Everything First Home Buyers Need to Know in 2026

First home buyers in Australia can now access a 5% deposit without paying lenders mortgage insurance through the Australian Government 5% Deposit Scheme, which operates without income caps or annual place limits.

This article walks through deposit structures, federal and state concessions, and the loan application process from the perspective of a data analyst preparing to purchase. The goal is to help you decide which combination of schemes applies to your situation, how to structure your deposit, and what to expect when you apply.

How the Australian Government 5% Deposit Scheme Works

The scheme lets eligible first home buyers purchase with a 5% deposit. Housing Australia guarantees the difference between your deposit and 20% of the property value. You avoid LMI, which can otherwise add thousands to your upfront costs or loan balance. Applications go through a participating lender, not directly to Housing Australia. The scheme has no income cap and no annual place limit, so availability depends on lender participation rather than a quota system.

Property price caps vary by state and region. In New South Wales, the cap is $1,500,000 for Sydney and regional centres, and $800,000 for other areas. In Victoria, it is $950,000 for Melbourne and regional centres, and $650,000 elsewhere. Queensland applies a $1,000,000 cap in Brisbane and regional centres, and $700,000 in other areas. Western Australia uses $850,000 for Perth and applicable metropolitan postcodes, and $600,000 for the rest of the state. Both the purchase price and the lender's valuation must sit at or below the relevant cap.

You can combine this scheme with most state and territory stamp duty concessions and grants. You cannot combine it with Help to Buy. Loan features such as offset accounts, redraw facilities, and split rate structures depend on the participating lender you choose. Confirm these options before lodging your application.

State-Specific Duty Concessions and Grants You Can Stack

Each state and territory offers its own combination of stamp duty relief and cash grants. These operate independently of the federal 5% deposit scheme and can be used alongside it in most cases.

In New South Wales, first home buyers receive full transfer duty exemption on properties valued up to $800,000, with a sliding concession up to $1,000,000. The first home owner grant of $10,000 applies only to new builds or substantially renovated homes valued under $600,000, or land and build contracts under $750,000. You must move into the property within 12 months of settlement and live there for at least 12 continuous months.

Victoria provides full duty exemption on properties up to $600,000, and a concession on properties between $600,001 and $750,000. The $10,000 first home owner grant applies to new homes valued up to $750,000. Both new and established homes qualify for the duty concession, but only new homes qualify for the grant. You must occupy the property as your principal place of residence within 12 months and remain there for at least 12 months.

Queensland offers a $15,000 first home owner grant for new homes valued under $750,000, down from $30,000 for contracts signed before 1 July 2026. Duty concessions differ between new and established homes. For established homes, duty is reduced by up to $17,350 for properties valued under $710,000, phasing out to nil at $800,000. For new homes and vacant land, full duty concessions apply with no price cap from 1 May 2025. At least one applicant must be an Australian citizen, permanent resident, or specified foreign retiree for contracts from 1 August 2026.

South Australia removed its property value cap for stamp duty relief and the first home owner grant from 6 June 2024. The $15,000 grant and stamp duty relief apply only to new homes and vacant land. Established homes do not qualify. You must live in the property as your principal place of residence for at least six continuous months, starting within 12 months of settlement.

Western Australia introduced a statewide threshold from 7 May 2026, removing the prior distinction between Perth, Peel, and regional areas. No duty applies on homes valued up to $600,000. A concessional rate applies on homes between $600,001 and $800,000. For vacant land, no duty applies up to $450,000, with a concession between $450,001 and $550,000. The first home owner grant is $10,000 for new homes valued up to $800,000 south of the 26th parallel, and $1,000,000 north of it. The grant does not apply to established homes. The link between the grant value cap and duty concession eligibility has been removed, so you can access the duty concession even if the property exceeds the grant cap.

The Australian Capital Territory removed both the property value limit and the income threshold for the Home Buyer Concession from 1 July 2026. All first home buyers are now fully exempt from conveyance duty regardless of property value or household income. You must own and occupy the property as your principal place of residence for at least one year, starting within 12 months of settlement.

The Northern Territory offers a $50,000 HomeGrown Territory Grant for new homes with no price cap, available for contracts signed between 1 October 2024 and 30 September 2027. The Territory Home Owner Discount provides up to $18,601 in transfer duty relief for buyers who have not owned a home in the Northern Territory for at least 24 months. The HomeBuild Access program allows deposits as low as 2.5% for new builds, with the government contributing up to 17.5% of the purchase price.

Tasmania increased its first home owner grant to $20,000 for new homes from 1 July 2026, subject to assent. The full duty exemption for established homes that applied until 30 June 2026 has ended, and no equivalent exemption for established homes is currently in place.

