The First Home Guarantee Scheme Just Changed Everything: Your Complete Guide to the October 2025 Expansion

Key Takeaways

The First Home Guarantee Scheme got a major makeover in October 2025. Here's what first home buyers need to know:

• Unlimited places available from October 1, 2025—no more waitlists or missing out

• Income caps removed entirely, opening the scheme to higher earners previously excluded

• Permanent residents now eligible alongside Australian citizens

• Property price caps increased to reflect market reality ($1.5M in Sydney, $850K in Perth)

• Still only requires a 5% deposit with no Lenders Mortgage Insurance (LMI)—potential savings up to $63,523

• Must be owner-occupied and move in within 6 months of settlement

• 78% of first home buyers are using or planning to use government schemes like this one

• Regional property caps remain lower ($600K in regional WA, $800K in regional NSW)

October 1, 2025 marked a turning point for Australian first home buyers. The government's expansion of the First Home Guarantee Scheme removed the biggest barriers that had frustrated buyers since the program launched: limited places, income restrictions, and citizenship requirements.

Think of it as the velvet rope being removed. What was once an exclusive club with a waitlist is now open to anyone who meets the basic criteria. For first home buyers in Australia—particularly those in WA where the property market is booming—this changes the game.

What Actually Changed on October 1, 2025

Let's cut through the noise and focus on what matters.

Unlimited Places—No More Missing Out

Previously, the First Home Guarantee Scheme operated on a quota system. Buyers who didn't apply early enough simply missed out for that financial year. That created frustration and FOMO, with eligible buyers racing against arbitrary deadlines rather than making decisions based on their own readiness.

From October 1, those quotas are gone. The scheme now offers unlimited places. If a buyer meets the eligibility criteria, they can access the scheme whenever they're ready—November, February, or August. The timing is now about personal readiness, not government rationing.

Income Caps Removed—Higher Earners Welcome

Here's where things get interesting. Previously, the scheme imposed income caps that locked out higher earners, even if they'd saved responsibly and met all other criteria. A single buyer earning over $125,000 or a couple earning over $200,000 was ineligible, regardless of deposit size or financial prudence.

That restriction is gone. Income is no longer assessed for eligibility. A surgeon earning $300,000 and a teacher earning $75,000 now have equal access to the scheme, provided they meet the other requirements.

Why does this matter? Because earning a good income doesn't automatically mean someone has saved a 20% deposit, particularly in markets like Sydney where the median dwelling price exceeds $1.1 million. Removing income caps recognizes that deposit hurdles affect buyers across income brackets.

Permanent Residents Now Included

Citizenship was previously a hard requirement. From October 1, permanent residents of Australia can now access the scheme alongside citizens.

This is significant for Australia's migrant population—people who've built careers, paid taxes, and contributed to communities but hadn't yet obtained citizenship. The expansion acknowledges their place in Australian society and removes an arbitrary barrier to homeownership.

Property Price Caps Increased

The scheme always included price caps to target genuine first home buyers rather than luxury purchasers. The October expansion raised those caps to reflect current market reality:

Capital city regional price caps:

• New South Wales (Sydney): $1,500,000

• Western Australia (Perth): $850,000

• Victoria (Melbourne): $950,000

• Queensland (Brisbane): $850,000

Regional area price caps:

• New South Wales: $800,000

• Western Australia: $600,000

• Other regions vary by state

These increases matter because they prevent eligible buyers from being squeezed out by market growth that pushed median prices above old caps. A $1.5 million cap in Sydney isn't luxury—it's baseline access to family homes in many suburbs.

How the First Home Guarantee Scheme Actually Works

Eligibility changes are great, but how does the scheme function day-to-day?

The 5% Deposit Advantage

The core benefit remains unchanged: buyers can purchase with just a 5% deposit. On a $600,000 property in Perth, that's $30,000 instead of the standard $120,000 for a 20% deposit.

That's a significant barrier reduced. Many first home buyers can save $30,000 in a reasonable timeframe, but saving $120,000 while simultaneously paying rent and living expenses? That's a multi-year slog that often sees buyers falling further behind as property prices rise faster than savings accumulate.

No LMI—The Hidden Saving 💰

Here's where the scheme delivers serious value: no Lenders Mortgage Insurance.

Normally, borrowing with less than a 20% deposit triggers LMI—an insurance policy that protects the lender if the borrower defaults. It's expensive. On a $1.5 million property in Sydney with a 5% deposit, LMI could cost up to $63,523.

The First Home Guarantee Scheme means the government essentially guarantees a portion of the loan, removing the need for LMI. That's $63,523 that stays in the buyer's pocket or can be directed toward stamp duty, legal fees, or furnishing the new home.

Owner-Occupied Requirement

The scheme strictly requires owner-occupation. Buyers must intend to live in the property as their primary residence and must move in within 6 months of settlement.

This isn't an investor scheme. The government is targeting people buying a home to live in, not property portfolios. Attempting to use the scheme for investment purposes violates the terms and can result in serious consequences.

Genuine Savings Requirement

While the 5% deposit is attractive, lenders still assess genuine savings. This typically means demonstrating that the deposit has been saved over time (usually 3 months), rather than being a gift, windfall, or borrowed funds.

