The First Home Guarantee is one of the most powerful tools available to Sydney first home buyers — letting you buy with as little as 5% deposit without paying Lenders Mortgage Insurance. But 35,000 places fill up fast every financial year, and not all Sydney properties qualify. Here's everything you need to know to use it successfully.
5%
Minimum deposit required
$900K
Sydney price cap 2025–26
35K
Places per financial year
$35K+
Avg. LMI saving
What Is the First Home Guarantee?
The First Home Guarantee (formerly First Home Loan Deposit Scheme) is a Federal Government initiative administered by Housing Australia. Under the scheme, the government guarantees up to 15% of a first home buyer's purchase price — allowing you to borrow up to 95% LVR without paying Lenders Mortgage Insurance (LMI).
To be clear about what the guarantee does and doesn't do:
- It does: Allow you to buy with 5% deposit without paying LMI (which typically costs $15,000–$35,000+ on a 95% LVR loan)
- It does not: Give you money, reduce your purchase price, or lower your interest rate
- It does not: Mean the government pays any part of your mortgage if you can't
The saving is the LMI premium you don't pay. On a $750,000 purchase with 5% deposit, this is typically $25,000–$32,000. That money stays in your pocket — or can be added to your deposit to reduce the loan amount. For a full picture of first home buyer options in Sydney, including grants and schemes that can be combined, speak to a specialist broker.
Who Qualifies? 2026 Eligibility Criteria
To use the First Home Guarantee in 2026, you must meet all of the following:
- Australian citizen or permanent resident aged 18 or over
- First home buyer — you must never have owned residential property in Australia before, either individually or jointly (this includes investment properties, not just owner-occupied)
- Income test: Singles earning up to $125,000 per year; couples up to $200,000 combined (based on prior year taxable income)
- Deposit of at least 5% but no more than 20% of the purchase price (in genuine savings — usually 3+ months of saved funds)
- Owner-occupier intent — you must move into the property within a reasonable time and live there (investment purchases are not eligible)
- Property within price cap — see the table below for Sydney's current caps
Important: Couples Must Both Be First Home Buyers
If you're buying with a partner or family member, all applicants must be first home buyers. If one person on the loan has previously owned property (even an investment property they've since sold), the application does not qualify. However, non-purchasing spouses or de facto partners are not counted — only people named on the loan.
Sydney Price Caps: What Properties Qualify?
| Location | Price Cap (2025–26) |
|---|---|
| Sydney (metro) | $900,000 |
| Regional NSW (major centres) | $750,000 |
| Other regional NSW | $650,000 |
Caps are reviewed annually. The 2026–27 caps will be announced in the Federal Budget (typically May). Use our stamp duty calculator to estimate all upfront costs for your target suburb.
First Home Guarantee vs Other Schemes
The First Home Guarantee isn't the only scheme available — and combining multiple schemes can significantly reduce your upfront costs. Here's how they compare:
- First Home Guarantee (FHG) — Federal scheme, 35,000 places/year. Buy with 5% deposit, no LMI. Must be owner-occupier. For existing and new properties.
- Family Home Guarantee — Federal scheme for single parents (natural or adoptive) with at least one dependent child. Can buy with as little as 2% deposit, no LMI. 5,000 places per year. Income cap $125,000.
- NSW First Home Owner Grant (FHOG) — $10,000 state grant for first home buyers purchasing or building new homes valued under $600,000 (or land + build under $750,000). Can be combined with the FHG.
- NSW stamp duty concessions — Exemptions (under $650,000) or discounts (under $800,000) on stamp duty for first home buyers purchasing existing or new homes. Significantly reduces upfront costs — for a full breakdown of how much deposit you actually need, see our NSW guide.
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Step-by-Step: How to Apply for the First Home Guarantee
- Check your eligibility before doing anything else. Confirm: Australian citizenship/PR, first home buyer status (no previous property ownership), income under $125,000 single / $200,000 couple, and a property target within the price cap. If you're not sure about your first home buyer status (e.g. you once had a small share in a property), check with a broker or Housing Australia before applying.