Deposit Structures That Lenders Accept

Lenders assess your deposit based on two categories: genuine savings and non-genuine savings. Genuine savings includes funds held in your own name for at least three months, such as salary deposits into a savings account, term deposits, or shares. Non-genuine savings includes gifted funds from immediate family, proceeds from the sale of assets like a car, or the First Home Super Saver Scheme.

Most lenders require at least 5% genuine savings when you are borrowing more than 90% of the property value. If you are using a 5% deposit under the federal scheme, that 5% generally needs to come from genuine savings. Gifted deposits can sometimes be used to top up your total deposit or cover costs, but they do not usually count toward the genuine savings requirement on their own. Some lenders allow a mix, particularly if you are using equity or other verifiable funds. Each lender interprets these rules differently, so confirm the acceptable sources before you lodge.

Consider a data analyst who has accumulated $50,000 in savings over two years from salary and annual bonuses. That amount qualifies as genuine savings. If the purchase requires $60,000 upfront, including settlement costs, a $10,000 gift from a parent can cover the shortfall. The lender assesses the $50,000 as genuine savings, meets its threshold, and accepts the gift as additional funds. The application proceeds without issue.

The First Home Super Saver Scheme lets you make voluntary contributions into superannuation and release up to $50,000 toward your deposit. You need a determination from the ATO before signing a contract. Released amounts count as savings but may not be classified as genuine savings by all lenders, depending on how long the funds have been accessible in your bank account. If you plan to use this scheme, factor in the timing of the release and confirm with your lender whether the funds meet their genuine savings criteria.

Fixed Rate, Variable Rate, and Offset Account Trade-Offs

First home buyers often face a choice between fixed rate certainty and variable rate flexibility. Fixed rates lock in your repayments for a set term, typically one to five years. Variable rates fluctuate with market movements and typically offer features like offset accounts and unlimited additional repayments.

An offset account is a transaction account linked to your home loan. The balance in the offset reduces the interest charged on your loan without affecting your access to the funds. If you have a $500,000 loan and $30,000 in your offset, you only pay interest on $470,000. This structure suits buyers who expect irregular income, such as bonuses or share vesting, and want the flexibility to park those funds without committing them to the loan permanently.

Fixed rates do not typically come with full offset functionality. Some lenders offer a partial offset or redraw facility on fixed loans, but the features are more limited than on a variable loan. Redraw lets you access additional repayments you have made, but some lenders cap the number of withdrawals or charge fees. If you value certainty over flexibility, a fixed rate may suit your situation. If you expect lump sum income and want to reduce interest without losing access to those funds, a variable loan with an offset is usually the more practical structure.

Split loans let you fix part of your borrowing and keep the rest variable. You might fix 50% of your loan to lock in a portion of your repayments, and keep the other 50% variable with an offset attached. This approach balances certainty and flexibility, but it also means you are managing two loan accounts with separate terms, fees, and features. Whether this adds value depends on your income pattern and how much you prioritise access to funds versus stable repayments. For more detail on how lenders assess complex income, refer to our guide on understanding your income.

What Pre-Approval Confirms and What It Does Not

Pre-approval gives you a conditional commitment from a lender before you make an offer. The lender assesses your income, expenses, credit history, and deposit, then issues a letter stating the amount you can borrow. This letter is valid for a set period, typically three to six months, and is subject to conditions such as a satisfactory property valuation, no material change in your financial circumstances, and final credit assessment.

Pre-approval does not lock in an interest rate. Rates can change between pre-approval and settlement. It also does not confirm that a specific property will be accepted as security. The lender will order a valuation once you have a signed contract, and if the valuation comes in below the purchase price, you may need to increase your deposit or renegotiate the price.

Consider a buyer who receives pre-approval for $600,000 based on a $30,000 deposit under the 5% scheme. The buyer makes an offer on a property listed at $600,000 in a regional Victorian town. The contract is signed, and the lender orders a valuation. The valuation returns at $580,000. The lender will only lend 95% of the valuation, which is $551,000. The buyer now needs to find an additional $49,000 in cash or renegotiate the purchase price. Pre-approval confirmed borrowing capacity, but it did not protect against a low valuation.

Use pre-approval as a planning tool, not a certainty. It helps you understand your borrowing limit and demonstrates to vendors that you have finance capacity. It does not replace a full credit assessment or guarantee that a lender will accept a particular property. For more information on structuring your application and timing, see our page on getting loan pre-approval.

How Lenders Assess Your Application

Lenders assess four main areas when you apply: income, expenses, credit history, and the property. Each lender applies its own serviceability buffer and assessment rate, which means borrowing capacity varies between institutions even when your income and expenses stay the same.

