LMI for First Home Buyers: Schemes, Waivers & What You'll Actually Pay

If you’re buying your first home with less than a 20% deposit, Lenders Mortgage Insurance (LMI) is often the single largest upfront cost you haven’t planned for. The good news: first home buyers have more ways to avoid or reduce LMI than any other group.

Estimate your premium with the LMI Calculator, then use the schemes below to see if you qualify to skip it entirely.

Why LMI matters most to first home buyers

First home buyers typically:

• Have smaller deposits (often 5–10% of the purchase price)
• Are at the higher LVR tiers (90–95%) where LMI is most expensive
• Face property prices that grow faster than they can save

On a $700,000 property with a 10% deposit, LMI can be $14,000–$18,000. That’s money you can’t get back — it protects the lender, not you.

Scheme 1: First Home Guarantee (FHBG)

The First Home Guarantee is the single most common way first home buyers avoid LMI in Australia. The federal government guarantees up to 15% of your loan, letting you buy with just a 5% deposit without paying any LMI.

Eligibility highlights (2026, reflecting the 1 October 2025 expansion):

• Australian citizen or permanent resident, 18 or older
• No income caps — the old $125,000 single / $200,000 joint limits were abolished from 1 October 2025
• Unlimited places — the scheme is no longer capped at an annual allocation
• Owner-occupier purchase — you must move in within 6 months and live there
• Property within the price cap for its location (see below)
• Haven’t owned property in Australia in the previous 10 years

Price caps (from 1 October 2025, current for 2026):

Region	Cap
Sydney & major NSW regional centres	$1,500,000
Regional NSW (other)	$800,000
Melbourne & major Vic regional	$950,000
Regional Vic (other)	$650,000
Brisbane & major Qld regional	$1,000,000
Regional Qld (other)	$700,000
Perth	$850,000
Adelaide	$900,000
Hobart	$700,000
ACT	$1,000,000

Check Housing Australia's site for the full current cap list — caps are reviewed periodically.

Scheme 2: Regional First Home Buyer Guarantee (now merged)

The separate regional variant was folded into the First Home Guarantee from 1 October 2025. Regional buyers now apply through the standard FHBG — same 5% deposit and no LMI, with the regional price caps shown in the table above.

Scheme 3: Family Home Guarantee (single parents)

Single parents with dependent children can buy with a 2% deposit without LMI. The former $125,000 income cap was removed from 1 October 2025; the usual owner-occupier rules apply.

Scheme 4: Help to Buy (shared equity)

The federal Help to Buy scheme lets eligible first home buyers purchase with:

• As little as 2% deposit
• Government takes up to 40% equity in a new home or 30% in an existing home
• No LMI payable
• Income caps: $100,000 single, $160,000 joint (scheme launched December 2025)

You repay the government’s share when you sell — or earlier if you choose. It’s a more aggressive leverage play than FHBG, but you effectively own less of the property.

Scheme 5: State-based schemes

Most states run their own first home buyer supports alongside the federal schemes:

• Victorian Homebuyer Fund — shared equity, up to 25%
• Keystart (WA) — low-deposit loans from an approved state lender
• HomesVic, HomeStart (SA) — variants of shared equity

Many of these also remove the LMI requirement because the state share reduces your effective LVR.

If you don’t qualify: when paying LMI is still the right move

Not everyone qualifies for a scheme — even with the higher 2025 price caps, premium-suburb buyers can still exceed them, and the 6-month move-in rule rules out rentvesting strategies.

Paying LMI is often the right choice when:

• You’ve been priced out of waiting — property growth exceeds your savings rate
• You have a stable income and plan to live in the home long-term
• The premium is a small fraction of the property growth you’d otherwise miss

Example: On a $1.7 million Sydney house (above the $1.5m FHBG cap), an LMI premium of $30,000+ looks large — but if the property grows 5% ($85,000) in the time it would take you to save another 10% deposit, paying LMI is cheaper than waiting.

Use our Borrowing Power Calculator and LMI Calculator together to model both paths. And remember LMI isn't the only upfront cost — check your state's first home buyer stamp duty concession, which can be worth far more than the LMI saving.

A tactical note: use the First Home Super Saver Scheme

The FHSSS lets you use voluntary super contributions toward your deposit, saving tax. It can accelerate your deposit by 20–30% vs saving in a regular account — sometimes enough to cross the LVR threshold and reduce your LMI tier even if you don’t avoid LMI entirely.

Quick path chart

Your situation	Best path
Buying under your region’s price cap	First Home Guarantee
Single parent, one dependent	Family Home Guarantee
Very low deposit, OK with shared equity	Help to Buy
Regional buyer	Regional FHBG
Above price caps, high income	Pay LMI + use FHSSS

Key caution

Scheme rules, price caps, and place allocations change every financial year (July 1). Always verify current terms with Housing Australia, your state housing authority, or a broker before relying on these figures.

Next: How to Avoid LMI → Capitalised LMI Explained