectively to cover all costs associated with purchasing a home. Be aware that you may need to pay for Lender’s Mortgage Insurance (LMI) if your deposit is less than 20%. Understanding mortgage insurance is crucial, as it can add significantly to your costs. You will also need to pay stamp duty and other government charges as part of the purchase.
If you're in healthcare, the new 5% rule is just one piece of the puzzle. Specialist lenders offer policies designed specifically for medical and dental professionals, and those policies can be even more powerful than what's available in the general market.
Here's why:
The bottom line? Working with a specialist broker or advisor who understands the industry can put you in a stronger position.
Yes, it's not just existing homes. Housing Australia covers vacant land bought alongside a comprehensive home building contract, and off the plan purchases qualify too. The catch: the total value of the land plus build must sit within your state's price cap. In Queensland, that's now $1 million. Worth double-checking before you sign a building contract.
You need to move in within 12 months of settlement and stay for six continuous months. Short term accommodation or anything that looks like investment purposes won't satisfy the test. At least one applicant must actually live there. It's a genuine owner-occupier requirement, not a technicality.
Yes, it matters. Anyone who has previously owned or previously occupied a home in Australia within the last 10 years is out. That includes property previously owned with a de facto partner. Australian Defence Force members have separate criteria worth checking. A financial institution that deals with first home buyers regularly will be able to tell you where you stand quickly.
You can. The Home Super Saver Scheme lets you pull out voluntary contributions made each financial year toward your deposit. Combined with the 5% First Home Guarantee, it's one of the more practical ways more Australians are closing the gap between their savings and what the bank actually wants to see.
Thinking of using the scheme? Here’s how to prepare:
State governments provide cash grants and stamp duty relief for first home buyers, which vary depending on whether the home is new or established.
Here’s a summary of key state-specific grants and concessions:
If you’re realistic about your budget and plan carefully, this could be the chance to secure your first home much sooner than you thought.
If you’re interested in making the most of the new %5 deposit scheme, talk to the finance experts at Cutcher & Neale today.
What are The New Rules for First-Time Home Buyers
Until now, the First Home Guarantee had plenty of roadblocks including tight income limits, price caps that left out most city homes, and a limited number of spots each year. From October, that’s all shifting:
The 20% deposit hurdle has always been the biggest barrier for first-home buyers. Now with a 5% deposit and avoiding LMI you could save thousands. It won’t make homes cheaper, but it will cut some of the steepest upfront costs.
E.g. For a $1,000,000 home in Brisbane, you used to need $200,000 upfront. From October, it’s just $50,000. That’s a $150,000 difference. Add in savings on LMI (possibly $20,000+), and you’re looking at a huge cut to the cash barrier.
It’s important to stay realistic. The scheme helps with the deposit, but it doesn’t remove the financial responsibility of owning a home:
If you’re in healthcare, the new 5% rule is just one piece of the puzzle. Specialist lenders offer policies designed specifically for medical and dental professionals, and those policies can be even more powerful than what’s available in the general market.
Here’s why:
The bottom line? Working with a specialist broker or advisor who understands the industry can put you in a stronger position.
Thinking of using the scheme? Here’s how to prepare:
If you’re realistic about your budget and plan carefully, this could be the chance to secure your first home much sooner than you thought.
If you’re interested in making the most of the new %5 deposit scheme, talk to the finance experts at Cutcher & Neale today.