First Home Guarantee in Sydney: Your 5% Deposit Path From October 2025

Sydney’s property market has always been a test of patience and savings discipline. For first home buyers, the gap between what houses cost and how fast deposits grow has often felt insurmountable. From 1 October 2025, the First Home Guarantee Scheme transforms that equation. With a new $1.5 million cap, no income limits, and unlimited places, Sydney buyers enter a new era of affordability.

This isn’t just another government tweak. It’s the first time Sydney first-home buyers can combine small deposits with serious price caps in a city where property values routinely outpace wages. In this guide, Unconditional Finance will walk through what the changes mean in practice, the opportunities they unlock, the risks to watch, and how to strategically approach the market.

Sydney Buyers Enter a New Era of Affordability

For years, Sydney has led the nation in property prices, leaving first-home buyers to chase deposits that rise slower than house values. A 20% deposit on a median-priced Sydney house often meant saving $250,000 or more before even getting a loan. By the time buyers reached the target, prices had often moved further out of reach.

The new $1.5 million property cap resets the game. Instead of being locked into fringe suburbs or small apartments, Sydney buyers can now look at a broader slice of the market with just a 5% deposit. That means:

• On a $1.2m home, the required deposit drops to $60,000, compared with $240,000 under the old 20% benchmark.
• Buyers save tens of thousands by avoiding Lenders Mortgage Insurance (LMI), which in Sydney can add up to $50,000–$80,000 on a high-value loan.
• The change makes it possible to buy sooner, instead of waiting years while prices climb.
  

So why does this matter right now? Because Sydney’s market often moves quickly in spring. With the scheme expansion landing on 1 October 2025, buyers are stepping into the busiest sales season of the year with more options and fewer upfront barriers.

Why the $1.5m Cap Is a Game Changer

Sydney’s previous $900,000 cap under the scheme excluded large parts of the city. For many, it meant choosing between moving far west, settling for small apartments, or staying out of the market entirely.

The jump to $1.5 million recognises Sydney’s reality: even modest freestanding homes or townhouses often sit well above $1m.

What does this mean in real terms?

1. Access to more desirable suburbs: Inner West, Ryde, Chatswood, and parts of the North Shore now fall inside the limit.
2. Bigger property types: Buyers aren’t restricted to one-bedroom units. Townhouses, duplexes, and family homes open up.
3. Lifestyle balance: Commuting from distant suburbs may no longer be the only option. Buyers can choose locations closer to work, family, or established communities.
4. Competition with investors: Many Sydney homes in the $1m–$1.5m range are also investor favourites. First home buyers now enter that same pool with a government-backed edge.
5. Reduced compromise: Instead of buying “just to get in”, buyers can choose homes with longer-term appeal, lowering the need to upgrade quickly.
   

This higher ceiling doesn’t erase Sydney’s affordability challenges, but it changes the scope of what’s possible when you’re starting out.

How the First Home Guarantee Works in Sydney

Before diving into suburb lists and strategies, it’s worth revisiting the mechanics of the First Home Guarantee. The scheme is simple on paper, but has unique implications in Sydney’s price band.

What the 5% deposit actually means for metro buyers

Saving 20% has always been the traditional benchmark. But for a $1.5m property, that’s $300,000 upfront, not including stamp duty and other costs. With the scheme, buyers only need $75,000.

That saving isn’t just about getting in sooner. It also:

• Reduces the risk of being priced out as the market moves.
• Allows savings to stretch further to cover stamp duty, legal fees, or moving costs.
• Gives flexibility to keep more funds aside for emergencies rather than locking everything into the deposit.
  

Why avoiding LMI is worth more in Sydney’s price range

In Sydney, LMI costs escalate sharply because premiums are tied to loan size. For loans above $1m, LMI can exceed $70,000. Avoiding this cost means more equity from day one and less debt overall.

In practice, not paying LMI can be the difference between taking on a comfortable repayment and being stretched to the limit.

Unlimited places explained in the Sydney context

In past years, buyers rushed to secure limited scheme places, often missing out if they weren’t first in line. From October 2025, the restriction will disappear. That means:

• Every eligible Sydney buyer with a 5% deposit can apply.
• No need to wait until the next financial year or compete for allocation.
• Greater confidence when making offers or bidding at auction.
  

For Sydney, where timing is everything, this flexibility is a major advantage.

1 October: Key Changes for NSW Buyers

The October reforms go beyond just raising price caps. For Sydney and broader NSW, several structural changes reshape who qualifies and what can be bought.

Scrapping of income caps

Previously, single applicants earning over $125,000 and couples earning over $200,000 were excluded. From October, income limits vanish. For Sydney, where many professionals earn above those thresholds but still struggle with deposits, this is a breakthrough.

Expansion of eligible properties

Until now, only around 31% of Sydney’s property market sat under the scheme’s cap. With the $1.5m ceiling, that rises to 67%. More than two-thirds of Sydney properties are suddenly in play.

Regional NSW benefits

It’s not just Sydney. Newcastle, Wollongong, and the Central Coast also benefit from raised limits. For buyers open to regional moves, these areas now fall more squarely into reach, often with larger homes for less money.

These reforms make the scheme not just bigger but more inclusive, particularly in a state where affordability has been the tightest.

What $1m vs $1.5m Gets You in Sydney

Numbers on a page are one thing, but what do they translate to in actual property choices?

