First Home Buyer Scheme 2026: What the October 2025 Changes Mean

Originally published 27 August 2025. Updated 25 June 2026.

The first home buyer scheme that expanded on 1 October 2025 has a new public name.

The Home Guarantee Scheme is now called the Australian Government 5% Deposit Scheme. The basic idea remains the same: eligible first home buyers may be able to purchase with a minimum 5% deposit without paying Lenders Mortgage Insurance. Eligible single parents or legal guardians may be able to purchase with a minimum 2% deposit.

The October 2025 expansion removed income caps and waitlists, opened unlimited scheme places and increased property price caps. Those changes are now operating settings, not a future announcement.

For Sydney buyers, the scheme can shorten the time needed to save a deposit. It can also make a broader range of homes possible. But it does not increase borrowing capacity, pay the deposit for you or make an expensive property affordable.

What changed on 1 October 2025

The expansion introduced four headline changes:

• No income caps: eligibility is no longer restricted by the previous income limits.
• No waitlists: the scheme is promoted as having unlimited places rather than a fixed annual allocation.
• Higher property price caps: the applicable maximum price increased across Australia, with the exact cap depending on location.
• No Lenders Mortgage Insurance: eligible buyers can use the government guarantee structure with a smaller deposit without paying LMI.

The scheme has also been renamed to make the central benefit clearer. It is now the Australian Government 5% Deposit Scheme, formerly known as the Home Guarantee Scheme.

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How the scheme works in plain English

Normally, a buyer with a deposit below 20% may need to pay Lenders Mortgage Insurance. LMI protects the lender, not the buyer, and can add a substantial upfront or capitalised cost to the loan.

Under the scheme, the Australian Government provides a guarantee to the participating lender over part of the eligible loan. That guarantee allows the lender to treat the purchase differently for LMI purposes.

The buyer still provides their minimum required deposit. The government does not hand the buyer cash and does not own a share of the property under this scheme. The buyer remains responsible for the mortgage, interest, rates, maintenance and every other ownership cost.

Who can the scheme help?

The detailed eligibility rules should always be checked through the official government website and a participating lender. In broad terms, the scheme is designed for:

• First home buyers with a minimum 5% deposit.
• Eligible single parents or legal guardians with a minimum 2% deposit.
• Buyers purchasing an eligible house, townhouse, apartment, new build or vacant land within the applicable price cap.
• Buyers who will live in the home as owner occupiers.
• Applicants who meet the citizenship, residency, previous ownership and lender requirements.

The expanded scheme may also cover some people who have previously owned property but have not owned a home during the relevant qualifying period. Do not assume that “first home buyer” is the only possible pathway. Use the official eligibility tool.

What the scheme does not do

This is where the headlines can get ahead of the detail.

It does not increase your borrowing capacity

The lender still tests income, expenses, debts, credit history and serviceability. If the bank believes the repayments are unaffordable, the guarantee does not override that decision.

It does not provide the deposit

The buyer still needs genuine savings or another acceptable deposit source under the lender’s rules. The government guarantee supports the lender. It is not a cash grant paid into the buyer’s account.

It does not remove stamp duty

NSW transfer duty is separate. An eligible first home buyer may also qualify for the NSW First Home Buyers Assistance Scheme, but that needs to be assessed independently.

It does not cover every buying cost

Legal fees, reports, inspections, moving costs, rates, insurance, strata levies and immediate repairs still need to be funded.

It does not make every property eligible

The property must meet the scheme rules and sit at or below the price cap that applies to its location. Confirm the cap for the exact postcode with a participating lender.

Why the scheme matters in Sydney

Sydney has a particular deposit problem.

Even buyers with strong incomes can spend years trying to save 20% while prices, rent and living costs keep moving. A smaller deposit can bring a purchase forward without the additional cost of LMI.

That can be valuable. It may allow a buyer to enter the market sooner, retain more cash for a buffer or consider a better quality property within the approved cap.

But the benefit should not be confused with free money. A smaller deposit usually means a larger loan relative to the property value. The buyer begins with less equity and may be more exposed if prices fall or circumstances change early in the ownership period.

The scheme improves access. It does not remove risk.

Property price caps still matter

Every property purchased through the scheme must fall within the price cap for its location and property type.

Do not rely on a cap quoted in an old article, social post or screenshot. Use the official government price cap tool and confirm the result with the participating lender before signing a contract.

This is especially important around Sydney because two properties a short distance apart can sit in different local government or regional classifications. New builds and house and land packages can also involve particular timing and contract requirements.

Treat the price cap as an eligibility ceiling, not a recommended budget. The right buying limit may be materially lower once repayments and other costs are considered.

How it works with NSW stamp duty assistance

The federal deposit scheme and NSW duty relief can potentially be used together.

In NSW, an eligible first home buyer may receive:

• A full transfer duty exemption on a new or existing home valued at $800,000 or less.
• A concessional duty rate when the value is above $800,000 and below $1 million.

The 5% Deposit Scheme may apply at a higher purchase price depending on the official location cap. That means a buyer could qualify for the federal deposit support but receive little or no NSW duty concession.

Model both separately. The federal cap tells you whether the property may fit the deposit scheme. The NSW thresholds tell you whether transfer duty assistance may apply.

The real cost of buying with a 5% deposit

A smaller deposit can get a buyer into the market sooner, but it also changes the loan.

