Changes to The First Home Loan Guarantee: No Income Caps, No Waiting List

If you ruled yourself out of the First Home Guarantee a few years ago because you earned too much, or you assumed there'd be a long wait for a place, it's time to take another look. Since October 2025, the scheme has been overhauled. Income caps are gone. Place limits are gone. Property price caps have been lifted. For many first home buyers in Melbourne's inner suburbs, this is the biggest improvement in accessibility the scheme has seen since it launched.

At Key Change Finance, we talk to a lot of first home buyers who assume government schemes aren't for them, often based on rules that no longer apply. Here's what's changed, who qualifies now, and what it could mean for your first house purchase.

Housing Australia's First Home Guarantee allows eligible first home buyers to purchase a home with as little as a 5 per cent deposit, without paying Lenders Mortgage Insurance, because the government guarantees a portion of the loan on the buyer's behalf. Since 1 October 2025, three major restrictions have been removed. There are no longer any income caps, previously $125,000 for singles and $200,000 for couples. There are no longer any limits on the number of places available each year, so there's no waiting list or risk of missing out due to the scheme filling up. And property price caps have been increased in every state and territory to reflect current housing costs, with Melbourne's cap now sitting at approximately $950,000.

The scheme still requires buyers to meet standard lending criteria with a participating lender, and to intend to live in the property as their main residence. But for many buyers who previously assumed they earned too much, or worried about missing out on a place, those barriers are now gone.

What's Changed, and Why It Matters

Before October 2025, the scheme capped taxable income at $125,000 for single applicants and $200,000 for couples, which excluded a significant number of professionals, particularly dual-income households, from a scheme designed to help first home buyers get into the market sooner. The removal of that cap means income is no longer a disqualifying factor, only your standard borrowing capacity with a lender matters.

The removal of place limits addresses a different problem. Previously, the scheme allocated a fixed number of guarantees each financial year, and buyers who missed out had to wait for the next year's allocation or find another way to reduce their deposit requirement. With unlimited places now available, any eligible buyer with a 5 per cent deposit can apply, regardless of when in the year they're ready to buy.

Higher property price caps matter because they determine which properties actually qualify for the guarantee. With Melbourne's cap now around $950,000, more properties across the inner and middle suburbs fall within reach of the scheme than under the previous, lower thresholds.

Who's Eligible Now

To use the First Home Guarantee, you generally need to be an Australian citizen or permanent resident aged 18 or over, be a first home buyer or not have owned property in Australia in the past ten years, and intend to live in the property as your main residence. You can apply as an individual, or jointly with a partner, friend or family member, and there's no longer any income test to meet on top of these criteria.

You'll still need to meet the participating lender's standard serviceability and credit assessment, including APRA's mortgage serviceability buffer, which tests whether you could still service the loan if rates rose by at least three percentage points. The scheme lowers the deposit hurdle and removes the cost of Lenders Mortgage Insurance, but it doesn't change how much a lender is willing to lend you based on your income and expenses.

What a 5 Per Cent Deposit Actually Means for You

The appeal of the scheme is obvious: getting into the market years sooner without needing to save a full 20 per cent deposit, and without paying potentially tens of thousands of dollars in Lenders Mortgage Insurance. On a $900,000 property, avoiding LMI under the guarantee can save a buyer a substantial amount upfront compared to borrowing the same amount without it.

You do still need to go in with eyes open about the trade-off. A 5 per cent deposit means a 95 per cent loan, which means a larger loan balance, higher monthly repayments, and more interest paid over the life of the loan compared to borrowing with a bigger deposit. For some buyers, particularly those who could realistically save a larger deposit within a year or two, compare the cost of waiting against the cost of a larger loan balance now. For others, particularly in a market where prices are rising faster than they can save, getting in sooner with a smaller deposit is the more financially sound choice. The right answer depends on your specific numbers, not a general rule of thumb.

How the Scheme Works With Other Support

The First Home Guarantee sits alongside other forms of first home buyer support, including state-based stamp duty concessions and the Family Home Guarantee for eligible single parents and legal guardians. Depending on your circumstances, you may be able to combine the guarantee with a stamp duty concession, further reducing the upfront cost of buying. Since the Regional First Home Buyer Guarantee has now been folded into the main scheme, buyers in regional areas apply through the same, simplified pathway as everyone else.

If you previously wrote off the First Home Guarantee because of your income or a perceived waitlist, it's worth another look. The barriers that used to rule people out are gone, but that doesn't mean the scheme is automatically the right fit for every buyer or every property. The team at Key Change Finance can help you work out whether it makes sense for your situation, and if so, which participating lender and loan structure suits you best.

Get in touch with us to talk through your options and find out where you stand.

Frequently Asked Questions

Is there still an income limit for the First Home Guarantee?

No. Since 1 October 2025, income caps have been removed entirely. Previously the scheme was limited to $125,000 for singles and $200,000 for couples, but there is now no income test beyond your lender's standard assessment of your ability to service the loan.

Are there still a limited number of places available each year?

No. Place limits have been removed. Previously the scheme allocated a fixed number of guarantees annually, meaning buyers could miss out or need to wait. There is now no cap on the number of eligible buyers who can use the scheme.

What is the property price cap for the First Home Guarantee in Melbourne?

Property price caps were increased for all states and territories from 1 October 2025 to reflect current housing costs. Melbourne's cap is now approximately $950,000. Caps vary by location, so it's worth checking the specific cap for the area you're looking to buy in.

Do I still need to pass normal lending criteria to use the scheme?

Yes. The First Home Guarantee reduces the deposit required and removes the need to pay Lenders Mortgage Insurance, but you still need to meet your chosen lender's standard credit and serviceability assessment, including the mortgage serviceability buffer that applies to all new home loans in Australia.

Is a 5 per cent deposit always the best option under the scheme?

Not necessarily. A smaller deposit means a larger loan and higher total interest over the life of the loan. Whether it's the right choice depends on your individual circumstances, including how quickly you could otherwise save a larger deposit and how the local property market is moving. It's worth running the numbers on your specific situation rather than assuming the smallest deposit is automatically the best outcome.