Suburbs within the $1m cap

At the old $900k–$1m level, buyers were typically looking at outer-ring suburbs such as Parramatta, Blacktown, and Penrith. Options included:

• Older freestanding homes needing renovation.
• Two-bedroom apartments in mid-density areas.
• Townhouses on the city’s edges.
  

Suburbs opening under the $1.5m cap

With the new ceiling, buyers can now consider suburbs like the Inner West, Ryde, Chatswood, and even entry-level properties in the North Shore. Choices include:

• Townhouses with family-friendly layouts.
• Renovated semis closer to transport hubs.
• Larger apartments in desirable school catchments.
  

How townhouse and unit options shift

Townhouses in Sydney often sit in the $1.2m–$1.4m bracket, previously off-limits. For buyers who prefer space without the maintenance of a freestanding home, this is a significant gain. 

Similarly, larger two- or three-bedroom apartments in prime areas are now feasible. This shift matters because it allows buyers to purchase “livable long-term” homes rather than stop-gap properties.

Auctions and Competition in a Hot Market

Sydney’s market is auction-heavy, and auctions move fast. The scheme’s benefits are powerful, but they don’t eliminate the unique risks of buying under the hammer.

Why is auction bidding riskier under a short approval timeline

When you buy at auction, contracts are unconditional. Without pre-approval, you risk committing without financial certainty. In Sydney’s price range, that can mean hundreds of thousands at stake.

Pre-approval strategies to avoid disappointment

Buyers should aim for:

1. Formal pre-approval from a lender already participating in the scheme.
2. Updated documentation is essential, as lenders often require payslips, bank statements, and ID within 30 days.
3. Multiple lender comparisons matter because policies vary on scheme loans, and timelines can differ.
   

Mortgage broker tactics for fast lender turnaround

As a mortgage broker in Sydney, we work directly with lenders to flag time-sensitive applications. Strategies include:

• Knowing which banks prioritise scheme applications.
• Preparing documents upfront to cut delays.
• Advising on auction conditions that minimise risk, such as extended settlements when possible.
  

These steps matter because auctions reward speed and certainty. Preparation makes the difference in both.

Risks Sydney Buyers Should Factor In

While the scheme opens doors, it’s not without trade-offs. Every buyer should weigh the risks alongside the benefits.

1. Stretching income: Just because you can borrow up to $1.5m doesn’t mean you should. Repayments on a $1.4m loan can be around $7,000–$8,000 per month, depending on loan type and current interest rates.
2. Dual-income pressure: Many buyers in this price band are couples combining incomes. Competing against dual salaries can push bidding higher.
3. Rate rises: Even small interest rate increases can add hundreds per month in repayments. Stress-testing your budget is essential.
4. Lifestyle costs: Higher loans leave less room for travel, childcare, or lifestyle expenses.
5. Resale timing: Buying at the upper cap may reduce flexibility if the market dips or your circumstances change.
   

Factoring these risks into your plan keeps the focus not just on getting in, but on staying comfortable once you do.

Step-By-Step Sydney Buyer Roadmap

So how do you actually move from interest to ownership? Here’s a clear roadmap tailored for Sydney’s fast-paced market.

Key documents to prepare upfront

• Payslips and proof of income.
• Tax returns (especially if self-employed).
• Bank statements showing deposited funds.
• Identification documents (passport, driver’s licence).
• Evidence of savings or gifted deposits.
  

Pre-approval and auction bidding strategies

• Secure pre-approval with at least two lenders.
• Confirm participation in the First Home Guarantee.
• Clarify conditions (validity period, maximum loan size).
• Discuss auction bidding limits with your broker.
  

What to do once you find the right property

• Move quickly to lock in finance.
• Arrange for legal review of contracts before signing.
• Prepare for settlement, often within 42 days in NSW.
• Line up building and pest inspections where relevant.
  

This structure ensures you’re not just eligible for the scheme but positioned to act decisively in Sydney’s high-pressure environment.

How Unconditional Finance Helps Sydney Buyers Navigate the Guarantee

The scheme rules are national, but Sydney adds unique layers of complexity: high property prices, auction-driven timelines, and varied lender policies.

As a Sydney mortgage broker, our role is to:

• Match buyers with Sydney lenders who are most flexible on scheme loans.
• Structure applications to reflect metro incomes, overtime, and variable bonuses.
• Guide buyers through tight settlement deadlines common in Sydney.
• Stress-test scenarios so repayments remain comfortable even if rates shift.
  

Our experience means you’re not walking blind into Sydney’s market. You’re making decisions with clarity.

Turning Sydney Dreams Into Reality

The First Home Guarantee Scheme changes on 1 October 2025 mark a major turning point for Sydney first home buyers. With higher property caps, no income limits, and unlimited places, you can enter the market sooner and with more choice.

These reforms align perfectly with Sydney’s spring selling season, when listings surge and opportunities expand. The challenge is matching that opportunity with preparation: getting your documents ready, securing pre-approval, and setting a clear budget.

Buying in Sydney has never been easy, but it no longer needs to feel impossible. With the right planning and expert guidance, you can turn a 5% deposit into a first home in suburbs that were once out of reach.

Ready to explore how the new scheme could work for you? Speak with us at Unconditional Finance today for tailored Sydney-first advice.

Frequently Asked Questions (FAQs)

Can I combine the First Home Guarantee with NSW stamp duty concessions? Are off-the-plan apartments eligible under the First Home Guarantee? Can I use a family gift or guarantor with a 5% deposit under the scheme? How do construction loans or house-and-land packages work with the scheme in NSW? What happens if the bank valuation comes in low in Sydney?