First Home Guarantee vs Help to Buy in 2026: Which Low-Deposit Scheme Suits You?
The First Home Guarantee lets eligible first home buyers purchase with a 5% deposit and no lenders mortgage insurance, with no income caps and no limit on places since 1 October 2025, while Help to Buy is a shared equity scheme where the government contributes up to 40% of the purchase price and you can start with as little as a 2% deposit — but income caps of $103,000 (singles) and $165,000 (joint applicants) apply, as at August 2026. Both schemes carry a $950,000 property price cap for Melbourne, which comfortably covers most homes in Melbourne's western suburbs. The right choice depends on your income, deposit and whether you are comfortable sharing equity in your home.
What is the difference between the First Home Guarantee and Help to Buy?
Both are federal government schemes designed to get first home buyers into the market sooner with a smaller deposit, but they work in fundamentally different ways. Under the First Home Guarantee, you borrow the full amount (less your deposit) and own 100% of your home — the government simply guarantees part of your loan so the lender does not charge lenders mortgage insurance (LMI). Under Help to Buy, the government takes an equity stake in your property — up to 40% for a new home or 30% for an existing home — which reduces the amount you borrow, but the government shares in any capital growth until you buy out its stake.
The practical differences come down to three things: how much deposit you need (5% versus 2%), whether income caps apply (none versus $103,000/$165,000), and whether you give up a share of future capital growth (no versus yes). A mortgage broker such as Brokio can model both options against your actual numbers, comparing lenders on each scheme's panel, at no cost to you on most home loans (the broker is paid by the lender).
How does the First Home Guarantee work in 2026?
The First Home Guarantee was significantly expanded on 1 October 2025, according to Housing Australia. From that date, income caps were removed entirely and the previous limit of 35,000 places per year was abolished, meaning every eligible first home buyer can access the scheme. The property price cap for Melbourne and Geelong was also lifted to $950,000 as part of the October 2025 expansion.
The mechanics are straightforward: you need at least a 5% genuine deposit, you must be an owner-occupier, and you must not have owned property in Australia in the last ten years. Housing Australia guarantees up to 15% of the property value, so the lender treats your loan as if you had a 20% deposit and waives LMI — a cost that could otherwise run to $15,000–$30,000 or more on a typical western suburbs purchase. You still borrow 95% of the price, so your repayments reflect the larger loan. Use our loan repayment calculator to see what a 95% loan looks like at current rates.
How does Help to Buy work in 2026–27?
Help to Buy launched nationally on 5 December 2025 and was expanded for the 2026–27 financial year with 10,000 new places, according to Housing Australia. Income caps were also lifted for 2026–27: your taxable income must be at or below $103,000 as a single applicant, or $165,000 for joint applicants and single parents, as at August 2026. Unlike the First Home Guarantee, places are limited, so timing matters.
Under the scheme, the government contributes up to 40% of the purchase price for a new home or up to 30% for an existing home, and you can enter with a deposit as low as 2%. Because the government's contribution reduces your loan size, your monthly repayments could be substantially lower than a conventional 95% loan. The trade-off is that the government owns a proportional share of your home, which you repay (at market value) when you sell, refinance, or choose to buy it out in increments. If your income later exceeds the cap for two consecutive years, you may be required to start buying back the government's share.
Which scheme could suit you better?
There is no universally better scheme — it depends on your situation. Broadly:
- Higher income, smaller deposit: If your household earns above $165,000, Help to Buy is off the table — the First Home Guarantee is typically the pathway, since it has no income test.
- Lower income, affordability stretched: If you are within the income caps and a 95% loan would strain your budget at current rates, Help to Buy's smaller loan could make repayments more manageable in suburbs like Tarneit, Truganina or Werribee.
- Long-term equity focus: If you expect strong capital growth and want to keep all of it, the First Home Guarantee means you own 100% of the upside — Help to Buy shares it with the government.
- Deposit size: With only 2–4% saved, Help to Buy may be the only immediate option; with 5%+ saved, both schemes open up.
Eligibility criteria apply to both schemes, participating lender panels differ, and any application remains subject to the lender's normal credit assessment and approval. Comparing across 40+ lenders is where a broker earns their keep.
What do higher interest rates mean for first home buyers right now?
The RBA cash rate sits at 4.35% as at August 2026, after rising 0.75 percentage points across three consecutive increases since February 2026, according to the Reserve Bank of Australia. The RBA board meets again on 10–11 August 2026, and all four major banks expect a hold, according to Finder's RBA cash rate survey, after June quarter headline inflation came in at 3.8%.
Higher rates cut borrowing power — each 0.25% rise typically reduces what a lender will approve by roughly 2–3%. That makes two things more important for first home buyers: knowing your true borrowing capacity before you shop (try our borrowing capacity calculator), and comparing lenders, because serviceability assessments and rates vary meaningfully between them. It also strengthens the case for Help to Buy among eligible lower-income buyers, since a smaller loan blunts the impact of higher rates. Rates, schemes and caps can change — always check current details before committing.
Can you stack Victorian stamp duty savings on top?
Yes — federal deposit schemes and Victorian stamp duty relief are separate and can be combined. First home buyers in Victoria pay zero stamp duty on homes valued at $600,000 or less, and a sliding-scale concession applies between $600,001 and $750,000, according to the State Revenue Office Victoria. On a $600,000 purchase, the full exemption saves around $31,000, as at August 2026.
This stacking is particularly powerful in Melbourne's western suburbs, where many houses and townhouses in Williams Landing, Point Cook, Tarneit and Werribee still transact under or near the $750,000 concession threshold. A buyer combining the First Home Guarantee (no LMI), the stamp duty exemption (no duty under $600,000) and a sharp lender rate could reduce upfront costs by $45,000 or more compared with a buyer using none of them. Budget the full picture — conveyancing, inspections, moving costs — with our property buying cost calculator.
Frequently asked questions
Can I use the First Home Guarantee and Help to Buy together?
No — they are separate schemes and cannot be combined on the same purchase. You would choose one pathway based on your income, deposit and goals. Both can, however, be combined with Victorian stamp duty exemptions and concessions where you meet the criteria.
Is there still an income cap on the First Home Guarantee in 2026?
No. Income caps on the First Home Guarantee were removed from 1 October 2025, along with the annual limit on places, according to Housing Australia. Other eligibility criteria still apply, including being an owner-occupier with at least a 5% genuine deposit, and applications remain subject to lender credit assessment.
What is the property price cap for Melbourne under these schemes?
Both the First Home Guarantee and Help to Buy apply a $950,000 property price cap for Melbourne and Geelong, as at August 2026. Regional Victoria has different caps. Price caps are set by Housing Australia and can change, so confirm the current figure before making an offer.
Do I pay the government back under Help to Buy?
Yes, eventually. The government's contribution is an equity share, not a grant — you repay it at market value when you sell or refinance, or you can buy it back in increments over time. If the property grows in value, the government's dollar share grows with it.
Important information
This article is general information only, current as at August 2026, and does not constitute personal financial, credit or legal advice. Interest rates, scheme rules, income caps and price caps can change at any time — confirm current details via Housing Australia, the State Revenue Office Victoria and the Reserve Bank of Australia before acting. All loan applications are subject to the lender's normal credit assessment and approval, and eligibility criteria apply to all government schemes mentioned. Consider seeking advice tailored to your personal circumstances before making financial decisions.