The First Home Guarantee scheme lets eligible first home buyers in Sydney and the Hills District purchase a property with just a 5% deposit and avoid Lenders Mortgage Insurance, with the federal government guaranteeing up to 15% of the loan. From 1 October 2025 the rules changed dramatically: the Sydney price cap was lifted to $1.5 million, the income cap was scrapped entirely, and the 35,000 place annual limit was removed. If you have been saving for a Castle Hill apartment, a Kellyville townhouse or a Norwest two bedder, the path into your first home in 2026 is wider than it has ever been.
This guide walks through the new rules in plain Australian English, shows what you can actually buy in the Hills District at the $1.5M cap, and lays out the lenders, paperwork and timing you need to lock in a place under the scheme this year.
What changed on 1 October 2025 (the three big updates)
The federal government rebuilt the First Home Guarantee from the ground up. Three changes matter for Hills District buyers:
| Change | Before 1 Oct 2025 | From 1 Oct 2025 |
|---|---|---|
| Sydney price cap | $900,000 | $1,500,000 |
| Income cap | $125k single / $200k couple | None |
| Annual place limit | 35,000 places | Demand-led, no limit |
| Deposit required | 5% | 5% (unchanged) |
| Govt guarantee | Up to 15% of loan | Up to 15% of loan (unchanged) |
Change 1: Sydney price cap lifted to $1.5 million
Before October 2025 the Sydney cap was $900,000. That was below the median Castle Hill apartment price for years, so the scheme barely worked for Hills District buyers. The new cap is $1.5 million for Sydney, Newcastle, Lake Macquarie and the Illawarra. Other NSW areas went from $750,000 to $800,000. For the first time, a free standing entry level house in Baulkham Hills, a three bedroom townhouse in Kellyville, or a near new apartment in Norwest is back in scope.
Change 2: Income cap removed entirely
The old income test ruled out a lot of dual income Hills District couples. A 32 year old project manager partnered with a registered nurse easily cleared the $200,000 combined cap. From 1 October 2025 there is no income cap at all. You can earn $250,000 as a single buyer or $400,000 as a couple and still use the First Home Guarantee, provided you genuinely have not owned property in Australia before.
Change 3: 35,000 annual place limit scrapped
The old scheme ran out of places by April or May most years. Buyers were racing to settle before the financial year reset. The 35,000 cap is gone. The scheme is now demand led, so eligible buyers in November or June get the same access as buyers in July. That removes a stack of pressure and lets you take the time to find the right home rather than chasing a deadline.
The deposit rule and the guarantee itself stayed the same. You still need a 5% genuine savings deposit and the government still guarantees up to 15% of the loan, which is what removes the LMI.
The new Sydney $1.5M cap explained with example suburbs
The $1.5 million cap is generous but it is a hard ceiling. The purchase price has to be at or under $1.5M including any deposit bonus structure. Stamp duty and conveyancing sit outside the cap. Here is what the cap actually buys in the suburbs we work in every week.
Castle Hill (2154)
Two bedroom apartments in the Showground precinct currently sit between $850,000 and $1.1 million for newer stock with secure parking. Three bedroom apartments in larger complexes off Old Northern Road push into the $1.1M to $1.35M range. A renovated three bedroom villa is generally $1.3M to $1.45M. Almost the entire established apartment and villa market is now in scope. Free standing homes start around $1.6M to $1.7M for older fibro stock, so houses are mostly out, but townhouses are very much in.
Kellyville (2155)
Modern three bedroom townhouses near the metro line sit between $1.2M and $1.4M. New four bedroom terraces in the North Kellyville release areas push toward $1.45M to $1.55M, so picking the right floor plan matters to stay under the cap. Older free standing four bedroom homes off Windsor Road can still be found around $1.45M to $1.5M with some negotiation.
Norwest (2153) and Bella Vista (2153)
Norwest is overwhelmingly apartments. One bedroom plus study units start around $620,000, two bedders run $900,000 to $1.15M, three bedders with two parking spots reach $1.2M to $1.45M. Bella Vista has more townhouse stock around $1.3M to $1.5M and a small pool of original three bedroom houses still slipping in around $1.45M.
Baulkham Hills (2153)
Townhouse complexes off Old Northern Road and Seven Hills Road run $1.1M to $1.35M for three bedders. Older three bedroom houses on smaller blocks occasionally sell at $1.4M to $1.5M, especially if cosmetic only. This is one of the few Hills District suburbs where a free standing house at or under $1.5M is realistic.
Cherrybrook (2126)
Townhouses are the FHG sweet spot here, $1.2M to $1.45M. Houses are generally above $1.7M.
The new cap turns the Hills District from "FHG impossible" into one of the better value zones in Sydney for the scheme. Use our borrowing power calculator to see what loan size your income actually supports before you start inspecting.
