The First Home Guarantee Scheme (FHGS) gets a lot of attention — and rightly so. It lets eligible first home buyers purchase with as little as a 5% deposit without paying Lenders Mortgage Insurance. That can save you $15,000–$30,000 depending on your loan size.
But there’s a lot of confusion about how it works, who qualifies, and — critically — how to actually apply. Let me clear it up.
How It Works
The government (via Housing Australia) guarantees 15% of your loan to the lender. This means the lender treats your loan as if you had a 20% deposit, even though you only have 5%. You don’t pay LMI. The government doesn’t give you money — they just provide a guarantee to the bank, which eliminates the LMI requirement.
You still borrow 95% of the purchase price. You still need to service the full loan. But you don’t need to save a 20% deposit, and you don’t need to pay thousands in LMI to get in with less.
What’s Changed for 2025-26
The scheme has been running for a few years now, but the 2025-26 financial year brought some updates worth knowing:
- Income caps: $125,000 for singles, $200,000 for couples (combined). These are based on your previous financial year’s taxable income, assessed from your Notice of Assessment.
- Property price caps (Sydney): $900,000. This applies to Greater Sydney — if you’re looking in Newcastle or Wollongong, the cap is $750,000.
- Places available: 35,000 places across the full scheme each financial year. They typically fill up well before June 30. Don’t wait until May to apply.
- Permanent residents: Now eligible (previously only Australian citizens).
Who Qualifies?
You need to tick all of these boxes:
- Australian citizen or permanent resident
- 18 years or older
- Income under the cap (singles $125k, couples $200k)
- Genuine first home buyer — you must not have previously owned property in Australia
- Intending to live in the property as your principal place of residence
- Purchasing within the price caps
The property types that qualify include houses, townhouses, units, and land + construction packages. Vacant land on its own doesn’t qualify unless paired with a construction contract.
Which Lenders Participate?
Not every lender is part of the scheme. Housing Australia has a panel of approved lenders — currently including the major banks (CBA, NAB, Westpac, ANZ), some second-tier lenders, and a number of smaller participants. The rates and terms vary between them, so getting into the scheme through the first lender you speak to isn’t necessarily getting you the best deal.
This is one of the main reasons a broker adds value here. We know which participating lenders have the most competitive rates and which have faster processing times — which matters if places are filling up and you’re under contract.
Common Mistakes That Cost People
Going straight to the bank
A bank’s branch staff can only offer their own products. If their FHGS rate isn’t competitive, you won’t know — because they have no reason to tell you. A broker accesses the full panel and finds you the best deal within the scheme.
Using the wrong property type
Company-title units, most off-the-plan purchases in the early stages, and properties in certain rural areas can be excluded. Check before you sign a contract of sale.
Applying too close to June 30
Places fill during the year. If you’re serious, apply in the first half of the financial year. This year (2025-26), the window opened July 1. Don’t wait until April and find the scheme is exhausted.
Not accounting for the full cost
No LMI is great. But you still need stamp duty (or at least some of it — see below), legal costs, building inspections, and a buffer for unexpected costs. In NSW, first home buyers are exempt from stamp duty on properties up to $800,000 and get a concession up to $1,000,000. On a $900,000 property you’d still pay partial duty.
How a Loan Connect Application Works
When clients come to us for FHGS, here’s roughly what the process looks like:
- Initial consultation — we confirm eligibility, check income, discuss property budget
- Pre-approval — we apply with the most suitable participating lender (usually 3–5 business days)
- Property search — you hunt for a property knowing your budget is confirmed
- Contract exchange — once you find a place, we submit formal approval
- Settlement — typically 42 days after exchange
The whole pre-approval process usually takes 7–14 days from the time we have your documents.
If you’re a first home buyer in Sydney trying to get into the market, the FHGS is genuinely one of the better pathways available — but you need to move early and apply properly. Get in touch with Loan Connect and we’ll check your eligibility, find the right participating lender, and walk you through every step of the application. No cost to you for the broker service.
