Buying your first home in Australia has always been a challenge with high deposits, rising property prices, and strict eligibility rules. But from 1 October 2025, the government is making major changes to the First Home Guarantee (FHG), making it easier for first-time buyers to get into the market sooner.
At Capkon Melbourne, we specialise in helping first-home buyers refinance, navigate schemes like this, and secure the right home loan in Asutralia. Here’s a full breakdown of what’s changing and how you could benefit.
What Is the First Home Guarantee?
The First Home Guarantee is a government project that aims to enable Australian citizens to buy a house with a smaller deposit. Conventionally, the deposit that lenders demand is 20% of the value of the home being purchased. With a loan amount lower than 20%, you would normally be expected to pay Lenders Mortgage Insurance (LMI).
The FHG acts as a government guarantee for a portion of your home loan, typically up to 15%. This allows you to get a home loan at a low deposit of as little as 5% and you also save many tens of thousands of dollars in the big cost of LMI. It has also turned a lot of lives around since those who would not have been able to save the entire 20% deposit would have done that.
What’s Changing from 1 October 2025?
The October 2025 update introduces the biggest expansion to date, making the scheme more accessible to a wider range of first-home buyers. The key changes include:
- Unlimited places: The previous annual cap on the number of available spots is being removed. This means all eligible first home buyers can apply, eliminating the need to rush for a limited spot.
- No income limits: The existing income caps (previously $125,000 for individuals and $200,000 for couples) are being scrapped. This opens the scheme to more buyers, including those with higher incomes who still face challenges saving a large deposit.
- Higher property price caps: The price limits for eligible properties are being raised significantly to reflect current market values. This gives buyers more options and flexibility in where they can purchase a home.
- Simplified regional access: The separate Regional First Home Buyer Guarantee will be integrated into the First Home Guarantee, streamlining the process for those buying outside major capital cities.
New Property Price Caps Across Australia
The higher property price caps are a major part of the new changes. They are being adjusted to better align with the median house prices in each state and territory. Here are the new maximum property values under the FHG (effective 1 October 2025):
| Capital City | New Cap (Oct 2025) |
| Sydney (NSW) | $1.5M |
| Melbourne (VIC) | $950K |
| Brisbane (QLD) | $1M |
| Perth (WA) | $850K |
| Adelaide (SA) | $900K |
| Canberra (ACT) | $1M |
| Darwin (NT) | $600K |
| Hobart (TAS) | $700K |
Regional areas also have higher limits, meaning more choice and flexibility for first-home buyers.
Example – Buying with a 5% Deposit in 2025
Let’s look at a real-world example of how the new rules can help a first-home buyer in Melbourne.
With the new FHG criteria, they require a deposit of a mere 5% amounting to only $30,000. The government will guarantee that they will be able to borrow 95% of the property value as a home loan, and will not pay Lenders Mortgage Insurance (LMI,) which saves them thousands of dollars.
Avoiding LMI with the First Home Guarantee
Lenders Mortgage Insurance (LMI) is a single payment that provides the lender with protection, and not the borrower, in the event that you default on the mortgage. Banks usually need it when borrowing less than 20% of the total deposit because it is their method of containing risk. The cost of LMI can be significant, often adding tens of thousands of dollars to your upfront costs.
The FHG allows you to bypass LMI completely. For example, on a home in Melbourne valued at the new $950,000 price cap, the LMI could be well over $20,000. The FHG allows you to avoid this cost entirely, making a substantial difference to your total savings and upfront costs.
Who Is Eligible for the 2025 FHG?
With the updated rules, the FHG is now open to more buyers. To be eligible, you must meet the following criteria:
- Citizenship: Be an Australian citizen or a permanent resident.
- First Home Buyer: You must be a first home buyer, meaning you have never owned a property in Australia before.
- Property Type: The property must be for residential use and you must intend to be an owner-occupier. It can be an existing home, a new build, or a house and land package.
- Deposit: You must have a minimum deposit of 5% of the property value.