Are you eligible for the First Home Guarantee in 2026?
The eligibility test in 2026 has four hard rules. Everything else is about supporting paperwork.
Rule 1: You have never owned property in Australia
This is the genuine first home buyer test. If you have ever held title, including as a name on a parental investment property or as an inheritance you sold years ago, you are out. There is no exception for "I owned it but never lived there". Housing Australia checks the title registry. If you previously held property overseas only, you are still in.
Rule 2: You are an Australian citizen or permanent resident
As of the 1 July 2024 change, only Australian citizens qualified. From 2025 permanent residents are also eligible. New Zealand citizens on Special Category Visa 444 count if they hold permanent resident status. Temporary visa holders, including 482 and 491, do not qualify.
Rule 3: You will live in the property
The First Home Guarantee is for owner occupiers. You must move in within 12 months of settlement and live there for the full duration the loan stays at over 80% LVR. If you move out earlier and rent it, you may lose the guarantee and have to refinance into a non FHG product.
Rule 4: You are 18 or older
Simple. Most lenders will not extend a home loan to under 18 borrowers anyway.
If you want a checklist version of this before you start, our first home buyer checklist for NSW walks through every supporting document.
How the 5% deposit actually works step by step
The mechanics of the 5% deposit confuse buyers more than any other part of the scheme. Here is the actual flow:
- Save 5% of the purchase price as genuine savings. Genuine savings means money held in your name for at least three months. Gifts from parents do not count as genuine savings on their own, though some lenders will accept a gift plus rental ledger evidence. For a $1.2M Kellyville townhouse, your 5% deposit is $60,000. You also need separate funds for stamp duty (or apply the NSW stamp duty concessions), conveyancing, building inspection and lender fees, roughly $5,000 to $10,000 unless stamp duty is fully exempt.
- Get pre-approval through an FHG panel lender. You cannot apply for the scheme yourself. Housing Australia works through 33 participating lenders. Your broker submits a normal home loan application with the FHG flag set. The lender assesses your borrowing capacity against their usual servicing rules (assessment rate, debts, dependents) and reserves an FHG place when conditional approval is issued.
- Find a property at or under $1.5M. Make an offer, sign the contract, pay the 0.25% holding deposit through your solicitor or conveyancer.
- Lender requests the guarantee certificate. Housing Australia issues a guarantee certificate covering up to 15% of the loan value. The loan is structured so you contribute 5%, you borrow 95%, but the lender treats it as if you had a 20% deposit for LMI purposes.
- Settle and move in within 12 months. Standard six week settlement on established stock. Off the plan timing depends on completion.
How much you save by skipping LMI (worked examples)
Lenders Mortgage Insurance is the main reason the First Home Guarantee is worth pursuing. It scales fast as your LVR goes up. Here are May 2026 ballpark LMI premiums for a 95% LVR loan, the position you would be in without the scheme.
| Purchase price | 5% deposit | Loan amount | LMI without FHG | What you save |
|---|---|---|---|---|
| $850,000 | $42,500 | $807,500 | ~$28,000 | $28,000 |
| $1,000,000 | $50,000 | $950,000 | ~$36,000 | $36,000 |
| $1,200,000 | $60,000 | $1,140,000 | ~$48,000 | $48,000 |
| $1,400,000 | $70,000 | $1,330,000 | ~$56,000 | $56,000 |
| $1,500,000 | $75,000 | $1,425,000 | ~$60,000 | $60,000 |
These are indicative Genworth and QBE numbers for a 30 year loan at 95% LVR. Actual quotes vary by lender, loan type and credit score. Most lenders let you capitalise LMI into the loan, so the saving compounds: you do not borrow it, you do not pay interest on it for 30 years.
You can stress test your stamp duty position with our stamp duty calculator (which handles the FHBAS exemption) alongside the borrowing power tool linked earlier.
Which lenders are on the FHG panel right now
Housing Australia maintains the participating lender list. As of May 2026 the panel includes 33 lenders. The most active for Hills District applications are:
- Commonwealth Bank
- Westpac
- NAB
- ANZ
- Macquarie Bank
- Bank Australia
- Bank of Queensland
- Suncorp
- Bendigo Bank
- ING
- Newcastle Permanent
- Greater Bank
- People's Choice
- Bank First
- AMP Bank
- Beyond Bank
- Police Bank
- Teachers Mutual Bank
- BankVic
- Defence Bank
- Heritage Bank
- Auswide Bank
- Great Southern Bank
- Bank of us
- Firefighters Mutual Bank
- G&C Mutual Bank
- Indigenous Business Australia
- Unity Bank
- Australian Mutual Bank
- Community First Bank
- IMB Bank
- P&N Bank
The advertised rates differ. The lower fixed and variable offers in May 2026 are sitting with Macquarie, Bank Australia, Bank of Queensland and several customer owned banks. The big four are competitive on cashback offers but rarely the cheapest sticker rate. The right lender for your situation is the one that:
- Approves your borrowing power for the property you want.