Some flexibility exists—gifts from family may be acceptable depending on the lender—but the principle remains: lenders want to see savings discipline as evidence of ability to manage mortgage repayments.

Who Should Consider the First Home Guarantee Scheme?

Not every first home buyer needs this scheme, but for many, it's the difference between buying now and waiting years.

You're a Strong Candidate If:

You've saved 5% but not 20%
This is the obvious sweet spot. Buyers who've demonstrated savings discipline but face a multi-year wait to reach 20% can accelerate their entry to the market.

You're buying in a growth market like Perth
When property prices are rising, waiting to save a larger deposit means chasing a moving target. Every year spent saving might require an extra $20,000-$30,000 in deposit due to price growth. The scheme helps buyers stop chasing and start owning.

You're a permanent resident
The October expansion specifically opened doors for permanent residents who were previously excluded. If citizenship was the only barrier, that barrier is gone.

You're a higher earner who hasn't prioritized deposit saving
High income doesn't automatically equal high savings, particularly for professionals early in their careers carrying HECS debt or supporting families. The income cap removal recognizes this reality.

You want to avoid LMI costs
For buyers purchasing near the higher property price caps, LMI savings are substantial. Avoiding a $50,000+ insurance premium is financially significant.

You Might Not Need It If:

You've already saved 20% or more
If a buyer has a full deposit, they don't need the scheme. Standard loan products may offer more flexibility in property choice, particularly for properties above the scheme's price caps or for non-standard properties.

You're buying investment property
The scheme is owner-occupier only. Investors need different financing structures.

You're buying above the price caps
Luxury buyers purchasing above the caps aren't eligible. This is by design—the scheme targets affordability, not prestige.

The FOMO Factor: Why 78% of First Home Buyers Are Using Government Schemes

Recent data shows 78% of first home buyers are using or planning to use government schemes like the First Home Guarantee. That's not coincidental—it's rational behaviour in a challenging market.

Australian property prices have grown faster than wages for years. The median dwelling price nationally sits at $848,858—a figure that would have seemed absurd a decade ago but is now reality. Government schemes aren't luxuries; for many buyers, they're necessities.

Some worry that widespread use of schemes like the First Home Guarantee artificially inflates prices by boosting demand. There's some truth to that concern—economists suggest schemes might add 0.5-5% to property prices. But for individual buyers, the question isn't whether schemes affect the market overall; it's whether accessing the scheme makes sense for their personal circumstances.

Waiting for policy to change or markets to correct can mean years on the sidelines. For buyers in strong markets like Perth, that delay often costs more than any theoretical price inflation from the scheme itself.

Combining the First Home Guarantee with Other Benefits

The First Home Guarantee Scheme isn't the only benefit available. Strategic buyers often layer multiple advantages:

First Home Owner Grant (FHOG)

State-based grants like Western Australia's FHOG provide cash grants for eligible first home buyers. The criteria and amounts vary by state, but combining FHOG with the First Home Guarantee Scheme can provide both deposit assistance and LMI savings.

Stamp Duty Concessions

Many states offer stamp duty exemptions or reductions for first home buyers. In some states, this can save tens of thousands of dollars—money that can be redirected toward the deposit or retained as an emergency buffer.

Salary Sacrifice and Superannuation Strategies

Some buyers use the First Home Super Saver Scheme to save within their superannuation with tax advantages, then withdraw those savings for a deposit. Combined with the First Home Guarantee's 5% deposit requirement, this creates a powerful accumulation strategy.

What to Watch Out For

The expanded scheme is excellent for many buyers, but it's not without considerations.

Lender Participation Varies

Not all lenders participate in the scheme. Buyers need to work with participating lenders, which may limit loan product choices or require shopping around for competitive rates.

Property Type Restrictions May Apply

Some lenders impose additional restrictions on property types under the scheme—certain apartments, off-the-plan purchases, or properties in specific locations might be excluded. Checking lender-specific policies is essential before falling in love with a particular property.

Serviceability Still Matters

The scheme helps with deposit and LMI, but it doesn't change serviceability assessments. Lenders still evaluate whether borrowers can afford repayments based on income, expenses, and financial commitments. A 5% deposit doesn't override responsible lending obligations.

You're Locked Into Owner-Occupation

Buyers who think they might want to convert their first home into an investment property within a few years need to understand the scheme's owner-occupier requirement. Moving out and renting the property may breach scheme terms or create complications.

Navigating the Application Process

Accessing the First Home Guarantee Scheme involves several steps, and getting them right matters.

Confirm Eligibility First

Before falling in love with a property, confirm eligibility:

• Australian citizen or permanent resident

• Never owned property in Australia before

• At least 18 years old

• Purchasing an owner-occupied property

• Property price within state/territory caps

• Using a participating lender

Engage a Participating Lender Early

Not all lenders participate. Working with a broker who knows which lenders participate and which offer the best rates and terms saves time and frustration.

Get Pre-Approval That Means Something

Pre-approval under the scheme should be verified and comprehensive, not just an automated estimate. Knowing exactly what can be borrowed and under what conditions prevents heartbreak when making offers.

Understand Settlement Timelines

The scheme requires settlement within specific timeframes. Buyers need to ensure contract terms align with scheme requirements and lender processing times.