- Start saving your 5% deposit — and make sure it's "genuine savings". Most participating lenders require 5% genuine savings — funds held in your name for at least 3 consecutive months. A gift from family alone typically doesn't count as genuine savings. If you need help understanding what counts, our guide to buying with a 5% deposit in Sydney covers every acceptable source.
- Engage a broker who participates in the scheme. You must apply through a participating lender — there are 33 approved by Housing Australia. A broker can assess which participating lender gives you the best rate and most likely approval for your specific income and employment type. This is especially important for self-employed applicants or those with non-standard income.
- Apply early in the financial year. Places open on 1 July each year and are first-come, first-served. Applying in July or August maximises your chance of securing a place before the 35,000 annual allocation fills. Do not wait until November — places often run out by then in high-demand markets.
- Get pre-approval before house hunting. Once your broker has confirmed your eligibility and the right participating lender, get a formal pre-approval that includes the First Home Guarantee reservation. This locks in your place while you search for the right property.
- Find a qualifying property within the price cap. Remember: the $900,000 Sydney cap is the maximum purchase price, not the loan amount. Your deposit comes off the purchase price, and the loan covers the rest. Make sure the property type qualifies (houses, townhouses, apartments, and vacant land for construction all qualify).
- Stack additional grants where eligible. If buying a new home under $600,000, also apply for the $10,000 NSW First Home Owner Grant. Check whether you qualify for stamp duty exemption or concession simultaneously — these don't compete with the First Home Guarantee.
Common Mistakes That Cost Buyers Their Guarantee Place
- Applying too late in the financial year. The scheme's 35,000 places are finite and fill up fast. Buyers who wait until September or October often find the scheme is full and must wait until the next financial year — by which time property prices may have increased.
- Not having genuine savings. A $50,000 bank transfer from parents the week before application doesn't qualify as a 5% deposit. Lenders look for savings history. Start building your deposit in your own name at least 3–6 months before applying.
- Choosing the wrong participating lender. Not all participating lenders have the same interest rates or credit policies. The fact that both the major banks and smaller lenders participate doesn't mean they're all equally competitive. A broker compares the 33 participating lenders and finds your best match.
- Overlooking the income cap. The $125,000 / $200,000 income threshold is based on your most recent Notice of Assessment from the ATO. If you received a bonus in the last financial year that pushed you over the threshold, you may not be eligible until the new tax year's assessment is processed.
- Assuming any property qualifies. The property must be within the price cap, must be for owner-occupation, and certain property types (e.g. company title apartments, retirement villages) may not qualify. Always confirm property eligibility with your broker before making an offer.
Frequently Asked Questions
35,000 places per financial year, released from 1 July. Places are allocated first-come, first-served through participating lenders and typically fill up before year-end in high-demand markets like Sydney. Apply as early in the financial year as possible to maximise your chances.
No — you must apply through one of 33 participating lenders approved by Housing Australia. These include major banks and smaller lenders. You can only apply through one participating lender at a time, so choosing the right one for your situation is important. A broker who works with multiple participating lenders can identify your best match.
For 2025–26, the Sydney metro price cap is $900,000. Regional NSW major centres are capped at $750,000; other regional areas at $650,000. These caps are reviewed annually — check for updates at the start of each financial year as they may increase.
Yes — the First Home Guarantee and the NSW First Home Owner Grant are separate schemes and can be used together. The FHOG provides $10,000 for new homes under $600,000. Using both schemes maximises your government support, effectively reducing your upfront costs by LMI savings plus the $10,000 grant.
The First Home Guarantee requires you to be an owner-occupier — you must live in the property. If you sell or rent out the entire property, the guarantee ceases. You may be required to pay LMI at that point depending on your LVR. Notify your lender and Housing Australia if your circumstances change.
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