- Accepts the property type (some restrict high density studios or off the plan).
- Offers a sharp ongoing rate (not just a teaser fixed rate).
- Has reasonable turnaround times so your contract does not blow out.
As a Castle Hill mortgage broker we run your file against all 33 panel lenders rather than just one. The fees are paid by the lender, not by you.
Stamp duty interaction with the FHG (NSW FHBAS)
The First Home Guarantee is federal. NSW stamp duty concessions are state. They stack.
NSW First Home Buyers Assistance Scheme thresholds (2026)
| Purchase price | Stamp duty position |
|---|---|
| Up to $800,000 | Full exemption |
| $800,000 to $1,000,000 | Concessional rate (partial saving) |
| Above $1,000,000 | No concession |
So a $780,000 one bedder in Norwest pays zero stamp duty and uses the FHG to skip LMI. Total savings around $60,000.
A $1.2M Kellyville townhouse falls outside the FHBAS concession range, so stamp duty is the full $51,915. But the FHG still saves $48,000 in LMI. Net effective benefit: $48,000.
A $1.5M Castle Hill villa: full stamp duty of $67,360 and the FHG saves around $60,000 in LMI.
NSW property tax (the old First Home Buyer Choice)
The First Home Buyer Choice (annual property tax instead of stamp duty) was wound back from 1 July 2023 and is not an active option for new buyers in 2026. You pay stamp duty unless the FHBAS exempts or discounts it.
What happens at settlement and after
The day to day mechanics for an FHG settlement look identical to a standard purchase from your side. Behind the scenes the lender registers the guarantee with Housing Australia. You receive a guarantee certificate copy with your loan documents.
After settlement, three obligations sit on your shoulders:
- Owner occupation. Move in within 12 months. Most Hills District buyers move in immediately, so this is rarely an issue.
- Stay over 80% LVR rules apply until LVR drops below 80%. Once you have built equity (through repayments and capital growth) and your LVR is under 80%, the guarantee restrictions ease. You can refinance, switch products, or convert to investment without losing benefit.
- Notify the lender of changes. If you separate, move overseas long term, or stop being eligible (for example, you inherit another property), tell the lender. Most cases are handled quietly without forcing a refinance.
The First Home Super Saver Scheme (FHSS) sits well alongside the FHG. You can voluntarily contribute up to $50,000 of super contributions toward your deposit. Read more in our guide to the First Home Super Saver Scheme.
Common reasons FHG applications get rejected
The FHG itself is rarely refused if you meet the four hard rules. What gets rejected is the underlying home loan. The common reasons we see in Hills District applications are:
- Borrowing capacity falls short. Lenders assess your repayments at the floor rate plus a 3% buffer. In May 2026 that means a loan stress test rate around 9.10%. A $1.2M loan at 9.10% over 30 years requires repayment capacity of about $9,800 per month. If you and your partner combined net income is below roughly $13,500 a month, the file struggles. Solution: lower the purchase target, pay off credit card limits, or wait until a pay rise lands.
- Casual or contract income not seasoned. Lenders generally need 6 to 12 months of casual income before they count it fully. Three months of new casual work in a graduate role at Norwest will not service a $1.4M loan even if the annualised figure looks fine.
- HELP/HECS debt biting harder than expected. A $40,000 HELP debt reduces borrowing capacity by roughly $80,000 to $110,000 at a $130,000 income. Not a deal breaker but worth modelling early.
- Property type restrictions. Some lenders exclude properties under 50 sqm, high density studios, or off the plan stock with completion dates more than six months out. The FHG itself does not exclude these, but if your chosen lender does, the file falls over even with an FHG place reserved.
- Deposit not genuine savings. If 4% of your 5% deposit is a parental gift and you cannot show three months of held savings or 12 months of rental ledger, the lender will treat the gift as non genuine and decline. Solution: park the gift, build a three month savings record, or use a lender with flexible genuine savings policy.
Ready to talk to a broker?
The First Home Guarantee is the strongest entry route into the Hills District market in a decade. The new $1.5M cap puts townhouses, villas and apartments back on the table, the income cap removal opens it to dual professional couples, and the place limit removal takes the pressure out of timing.
The catch is execution. Borrowing capacity, panel lender choice, deposit structure and property type all need to line up. Get them wrong and the file falls over even with a guarantee place reserved.
We help Hills District first home buyers run the eligibility check, model the LMI savings against your specific numbers, and submit through the lender most likely to approve your file at the sharpest rate. The service is free. The lender pays our fee, not you.
