A 5 per cent deposit, no mortgage insurance, and a wider door for Indian-Australian first home buyers

Since 1 October 2025, any Australian citizen or permanent resident buying a first home has been able to do it with a deposit of just 5 per cent, with no income test and no lenders mortgage insurance to pay. The change to the First Home Guarantee removed the income limits that used to shut out many dual-income households, scrapped the annual cap on places, and lifted the property price limits in every capital. In the first month alone, 5,778 buyers used the scheme, a 48 per cent rise on the same month a year earlier, and Treasury expects about 70,000 buyers to take it up in the first year.

The expansion was an Albanese Government election promise, and it was brought forward. It had been costed to begin on 1 January 2026, but the government moved the start to 1 October 2025, roughly three months early. Housing Minister Clare O’Neil said that from that day, every first home buyer could purchase with a 5 per cent deposit. For the Indian-Australian community, where many families arrive on skilled visas and move through permanent residency to citizenship, the detail that matters most sits in the eligibility rules.

What changed on 1 October 2025

The First Home Guarantee is not new. It began in 2020 as the First Home Loan Deposit Scheme, and more than 185,000 buyers have been supported since. What changed is its reach. The income caps of 125,000 dollars for a single buyer and 200,000 dollars for a couple, measured on taxable income, are gone, so a couple both earning solid salaries in health, IT or engineering are no longer locked out for earning too much. The number of guarantees each year, previously rationed and often exhausted well before the financial year ended, is now uncapped. And the price caps were lifted to track real house prices rather than lag behind them.

How the guarantee actually works

Buying with less than a 20 per cent deposit normally means paying lenders mortgage insurance, a premium that protects the lender, not you, if you default. On a high loan-to-value loan that cost can run from a few thousand dollars to more than 35,000 dollars, added to the loan and paid off with interest over years. Under the guarantee, Housing Australia, a federal agency, guarantees to your lender up to 15 per cent of the property value, covering the gap between your 5 per cent deposit and the 20 per cent lenders usually want. The lender then treats the loan as though you had a 20 per cent deposit and waives the insurance. The government’s own examples put the saving at about 42,000 dollars on a 1 million dollar home bought with a 50,000 dollar deposit, and about 25,000 dollars on a 600,000 dollar home bought with a 30,000 dollar deposit. You still take out an ordinary mortgage from a participating lender and repay it in full. The guarantee is not a cash grant or a co-purchase.

The price caps, city by city

The cap is the most a property can cost and still qualify, and it depends on where you buy. In Sydney, along with Newcastle, Lake Macquarie and the Illawarra, it is now 1.5 million dollars. Melbourne and Geelong sit at 950,000 dollars. Brisbane, the Gold Coast and the Sunshine Coast are capped at 1 million dollars, the same as the Australian Capital Territory. Perth is 850,000 dollars, Adelaide 900,000 dollars and Hobart 700,000 dollars. Darwin rose to 750,000 dollars on 1 July 2026. Regional and rest-of-state areas carry lower caps, generally between 500,000 and 800,000 dollars. The cap that applies is fixed by the property’s location and the date you sign the contract, so it is worth checking the postcode tool on the Housing Australia website before you make an offer.

What it means for migrants and new citizens

This is the part that decides whether many Indian-Australian buyers can take part at all. You must be an Australian citizen or a permanent resident, and you must hold that status on the day your home loan is settled, not merely when you start house-hunting or get pre-approval. Permanent residents have been eligible only since 1 July 2023. Before that the scheme was for citizens alone, so this is still a relatively recent opening. There is no minimum time you must have held permanent residency or citizenship, which means a newly naturalised citizen or a freshly granted permanent resident can qualify straight away, provided they have not owned Australian property in the past 10 years and will live in the home. Temporary visa holders are excluded, and this catches many people. If you are on a 482 skilled visa, a 485 graduate visa or a student visa, you cannot use the guarantee yet. Couples need particular care. Both applicants must be citizens or permanent residents, so if one partner is still on a temporary visa, the couple cannot apply together, and only the eligible partner can apply alone, which usually lowers how much they can borrow because lenders may not count the other partner’s income. New Zealanders on a Special Category Visa, subclass 444, have been treated as permanent residents for the scheme since July 2024. Individual lenders also set their own rules on visa history and employment, so approval is not automatic even when the scheme’s own test is met.

The risk in a small deposit

A smaller deposit is a genuine help, but it is still a bigger loan. Borrowing 95 per cent of a property’s value rather than 80 per cent means more debt, higher monthly repayments and more interest paid over the life of the loan, even after the insurance saving. It also leaves a thin equity buffer. If prices dip even 5 per cent soon after you buy, you can owe more than the home is worth, which makes refinancing or selling difficult. A 5 per cent deposit leaves less set aside for stamp duty, conveyancing, moving costs and the repairs that follow most purchases. Buyers stretching towards the higher city caps should be honest about whether the repayments still fit if interest rates rise. The guarantee lowers the hurdle to get in. It does not lower the cost of the loan once you are in.

The takeaway

For many in the Indian-Australian community, the maths has genuinely shifted. Saving a 20 per cent deposit in Sydney or Melbourne can take well over a decade, and dropping the income test means a hard-working dual-income household is no longer penalised for earning well. Getting in years earlier, and keeping tens of thousands of dollars that would otherwise have gone to mortgage insurance, is a real advantage. But a 5 per cent deposit is a tool, not a free pass. It suits buyers with stable incomes, a little saved beyond the deposit, and a property sitting comfortably inside their budget rather than at the very top of the cap. Confirm your eligibility and the current caps through Housing Australia, run the numbers with a broker or lender, and weigh the cost of buying sooner against the cost of borrowing more.

Related reading: the new checks at settlement, whether students drive up rents and blame is cheaper than building.