The New First Home Guarantee: What It Is and What You Need to Know

From 1 October 2025, the First Home Guarantee has undergone a major overhaul: income caps have been removed, property price limits have increased (up to $1.5 million in Sydney), and there are now unlimited places available. The headlines are certainly eye-catching, but as always the details matter.

While these changes sound promising, Emerging Wealth find the scheme is only truly relevant in a limited set of circumstances. Below, we break down what the scheme is, who it actually benefits, and the important considerations that often go unmentioned.

What is the First Home Guarantee?

The First Home Guarantee allows eligible first-home buyers to purchase a property with as little as a 5% deposit, while avoiding Lenders Mortgage Insurance (LMI). The government guarantees up to 15% of the property’s value to the lender, so you can borrow up to 95% of the purchase price without paying LMI.

First home guarantee key changes from 1 October 2025:

• No income caps: Anyone can apply, regardless of earnings.

• Unlimited places: No more waiting lists or missed-out opportunities.

• Higher property price caps: For example, Sydney’s cap is now $1.5 million (see table below).

• Eligibility: Must be a first-home buyer (or not have owned property in the last 10 years), Australian citizen or PR, and intend to live in the property.

First home guarantee price caps from 1 Oct 2025 (selected capitals):

• Sydney (capital & regional) Cap: $1,500,000

• Melbourne (capital & regional) Cap: $950,000

• Brisbane (capital & regional) Cap: $1,000,000

• Perth (capital) Cap: $850,000

• Adelaide (capital) Cap: $900,000

• Canberra Cap: $1,000,000

• Hobart (capital) Cap: $700,000

Who is it good for?

The expanded First Home Guarantee is particularly useful for:

• Those with a recent pay rise or career jump: Buyers who can now comfortably service a 95% loan but haven’t had time to save a 20% deposit.

• Or for those who have recently combined their finances: Couples or households who are now saving on some fixed costs and have surplus cash flow for the first time.

Emerging Wealth Perspective:

If your income hasn’t changed in years and you’re struggling to save, the real issue may be affordability, not just the deposit. The scheme is best used as a springboard for those whose financial position has recently improved, rather than as a workaround for underlying affordability challenges.

The Untold Considerations

We covered these in our Wealth Wednesdays session with mortgage broker Tina Howes (Amara Mortgage Brokers). Here are the big ones we see people miss:

1. The “5% Deposit” Headline is Misleading
   While the scheme advertises a 5% deposit, the real cash required is often closer to 10% once you factor in stamp duty, legal fees, and other upfront costs. For properties above the NSW $800,000 threshold, you’ll pay full stamp duty—so budget accordingly.

2. Affordability is Still the Real Barrier
   The First Home Guarantee removes the LMI hurdle, but it doesn’t make the loan any smaller. Repayments on a 95% loan are substantial. Make sure you stress-test your budget, ideally with a buffer for higher interest rates and living costs.

3. Investment Property Trap
   The First Home Guarantee is strictly for owner-occupiers. If you move out while your loan is still above 80% LVR, the government guarantee ends and you may be forced to pay LMI retroactively. The ATO and banks share data—so don’t assume you can quietly turn your home into an investment property without consequences.

4. Cash Buffer Restrictions
   Lenders under the scheme are strict about how much cash you can keep at settlement. Most of your surplus cash will need to go towards the purchase, leaving only a modest buffer. Plan your finances carefully, and don’t liquidate shares or other assets before speaking to your broker.

5. If the First Home Guarantee Doesn’t Fit: Alternatives
   If you can’t make the numbers work as an owner-occupier, you may have to consider Rentvesting (buying an investment property while renting where you want to live) or using a parental guarantee. These options can offer more flexibility, especially if your long-term plans include moving or investing.

Bottom Line

The new First Home Guarantee can help if you’ve just had a pay bump and can comfortably service a 95% loan—it can save you tens of thousands in LMI and get you into the market sooner. If not, pause and ask yourself: is the real issue the deposit, or is it affordability? Don’t let the headlines rush you into a commitment you can’t sustain.

Need help crunching the numbers?

If you'd like us to run the calculations on affordability, repayments, or your true cash requirements, please get in touch. As your financial adviser in Sydney, Emerging Wealth is happy to help you make an informed decision.

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MIKE MILLER 
Founder, Financial Adviser | BBus, CFP®, RLP, JP
Emerging Wealth l Financial Planners in Sydney for ambitious under 50s who want more out of life than the ordinary.