Book a free 15 minute eligibility call with Sumit on 1300 11 7976 or visit our home loans page to see how we work with first home buyers across Castle Hill, Kellyville, Norwest, Baulkham Hills and Bella Vista. Or contact us directly.
Last updated: May 2026.
Quick answers
Frequently asked questions
No. From 1 October 2025 the income cap was removed entirely. The old test was $125,000 for singles and $200,000 for couples, which ruled out a lot of dual income Hills District buyers. You can now earn any amount and remain eligible, provided you meet the other rules (first home buyer status, Australian citizenship or permanent residency, owner occupation intent). The scheme is no longer means tested. Most other state and federal first home buyer benefits, including the NSW First Home Owner Grant on new builds, do still have income or property thresholds, so check each separately.
The Sydney cap is $1.5 million as of 1 October 2025, up from $900,000. The same $1.5M cap applies to Newcastle, Lake Macquarie and the Illawarra. The Hills District is part of Greater Sydney, so all suburbs including Castle Hill, Kellyville, Norwest, Bella Vista, Baulkham Hills, Cherrybrook and Rouse Hill fall under the $1.5M cap. The rest of NSW (regional areas outside those four zones) sits at $800,000. The cap is on the contract purchase price including any deposit bonus structures. Stamp duty, legal fees and lender fees are not counted toward the cap.
Yes, since the 2025 expansion. Previously both applicants had to be first home buyers. Now you can apply jointly with a partner who has owned property before, but only the first home buyer needs the scheme to remove LMI. The lender will assess both incomes for borrowing capacity, which usually helps. The property still needs to be the couple's principal residence within 12 months of settlement. If both buyers have owned property before, neither qualifies and the FHG is not available.
On a $1.2M purchase with a 5% deposit, the loan is $1,140,000 at 95% LVR. Indicative LMI for that scenario in May 2026 is around $48,000 with a standard insurer. The First Home Guarantee removes that premium completely. If you would normally capitalise LMI into the loan at 6.10% over 30 years, you also save roughly $104,000 in interest over the life of the loan. Total economic benefit on a $1.2M Kellyville or Castle Hill purchase is therefore over $150,000.
Yes. The FHG is federal (removes LMI). The NSW First Home Buyers Assistance Scheme is state (reduces or removes stamp duty). They run independently and stack. A $780,000 Norwest apartment can claim full stamp duty exemption under FHBAS and use the FHG to skip LMI. Total saving sits around $50,000 to $60,000. Between $800,000 and $1,000,000 you get a stamp duty concession but not full exemption. Above $1,000,000 there is no stamp duty concession, but the FHG still works up to the $1.5M cap.
No. Housing Australia maintains a panel of 33 participating lenders. The big four (CBA, Westpac, NAB, ANZ) are all on the panel, along with Macquarie, Bank Australia, Bank of Queensland, ING, Suncorp, Bendigo and most customer owned banks. Some smaller non bank lenders and most specialist lenders are not on the panel. If you want a particular lender for their rate or product, check the panel first. Brokers can see live availability and route your file to a lender that fits both your borrowing capacity and the panel.
Yes, with two timing caveats. Settlement on the off the plan property must occur within the policy timing rules, generally within 12 months of unconditional approval. Some lenders restrict off the plan with completion dates more than six months out, and they will not pre-approve until completion is closer. If you are buying in a Castle Hill or Norwest off the plan tower that completes in 2027, you may not be able to lock the FHG in until 2026 closer to settlement. Pricing is set at the contract date, so signing now at $1.45M means the cap is met even if market value rises.
You must live in the property as your principal place of residence while the loan sits above 80% LVR. Moving out within that window and renting the property may breach the guarantee. The lender can require you to refinance into a standard product, pay LMI retrospectively (less likely but possible), or in serious cases recover costs from the guarantee. There is a six month grace period for short term absences (overseas work, family emergencies). Once your LVR drops below 80% through repayments and growth, the rules ease and you can convert to investment.
Standard conditional pre-approval through a panel lender takes 5 to 12 business days for a clean file. FHG adds about 1 to 3 days for the place reservation. Total realistic timeline from broker meeting to FHG conditional approval is two to three weeks. Self employed applicants and couples with complex income structures can run four to six weeks. Once you have unconditional approval and a property under contract, settlement is the usual 30 to 42 days. Plan a 90 day window from "I want to buy" to keys.
The First Home Guarantee removes LMI by having the federal government guarantee 15% of your loan. You still own 100% of the property and you borrow 95%. Help to Buy is a separate scheme (currently legislated, rolling out from 2025) where the government takes an equity stake of up to 30% (40% for new builds) in exchange for putting in part of the deposit. You then own 60 to 70% of the property and the government owns the rest, with a share of any capital gain. FHG suits buyers who can service a 95% loan. Help to Buy suits buyers who cannot service a 95% loan but can afford a smaller share.
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