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: Australian Government 5% Deposit Scheme

The Australian Government 5% Deposit Scheme (called the Home Guarantee Scheme, including the First Home Guarantee, until 1 October 2025) is the most common way first home buyers avoid LMI in Australia. The Government guarantees part of your loan with a Participating Lender, so you can buy with a 5% deposit without paying LMI.

Eligibility highlights (as published on firsthomebuyers.gov.au, checked 1 October 2026):

• Australian citizen or permanent resident
• No income caps — the old $125,000 single / $200,000 joint limits were removed from 1 October 2025
• Unlimited places — no annual allocation or waitlist
• A home you will live in (owner-occupier)
• Property at or below the price cap for its location (see below)
• A first home buyer, or haven’t owned a home or land in Australia in the last 10 years
• Apply through a Participating Lender — you can’t apply to the Government directly

Property price caps (official table, checked 1 October 2026):

State / territory	Capital city and regional centres*	Other areas
NSW	$1,500,000	$800,000
VIC	$950,000	$650,000
QLD	$1,000,000	$700,000
WA	$850,000	$600,000
SA	$900,000	$500,000
TAS	$700,000	$550,000
ACT	$1,000,000 (all areas)	—
NT	$750,000 (capital city)	$600,000

*Regional centres include, for example, Newcastle and Lake Macquarie, Illawarra and the Central Coast in NSW, Geelong in Victoria, and the Gold and Sunshine Coasts in Queensland. Both the purchase price and the lender's valuation must be at or below the cap. Check the exact cap for a postcode with the official price cap tool.

Scheme 2: Regional buyers

The separate Regional First Home Buyer Guarantee closed to new applicants from 1 October 2025. Regional buyers now use the 5% Deposit Scheme as a first home buyer or as a single parent or legal guardian — with the “other areas” price caps in the table above.

Scheme 3: Single parents and legal guardians (2% deposit)

The former Family Home Guarantee is now part of the 5% Deposit Scheme. Single parents or legal guardians of at least one dependent child can buy with a 2% deposit without LMI, and don’t have to be first home buyers — but can’t own another home or property interest once the new home settles. Applications are individual only (no joint applications), and there is no income cap.

Scheme 4: Help to Buy (shared equity)

The federal Help to Buy shared equity scheme lets eligible buyers who don’t own any property (in Australia or overseas) purchase with:

• A minimum 2% deposit
• A Government contribution of up to 40% of the price of a new home, or up to 30% of an existing home
• No LMI payable
• Taxable income at or below $103,000 (single) or $165,000 (single parent or joint) for applications in 2026–27
• 10,000 places each year; all applicants must be Australian citizens

You share the home’s value with the Government and can buy back its share over time. Help to Buy can’t be combined with state or territory shared equity schemes, loans or guarantees, but stamp duty concessions and grants still apply. Source: Help to Buy and 2026–27 thresholds.

Scheme 5: State-based schemes

Some states and territories run their own low-deposit lending or shared equity programs — for example, Keystart in WA and HomeStart Finance in SA. Eligibility, caps and LMI treatment differ by program and change often, so check your state housing authority’s current rules. Remember that a state shared equity scheme can’t be combined with Help to Buy.

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

Not everyone qualifies for a scheme — even with the higher price caps from October 2025, buyers in premium suburbs can still exceed them, and the owner-occupier requirement rules out rentvesting.

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 price 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	5% Deposit Scheme
Single parent or legal guardian	5% Deposit Scheme (2% deposit)
Very low deposit, OK with shared equity	Help to Buy
Regional buyer	5% Deposit Scheme (“other areas” caps)
Above price caps, high income	Pay LMI + use FHSSS

Key caution

Scheme rules, price caps and income thresholds change — Help to Buy thresholds are indexed every 1 July. Always check current terms on firsthomebuyers.gov.au, with a Participating Lender or your state housing authority before relying on these figures.

Next: How to Avoid LMI → Capitalised LMI Explained