Consider:

• The loan will usually be larger than it would be with a 10% or 20% deposit.
• Total interest may be higher if the larger balance remains for longer.
• Equity builds from a lower starting point.
• Refinancing options may be more limited until the loan to value ratio improves.
• A fall in value can matter more during the early years.
• A strong emergency buffer becomes even more important.

This does not make the scheme a bad idea. It means buyers should compare “buy sooner” with “borrow comfortably”, not simply celebrate avoiding LMI.

A practical Sydney buying strategy

1. Start with repayments, not the scheme maximum

Ask what monthly repayment remains comfortable after rates, strata or maintenance, insurance and normal life costs. The bank’s maximum is not automatically your maximum.

2. Keep a buffer after settlement

Do not use every dollar for the deposit and purchasing costs. Homes create surprises. Apartments can produce special levies. Houses can produce repairs. Life has a habit of ignoring settlement day.

3. Build a two level suburb brief

Have preferred suburbs and genuine alternatives. In Sydney, a small shift in location or property type can materially improve quality without destroying the lifestyle brief.

4. Choose the asset, not just the eligible price

The scheme may expand the field, but property quality still matters. Natural light, layout, building condition, street position, transport, land, strata health and resale depth will matter long after the guarantee feels exciting.

5. Complete due diligence before emotion takes over

Review the contract, building or strata records, planning controls and comparable sales before committing. A low deposit pathway should not become a shortcut around proper checks.

The application process

The official process generally follows these steps:

1. Check eligibility: use the government eligibility information and tools.
2. Speak with a participating lender: the application is made through an approved lender as part of the home loan process.
3. Obtain pre approval: the lender assesses eligibility, borrowing capacity and the proposed loan.
4. Search within the timeframe: once pre approved, buyers generally have a specified period, currently described as 90 days, to find a home and sign a contract.
5. Confirm the property: the lender checks the price cap and property eligibility before final approval.
6. Settle and move in: the buyer must continue meeting owner occupier and other ongoing obligations.

Buyers cannot apply directly to Housing Australia. The participating lender manages the scheme application.

Owner occupier obligations continue after settlement

The guarantee is not simply approved and forgotten.

The property is intended to be the buyer’s home. If the ongoing obligations are not met, the guarantee may stop applying. That could lead the lender to require LMI or take another action under the loan terms.

If you expect to move interstate, work overseas, rent the home out or change the ownership structure, speak with the lender before making the change.

Who may benefit most?

The scheme may be particularly useful for buyers who:

• Have reliable income and can service the loan comfortably.
• Have saved at least the minimum deposit but are struggling to reach 20% while paying rent.
• Want to buy an owner occupied home under the local price cap.
• Can keep a sensible emergency buffer after settlement.
• Have a clear property brief and are prepared to complete proper due diligence.

It may be less suitable for buyers who need to use every available dollar, have unstable income, plan to convert the home quickly into an investment or are stretching to the absolute serviceability limit.

Common mistakes

• Calling the scheme a grant.
• Assuming no income cap means no lender affordability assessment.
• Looking above the applicable postcode price cap.
• Forgetting NSW transfer duty and other acquisition costs.
• Comparing the scheme maximum with the bank maximum instead of a comfortable budget.
• Keeping no cash buffer after settlement.
• Buying a poor property simply because it is eligible.
• Making plans to rent the property without checking ongoing obligations.

Frequently asked questions

Is the Home Guarantee Scheme still available?

The program has been renamed the Australian Government 5% Deposit Scheme. The expanded settings introduced on 1 October 2025 continue under the new name.

Do I need exactly a 5% deposit?

First home buyers generally need a minimum 5% deposit under the scheme. Eligible single parents and legal guardians may have a minimum 2% pathway. Lender rules and acceptable savings sources still apply.

Does the government own part of my home?

Not under the 5% Deposit Scheme. The government provides a guarantee to the participating lender. This differs from a shared equity program such as Help to Buy.

Can I buy an apartment?

Eligible property types can include houses, townhouses and apartments, whether existing or new, provided the property and price meet the scheme rules.

Can I use the scheme for an investment property?

The scheme is designed for owner occupiers and includes ongoing occupancy obligations. It is not an investment property deposit scheme.

Is there still a waiting list?

The expanded scheme is promoted as having unlimited places and no waitlist. A buyer still needs lender approval and must meet all eligibility requirements.

How do I find the Sydney price cap?

Use the official government property price cap tool for the exact location, then confirm the result with a participating lender before signing a contract.

The takeaway

The October 2025 changes materially widened access to the scheme. The new name makes the headline simpler, but the buying decision is still complex.

A 5% deposit without LMI can be genuinely useful. It can reduce the years spent saving and help a capable buyer enter the market sooner. It can also leave that buyer with a larger loan and less early equity.

Use the scheme as a tool, not a reason to rush.

Set a comfortable repayment limit. Check the postcode cap. Confirm NSW duty separately. Keep a buffer. Then buy the best quality home the brief and budget can support.

Sources and further reading

• Australian Government, Australian Government 5% Deposit Scheme: https://firsthomebuyers.gov.au/australian-government-5-percent-deposit-scheme
• Australian Government, eligibility and price cap tools: https://firsthomebuyers.gov.au/
• Revenue NSW, First Home Buyers Assistance Scheme: https://www.revenue.nsw.gov.au/grants-schemes/assistance-scheme

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