Big changes coming to the first-home buyer 5% deposit scheme

From 1 October 2025, the government's First Home Guarantee scheme — the 5% deposit, no-LMI program — was substantially expanded. If you've looked at it before and decided you didn't qualify, it's worth re-checking. The changes are material.

What's actually new

• More places per year. The annual allocation increased significantly, reducing the risk that places run out mid-year (which had become an issue in 2024).
• Higher property price caps. Updated to reflect actual median first-home buyer prices in each capital city and region. The caps now genuinely cover what first-home buyers buy.
• Broader income eligibility. Income thresholds raised, bringing more households into scope, particularly dual-income couples.
• Expanded property eligibility. Townhouses and certain off-the-plan properties more clearly included.

How the scheme actually works

You buy a property with a 5% deposit. The government guarantees the lender for the difference between your deposit and 20%. The result: no Lenders Mortgage Insurance (LMI), which would normally cost between $10k and $35k+ on a typical first-home purchase.

You still need:

• A minimum 5% deposit from genuine savings (some lenders accept family gifts; the scheme rules around this vary).
• Income within the thresholds for your state.
• The property within the price cap for the area.
• The intent to live in the property (it's owner-occupier only).
• Australian citizenship or eligible permanent residency.

Who benefits most from the changes

• Dual-income couples in capital cities. The old caps locked many of them out of the median apartment or townhouse. The new caps cover most realistic first purchases.
• Buyers who'd written off townhouses. The clarified eligibility for attached dwellings opens up a class of property that often offers the best value entry point.
• Buyers waiting on places to be released. The expanded allocation reduces the lottery feel of timing your application.

What to do now

If you've already saved a 5–10% deposit and were planning to wait until you had 20%: stop waiting. Run the numbers under the scheme — the timeline savings are usually 18–36 months, and the property market doesn't reward waiting.

If you're earlier in saving: build to 5% genuine savings (with three to six months of consistent deposits showing in your statements), get pre-approved through a lender that participates in the scheme, and apply as soon as you have a property under contract.

Not every lender is in the scheme, and the experience varies. Pick a lender that processes these applications quickly — speed matters when you're competing on contracts.