Most coverage of the expanded First Home Guarantee stops at the headline. Five per cent deposit, no lenders mortgage insurance, no queue. All true. What almost nobody publishes is the second number, which is what the loan behind that deposit costs you every month for the next thirty years.
That is the number that decides whether the scheme is useful to you or simply expensive.
Where the Scheme Sits Now
The guarantee was overhauled on 1 October 2025 and the version running through 2026 is materially bigger than the one it replaced.
Eligible buyers need a minimum 5% deposit, or 2% for single parents and legal guardians. The government guarantees the balance up to 20%, so lenders mortgage insurance is not charged. The place caps were removed, so there is no longer a race to secure one of a limited number of spots each financial year. The income test was removed as well.
That last point is the one investors and higher earners tend to miss. A first home buyer on a strong salary who would previously have been excluded by an income cap is now eligible, provided they meet the other criteria and buy under the relevant price cap.
The Price Caps
The caps are set by location, and they are the real constraint on what the scheme can do for you. The figures below are current as at August 2026.
| Location | Cap |
|---|---|
| Sydney and major NSW regional centres | $1,500,000 |
| Brisbane, Gold Coast, Sunshine Coast | $1,000,000 |
| Melbourne and Geelong | $950,000 |
| Adelaide | $900,000 |
| Perth | $850,000 |
| Darwin | $750,000 |
| Northern Territory outside Darwin | $600,000 |
Caps for other capitals, regional areas and territories sit alongside these and are published by Housing Australia. Check the current figure for your exact suburb before you make an offer, because the caps have moved more than once and a contract signed above the cap does not qualify.
What Buying at the Sydney Cap Actually Costs
Here is where the second number matters. The example below is illustrative only and uses round figures to show the shape of the commitment.
Take a $1,500,000 purchase in Sydney with a 5% deposit.
- Deposit: $75,000
- Loan amount: $1,425,000
- Repayment at 6% per annum over 30 years, principal and interest: roughly $8,500 per month
That is approximately $102,000 a year in repayments alone, before council rates, insurance, strata, water and maintenance. Lenders assess your capacity with a serviceability buffer on top of the actual rate, so the income required to be approved for that loan is considerably higher than the income required to feel comfortable making the repayment.
Run the same exercise at the Melbourne cap of $950,000 and the loan is $902,500, or roughly $5,400 a month on the same assumptions. At the Perth cap of $850,000 the loan is $807,500, or roughly $4,840 a month.
The scheme does not change any of that. It changes how quickly you can get to the starting line.
The LMI Saving Is Real, and It Is Not the Whole Story
Avoiding lenders mortgage insurance at a 95% loan to value ratio is a genuine saving. At the higher price points the premium that would otherwise be capitalised onto the loan commonly runs into the tens of thousands of dollars, and you pay interest on it for the life of the loan if it is capitalised. Removing it is worth having.
What the guarantee does not remove is the interest cost of borrowing 95% instead of 80%. On a $1,500,000 purchase, a 5% deposit produces a $1,425,000 loan while a 20% deposit produces a $1,200,000 loan. That is $225,000 more debt, which at 6% is roughly $13,500 a year in additional interest in the early years. Over the period it takes to build equity back to 20%, the extra interest can exceed the lenders mortgage insurance you avoided.
That is not an argument against using the scheme. It is an argument for knowing which problem you are solving. If the alternative is another three years of saving while prices move, entering earlier can be the better financial outcome. If you are close to a 20% deposit already, the maths is different.
The Part That Deserves More Attention
In April 2026, analysis reported by the ABC and drawn from Cotality data suggested the expanded scheme has been contributing to price growth at the lower end of the market, which is precisely the segment first home buyers compete in. More buyers with access to finance, chasing a similar volume of stock under a fixed cap, produces the outcome you would expect.
Two practical consequences follow.
The first is that properties priced just under a cap attract concentrated competition. A Sydney property listed at $1,480,000 sits inside the guarantee. The same property at $1,520,000 does not. That line creates a bunching effect around the cap, and buyers should assume they are not the only ones who noticed.
The second is negative equity risk. Buying at 95% loan to value ratio means a 5% fall in value puts you at zero equity, and a larger fall puts you behind. That matters if you may need to sell within a few years. It matters much less if you intend to hold for a decade.
What to Do Before You Sign Anything
Get the current cap for your specific location in writing. Not the state figure, the location figure. Housing Australia publishes them, and participating lenders confirm them as part of assessment.
Model the repayment at a rate above today's rate. If the number only works at the current rate, it does not work. Add two percentage points and see how it feels.
Check your state duty position separately. The guarantee is a Commonwealth scheme and it does not touch stamp duty. In NSW, for example, the first home buyer exemption stops at $800,000 with partial relief to $1,000,000, so a purchase at the $1,500,000 cap attracts full transfer duty. That is a large cash cost sitting on top of your deposit.
Decide whether new or established suits you better. Every state first home owner grant now applies to new homes only, and several state duty concessions have moved the same way. If a grant is part of your plan, that decision needs to be made early rather than after you have fallen for a listing.
Line up the finance before you shortlist. Participating lenders differ in how they assess the scheme, and a pre approval that reflects the guarantee is worth more than a general estimate.
If you want help working out which of the current schemes actually applies to your situation, and what the resulting repayment looks like on real stock rather than a calculator, the team at Elite Wealth Creators works through that with buyers every week. You can read more on the insights page or book a call.
General information only, not personal financial advice. Figures are illustrative, current as at August 2026, and subject to change. Speak with a licensed adviser and confirm current scheme rules before acting.