Buying a first home in Australia looks different now than it did two years ago. The rules on the main federal deposit scheme were rewritten on 1 October 2025, the income tests are gone, and the RBA cash rate has sat at 4.35% since the board held in August 2026. That combination has pulled a lot of buyers off the sidelines and put a lot of half-right advice back into circulation.
This guide covers what a first home buyer actually has to decide in 2026: how much deposit you need, which loan type suits you, what government help you can claim in your state, and what lenders look at before they say yes.
Free download
The First Home Buyer’s Complete Guide
Every step from checking your credit file to collecting the keys. 40 pages, written for Australian first home buyers. Tell us where to send it and it lands in your inbox straight away.
The 5% deposit scheme is now the main way in
What used to be called the First Home Guarantee is now the Australian Government 5% Deposit Scheme. Three things changed on 1 October 2025 and they are the reason so many people are buying earlier than they planned:
- The income caps were scrapped. The old limits of $125,000 for a single buyer and $200,000 for a couple no longer apply.
- The cap on places went too. There is no annual quota to beat any more, so there is no rush to apply in July.
- The property price caps went up. In Sydney and the NSW regional centres you can now buy up to $1.5 million under the scheme, Melbourne $950,000, Brisbane and the ACT $1 million, Perth $850,000, Adelaide $900,000, Hobart $700,000 and Darwin $750,000.
Under the scheme you put in 5%, the lender funds the other 95%, and the government guarantees up to 15% of the purchase price. That guarantee is what removes lenders mortgage insurance, which on a $900,000 purchase with a 5% deposit would otherwise cost you somewhere around $30,000 added to the loan.
Single parents get a separate stream with a 2% deposit. Prior ownership does not automatically rule you out, as long as you hold no other property once the new place settles.
How much deposit you actually need
There are three realistic deposit positions in 2026, and they lead to very different loans.
- 20% or more. No LMI, the widest choice of lenders, and the sharpest advertised rates. Most lenders price their best variable rates at 60% to 80% LVR.
- 5% under the government scheme. No LMI because of the guarantee, but you are borrowing 95% of the price and the repayment reflects that.
- 5% to 19% outside the scheme. You will pay LMI, which is a one-off premium protecting the lender, not you. It is usually capitalised onto the loan.
Lenders also want to see genuine savings, which generally means money you have accumulated yourself over at least three months. A gift from parents counts towards the deposit but is treated differently, and some lenders will want a letter confirming it is not repayable.
Fixed, variable or split
Owner-occupier variable rates are broadly sitting between about 5.7% and 6.5% at the moment, with the sharpest pricing reserved for lower LVRs. The choice between rate types matters less than people expect, but it still matters.
- A fixed rate locks your repayment for one to five years. You get certainty. You usually give up offset accounts, unlimited extra repayments, and the ability to refinance without a break cost.
- A variable rate moves with the market and with your lender’s decisions. You keep the features, and you carry the risk.
- A split loan puts part of the debt on each. A common structure is fixing enough to cover the repayment you could not absorb if rates rose, and leaving the rest variable.
With the cash rate held at 4.35% through August 2026 and the next RBA decision due on 29 September, fixed rates are being priced by lenders on their own view of where rates go, not on where they are today.
The features that change what you actually pay
Offset account. A transaction account linked to the loan. Every dollar sitting in it reduces the balance interest is charged on. If you keep $25,000 in an offset against a $700,000 loan at 6%, that is roughly $1,500 a year in interest you do not pay. Check whether the offset is full or partial, and whether it carries a monthly fee.
Extra repayments. Paying above the minimum shortens the loan and cuts total interest. Most variable loans allow it without limit. Most fixed loans cap it, often at $10,000 a year.
Redraw. Lets you pull those extra repayments back out. Useful as a safety net, though a lender can change or freeze redraw terms in a way it cannot do with money sitting in an offset.
What your state will give you
Federal help stacks on top of state help, and the state schemes are where most of the money is. The amounts below are current as at September 2026.