Income assessment depends on your employment type. Lenders typically require two recent payslips and a letter of employment for permanent employees. If you are on probation, some lenders will still proceed, while others wait until probation ends. Contract workers and those on fixed-term agreements face stricter documentation requirements, including a copy of the contract and evidence of work history in the same field. If you receive bonuses, commissions, or equity-based income such as restricted stock units, lenders may average those amounts over one or two years and apply a discount. For a detailed breakdown of how lenders treat different income types, see our article on home loans for data analysts.

Expenses are assessed using either your declared living expenses or a household expenditure measure, whichever is higher. The household expenditure measure is a benchmark figure that varies by household size and income. Lenders also add your existing debt commitments, including credit card limits, personal loans, and any other mortgages. Even if you pay your credit card in full each month, lenders assess the limit as if you are carrying that debt. Closing unused accounts or reducing limits before you apply can improve your borrowing capacity.

Credit history is checked through a credit report. Lenders look at your repayment history, any defaults or judgments, and the number of recent credit enquiries. Multiple applications for credit in a short period can reduce your score. Late payments on phone bills, utility accounts, or buy-now-pay-later services appear on your report and can affect your application. Obtain a copy of your credit report before applying and resolve any errors or outstanding issues.

The property must meet the lender's security criteria. Lenders have internal lists of property types they will not accept or will lend against only at a lower loan-to-value ratio. These include serviced apartments, properties with certain lease structures, and homes in specific regional or remote areas. If you are buying under the 5% deposit scheme, the lender must also confirm that the property falls within the applicable price cap for your location. Both the purchase price and the lender's valuation must meet this threshold.

Combining Low Deposit Options with Duty Savings

The combination of a 5% deposit and state stamp duty concessions reduces the cash required upfront, but it does not eliminate all costs. You still need to cover settlement costs, including conveyancing fees, building and pest inspections, and any lender application fees. Budget between $5,000 and $10,000 for these costs, depending on the property location and the complexity of the transaction.

If you are buying in the Australian Capital Territory, the removal of the income threshold and property value cap from 1 July 2026 means all first home buyers pay no conveyance duty regardless of the property price. If you are buying in Western Australia, the removal of the geographic distinction and the increase in the duty-free threshold to $600,000 applies statewide. If you are buying in South Australia, the removal of the property value cap means you can access stamp duty relief and the first home owner grant on new homes regardless of price. These changes have expanded access to concessions, but they have not removed the need for cash at settlement.

For buyers using the 5% deposit scheme in New South Wales or Victoria, the combination of no LMI and full or partial duty exemption can reduce upfront costs by tens of thousands of dollars compared to a conventional loan. The trade-off is that you are borrowing 95% of the property value, which means higher repayments and less equity buffer if property values fall. If you lose your job or experience a reduction in income, refinancing or selling may be more difficult. Consider whether the lower upfront cost is worth the higher ongoing commitment.

Some buyers choose to delay their purchase and save a larger deposit to reduce their loan balance and improve their serviceability. Others prioritise entering the market sooner to benefit from any future capital growth and to stop paying rent. There is no single correct approach. The decision depends on your job security, income growth expectations, and your tolerance for debt. For more on low deposit structures, see our page on low deposit loans for tech industry workers.

When to Apply and What Documentation You Need

Apply for pre-approval once you have saved your deposit and confirmed which schemes apply to your situation. Do not wait until you find a property. Pre-approval takes between a few days and two weeks, depending on the lender and the complexity of your application. If you apply after signing a contract, you risk missing your finance clause deadline and forfeiting your deposit.

Documentation includes proof of identity (driver's licence and passport or birth certificate), proof of income (payslips, tax returns, and a letter of employment), proof of savings (bank statements covering at least three months), and details of your liabilities (statements for credit cards, loans, and any other debts). If you are using gifted funds, you need a signed gift letter from the donor confirming the funds are a gift, not a loan. If you are using the First Home Super Saver Scheme, you need a determination from the ATO confirming the amount you can release.

Lenders assess your application based on the documents you provide. Incomplete or inconsistent information delays the process. If your income has changed recently, or if you have switched jobs, provide a clear explanation and supporting documents. If you have gaps in your savings history, be prepared to explain where the funds came from. Lenders are required to verify the source of your deposit, and unexplained deposits can trigger additional questions or decline your application. For more on how job changes affect your application, see our article on job switching.

Once you have pre-approval, you can make offers with confidence. When you sign a contract, notify your broker or lender immediately and provide a copy of the contract and the vendor's statement. The lender will order a valuation and complete the final credit assessment. If the valuation is satisfactory and your circumstances have not changed, the lender issues formal approval and prepares settlement documents. Settlement typically occurs four to six weeks after the contract is signed, though this varies by state and contract terms.

Tech Home Loans works with data analysts and other tech professionals to structure applications that reflect the way your income is earned and paid. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions