Last Updated: September 2025
From 1 October 2025, the First Home Guarantee (FHG) gets its biggest upgrade yet: unlimited places, no income caps, and higher property price caps. If you’re an eligible first-home buyer, you can purchase with a 5% deposit and pay zero Lenders Mortgage Insurance (LMI)—a saving that can run into the tens of thousands.
This guide explains how the FHG removes LMI, what qualifies, how much you could save, and the steps to apply.
How the FHG removes LMI
- With a 5% deposit, your loan is at 95% LVR. Normally that triggers LMI.
- Under FHG, Housing Australia guarantees up to 15% of the property value to your lender.
- The lender treats your loan like it’s ≤80% LVR, so LMI isn’t required.
- You still need to pass the lender’s credit and serviceability checks.
Owner-occupier rule: You must move in within 6 months (or within 6 months of the occupancy certificate for new builds) and keep living there while the guarantee applies.
Table 1: FHG 2025 Price Caps (from 1 Oct 2025)
| State/Territory | Capital & Regional Centres* | Other Areas |
|---|---|---|
| NSW | $1,500,000 | $800,000 |
| VIC | $950,000 | $650,000 |
| QLD | $1,000,000 | $700,000 |
| WA | $850,000 | $600,000 |
| SA | $900,000 | $500,000 |
| TAS | $700,000 | $550,000 |
| ACT | $1,000,000 | – |
| NT | $600,000 | – |
| JBT / Norfolk | $550,000 | – |
| Christmas / Cocos | $400,000 | – |
*Regional centres: Illawarra; Newcastle & Lake Macquarie (NSW); Geelong (VIC); Gold Coast & Sunshine Coast (QLD).
Tip: For land + build, the combined land price + build cost must be at or under the cap for the location.
What you could save
LMI is a once-off premium that protects the lender, not you. With a 5% deposit, LMI can be substantial. These ranges are indicative only (actual LMI varies by lender/insurer and borrower profile):
Table 2: Illustrative LMI at 5% Deposit (Without FHG) vs With FHG
| Property Value | 5% Deposit | Loan @95% LVR | Typical LMI without FHG | LMI with FHG | Indicative Saving |
|---|---|---|---|---|---|
| $500,000 | $25,000 | $475,000 | ~$15,000–$20,000 | $0 | ~$15,000–$20,000 |
| $700,000 | $35,000 | $665,000 | ~$20,000–$28,000 | $0 | ~$20,000–$28,000 |
| $900,000 | $45,000 | $855,000 | ~$28,000–$38,000 | $0 | ~$28,000–$38,000 |
| $1,000,000 | $50,000 | $950,000 | ~$32,000–$42,000 | $0 | ~$32,000–$42,000 |
Worked examples (for structure, not advice)
Example 1 — Sydney apartment, $800,000
- Traditional (10% deposit): $80,000 deposit; LMI about mid-$20k; higher upfront cost.
- FHG (5% deposit): $40,000 deposit; $0 LMI; lower upfront cost and sooner entry.
Example 2 — Melbourne house, $750,000
- Traditional (15% deposit): $112,500 deposit + LMI around high-teens.
- FHG (5% deposit): $37,500 deposit; $0 LMI.
Example 3 — Brisbane townhouse, $650,000
- Traditional (20% deposit): $130,000 deposit; $0 LMI.
- FHG (5% deposit): $32,500 deposit; $0 LMI; far lower upfront.
Reality check: skipping LMI doesn’t change the fact you’re borrowing more with a 5% deposit. Make sure the repayments fit comfortably—even if rates rise.
Eligibility
- Who: Australian citizens or permanent residents, 18+.
- First-home status: First-home buyer or haven’t owned Australian residential property in the last 10 years.
- Deposit: At least 5% of the property value (as assessed by your lender). If you already have 20%+, you won’t qualify for FHG.
- Loan: Owner-occupier, principal & interest, up to 30 years (new builds can have an additional build period).
- Income caps: None from 1 October 2025.
- Property: Must be residential and at or under the price cap for the location (see Table 1). Eligible types include established, new, off-the-plan, house-and-land, and land + separate build (combined cost under cap).
How to apply (five clear steps)
- Check your cap & eligibility for your target postcode and property type.
- Choose a participating lender (or work with a broker who places loans with them).
- Get pre-approval: submit ID, income, savings history, statements, and any build/contract info if relevant.
- Find a property within the cap and sign subject to finance; valuation follows.
- Formal approval & settlement: your lender reserves the FHG place, finalises the loan, and you move in within 6 months.
Refinancing and changes later
- You can usually refinance to another participating lender and keep the guarantee—so long as you don’t increase the loan amount or extend the term, and you still meet eligibility.
- Refinancing to a non-participating lender ends the guarantee; if your LVR is still above 80%, LMI may apply.
- If you stop living in the property while the guarantee applies (without an approved exemption), you’ll breach the scheme and may face costs (e.g., LMI).
When FHG might not be the best fit
- You already have a 20%+ deposit.
- You want investment flexibility immediately (FHG is owner-occupier only while the guarantee applies).
- Your preferred property sits above the cap.
- A lender’s professional LMI waiver or a family guarantee provides a better overall deal for your situation.
Practical tips
- Aim for a buffer in your budget; don’t stretch right to your maximum.
- Keep your credit file clean for 3–6 months before applying.
- If you’re building, track the combined land + build cost against your cap.
- Have backup lender options—credit policies and turnaround times differ.
Bottom line
From 1 October 2025, FHG lets eligible first-home buyers get in with a 5% deposit and no LMI, backed by unlimited places, no income caps, and higher price caps. That combination can cut years off your saving timeline and keep tens of thousands in your pocket—provided the repayments still stack up for you.
Disclaimer: This is general information only, not financial advice. Always confirm your eligibility, price caps, and loan terms with a participating lender or mortgage broker before proceeding.
FAQs — 5% Deposit Home Loans & FHG (No LMI)
When do the new FHG settings start?
1 October 2025.
Are there income caps?
No. From 1 October 2025, income caps are removed.
What’s the minimum deposit I need?
At least 5% of the property value (as assessed by your lender).
Why is there no LMI with FHG?
Housing Australia guarantees up to 15% of the property value to the lender, so a 95% LVR loan is treated like ≤80% LVR and LMI isn’t required.
Who is eligible?
Australian citizens or permanent residents, 18+, who are first-home buyers or haven’t owned Australian residential property in the last 10 years, and will live in the home.
Do I have to live in the property?
Yes. You must move in within 6 months (or within 6 months of the occupancy certificate for new builds) and keep it as your principal place of residence while the guarantee applies.
What are the property price caps?
They vary by location. Example caps from 1 Oct 2025: NSW (Sydney/Illawarra/Newcastle–Lake Macquarie) $1.5m; VIC (Melbourne/Geelong) $950k; QLD (Brisbane/Gold Coast/Sunshine Coast) $1.0m. Check your postcode before you buy.
Which property types are eligible?
New or established homes, off-the-plan, house-and-land, and land + separate build (the combined land + build cost must be at or under the local cap).
How do I apply?
Through a participating lender (directly or via a mortgage broker). You can’t apply directly to Housing Australia.
Can I use gifted funds for my deposit?
Often yes, subject to the lender’s credit policy. You still need to meet serviceability and other loan criteria.
Can I refinance later?
Usually yes—to another participating lender—provided you don’t increase the loan amount or extend the term, and you still meet eligibility.
Can I rent the property out?
Not while the guarantee applies. It must remain your principal residence unless you have an approved exemption.
Are there still “limited places”?
No. From 1 October 2025, places are unlimited.