- Property Price: The property’s value must be at or below the new price caps for your location.
Breaking Down the Costs Beyond the Deposit
While the FHG significantly reduces your deposit requirement and helps you avoid LMI, it’s crucial to remember there are other costs to budget for. These upfront costs include:
- Stamp duty: This is a state government tax on property purchases. In Victoria, first home buyers may be eligible for a stamp duty concession or exemption depending on the property’s value.
- Legal & conveyancing fees: These cover the legal costs of transferring ownership of the property.
- Inspections: Pre-purchase building and pest inspections.
- Bank & application fees: Various fees charged by your lender.
In the case of a property in Melbourne valued at $700 000 a deposit of 5% will be 35,000. Although you would save on LMI, you would still have to have extra cash to cover expenses such as stamp duty (where you can be provided with a concession), legal fees and other miscellaneous expenses.
Alternative Support Options for First Home Buyers
The FHG is not the only option available. Capkon Melbourne can also help you explore other pathways to home ownership, such as:
- Victorian Homebuyer Fund (Shared Equity): The Victorian government co-purchases a percentage of your home (up to 25%), which reduces the amount you need to borrow.
- Guarantor Loans: A family member, typically a parent, uses the equity in their own home as security for your loan. This can help you avoid LMI and may even allow you to borrow up to 100% of the property’s value.
Why Work with Capkon Melbourne for Your First Home Loan?
Navigating the FHG and other government schemes can be complex. At Capkon Melbourne, we are more than just mortgage brokers in Melbourne; we are your dedicated partners in your home-buying journey.
- Specialised Expertise: We specialise in first-home buyer loans and have in-depth knowledge of all government schemes.
- Streamlined Process: We handle the eligibility checks, paperwork, and applications for you, ensuring a smooth and stress-free process.
- Access to Multiple Lenders: We work with a wide panel of lenders, giving you access to the best rates and loan products.
- Personalised Guidance: We provide step-by-step guidance, from your initial consultation to settlement, answering all your questions along the way.
Should You Enter the Market Now?
The changes to the First Home Guarantee from October 2025 are a game-changer. With unlimited places and higher property price caps, the scheme will become more accessible than ever, and the competition for spots will disappear. This gives you more time and choice to find the right property.
Now is the perfect time to plan ahead and get your finances in order. Contact Capkon Melbourne today to start your first home journey and take the first step towards securing your dream home.
FAQ related to Changes Coming to the First Home Guarantee (FHG) in 2025
What is the First Home Guarantee?
The First Home Guarantee is a government scheme that helps eligible first home buyers purchase a home with a 5% deposit and avoid paying Lenders Mortgage Insurance (LMI).
How much deposit do I need in 2025 to buy a home?
Under the First Home Guarantee, you can buy a home with a minimum of a 5% deposit.
Can I buy in Melbourne with just a 5% deposit?
Yes, with the First Home Guarantee, eligible buyers can purchase a property in Melbourne with a deposit of 5% and no LMI.
Do I still need to pay LMI under the FHG?
No, the key benefit of the FHG is that the government guarantees a portion of your loan, so you do not have to pay LMI.
What are the new property price caps in 2025?
The new price caps, effective 1 October 2025, are $1.5M in Sydney, $950K in Melbourne, and $900K in Adelaide, among others.
Can couples apply together?
Yes, the scheme is available for individuals and joint applicants, including couples.
What if I’ve owned property before?
To be eligible for the FHG, you must be a first-home buyer and have never owned property in Australia before.
How does the FHG differ from Shared Equity schemes?
The FHG is a government guarantee that helps you secure a low-deposit loan and avoid LMI. Shared equity schemes, like the Victorian Homebuyer Fund, involve the government co-purchasing a portion of your home.
Is there still a limit on the number of places?
From 1 October 2025, the annual cap on places for the First Home Guarantee will be removed.
Can I use my super for a home deposit?
The First Home Super Saver Scheme (FHSSS) allows eligible first home buyers to make voluntary contributions to their superannuation and withdraw them to use as a deposit.