First Home Owner Grants are almost all new-build only now:
- NSW: $10,000 on a new home, capped at $600,000 built or $750,000 for a house and land package
- Victoria: $10,000 on a new home valued up to $750,000
- Queensland: $30,000 on a new home under $750,000, locked in for four years in the 2026-27 state budget
- Western Australia: $10,000, with caps of $800,000 south of the 26th parallel and $1 million north
- South Australia: $15,000 on new builds, off-the-plan or land plus a building contract, with no value cap
- Tasmania: $20,000 on new homes for transactions started between 1 July 2026 and 30 June 2027
- Northern Territory: $50,000 under HomeGrown Territory for new builds, with no value cap
- ACT: no grant, but see the duty position below
Stamp duty is usually the bigger number:
- NSW: no duty up to $800,000, tapering out to $1 million
- Victoria: no duty up to $600,000, tapering out to $750,000, on new and established homes
- Queensland: no duty at all on a new home or off-the-plan purchase with no value cap, and no duty on an established home up to $700,000, phasing out at $800,000. From 1 August 2026 you need to be a citizen or permanent resident to claim it
- ACT: from 1 July 2026 eligible buyers pay $0 duty, with no income test and no property value cap
- South Australia: no duty on eligible new homes or vacant land, with no value cap
- Western Australia: duty-free to $600,000 since 7 May 2026, with a concession to $800,000
- Tasmania: the established-home exemption finished on 30 June 2026 and has not been renewed
Two federal options are worth knowing about as well. Help to Buy went national in June 2026 and lets the government take an equity stake of up to 40% in a new home or 30% in an existing one, with a 2% deposit, 10,000 places a year, and income caps of $103,000 single and $165,000 for a couple or single parent. The First Home Super Saver Scheme lets you release up to $15,000 of voluntary super contributions a year, to a total of $50,000, plus associated earnings.
What lenders look at before they approve you
Your borrowing power comes down to income, existing debts, living expenses and dependants. The number that surprises people is the buffer: APRA still requires lenders to test you at 3 percentage points above the actual rate, and confirmed in May 2026 that it is staying. On a 6% loan you are being assessed at 9%.
Credit history matters, though not as much as the internet suggests. A clean 12 months counts for more than a perfect score, and defaults or missed payments will narrow your lender options rather than end the process. Employment history matters more: most lenders want you past probation, and self-employed buyers usually need two years of returns.
Pre-approval is worth getting before you bid. It tells you your ceiling, and agents treat pre-approved buyers differently. Get one that has been assessed by a credit officer rather than generated by a calculator, and remember it usually lasts 90 days.
Comparing loans without getting lost
Once you have a shortlist, four things decide which loan is better for you:
- The rate, and the comparison rate next to it, which folds in the fees
- Annual package fees, which can run $395 a year and are sometimes worth it and sometimes not
- Whether the offset is genuine and unlimited, or a partial offset with a cap
- Whether the lender accepts your deposit source, your employment type and your scheme application
That last point is where most first home buyers get caught. A lender with the sharpest rate is no use if they will not accept a gifted deposit or if they are not a participating lender under the 5% scheme.
A mortgage broker can compare across lenders and handle the application, and is paid by the lender rather than by you. If you want to start from a shortlist, our Sydney and Melbourne broker lists are a reasonable place to begin, and our calculators will give you a rough repayment before you speak to anyone.
FAQs
Five per cent is enough if you go through the Australian Government 5% Deposit Scheme, because the guarantee removes lenders mortgage insurance. Outside the scheme, 20% avoids LMI and gets you the sharpest rates, and anything between 5% and 19% means paying an LMI premium that is usually added onto the loan. Single parents can buy with 2%.
No. The $125,000 single and $200,000 joint income caps were removed on 1 October 2025, along with the annual limit on places. What still applies is the property price cap for your area: $1.5 million in Sydney, $1 million in Brisbane and the ACT, $950,000 in Melbourne, $900,000 in Adelaide, $850,000 in Perth, $750,000 in Darwin and $700,000 in Hobart.
LMI is a one-off premium charged when you borrow more than 80% of a property value. It protects the lender if you default, not you. You avoid it three ways: a 20% deposit, the government 5% deposit scheme, or a guarantor. Some lenders also waive it for certain professions, including doctors and a handful of other occupations.
In most states, no. The grants are now tied to new builds or substantially renovated homes almost everywhere. As at September 2026 the amounts are $10,000 in NSW, Victoria and Western Australia, $15,000 in South Australia, $20,000 in Tasmania, $30,000 in Queensland and $50,000 in the Northern Territory, and the ACT has no grant at all. Stamp duty concessions are different, and in NSW, Victoria and Queensland they do cover established homes.
Lenders start with your income, your existing debts, your living expenses and how many people you support, then stress test the result. APRA still requires them to assess you at 3 percentage points above the actual rate, so a loan advertised at 6% is assessed at 9%. Clearing a credit card limit or paying out a car loan often lifts your borrowing capacity more than a pay rise would, because the limit itself counts against you whether you use it or not.
Yes, and make sure it is one a credit officer has assessed rather than a number a website generated. It tells you your real ceiling, agents treat pre-approved buyers more seriously, and it generally lasts 90 days. Under the 5% deposit scheme you also get 90 days from approval to find a property.