A New Dawn for First Home Buyers: 5 % Deposit, No LMI
Great news for first home buyers with the announcement of Australia’s new First Home Guarantee scheme, a breakthrough opportunity for first home buyers.
Starting 1 October 2025, first home buyers in Tasmania can enter the market with just a 5 % deposit and no lenders mortgage insurance (LMI), thanks to a government-backed guarantee covering the rest of the usual 20 % threshold.
What's Changing and How does it work?
Expanded accessibility: From 1 October 2025, there will be no limits on participant numbers (i.e. unlimited places) and no income caps—making it open to all eligible Tasmanian first home buyers
Higher property price caps:
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In Hobart: the cap increases from $600,000 to $700,000.
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In regional parts of Tasmania: the limit rises from $450,000 to $550,000
- Deposit requirement: Just 5 % of the property value from the buyer.
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Government guarantee: Covers up to 15 %, eliminating the need for LMI and boosting affordability
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Eligibility: Must be a Tasmanian first home buyer (or not owned in past 10 years), must be owner-occupier, and an Australian citizen or permanent resident
Real Tasmanian Example: How Much Could You Save?
Example: Hobart Home Purchased – $700,000 property
- 5 % Deposit: $35,000
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LMI Avoided: Potentially $25,000–$30,000+, depending on lender
Additional Tasmanian Support: Building with Extra Savings
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$30,000 First Home Owner Grant (FHOG): Available for eligible Tasmanians building their first home
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MyHome Shared Equity Program: Deposit caps increased to $800,000 for new builds; FHOG can be used as part of deposit—potentially lowering it to just 2 %, with mortgage payments comparable to rent
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Stamp Duty Relief: Tasmanian first-home buyers may also benefit from exemptions and transfer duty concessions
Risks & Considerations for Tasmanian Buyers
Even with these incentives, there are still factors to weigh:
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Potential price inflation: Increased demand may push up local house prices, potentially offsetting savings from no LMI
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Higher loan-to-value ratio: A 95 % mortgage can mean higher interest costs, fewer lender options, and increased vulnerability if rates rise
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Supply constraints: Unless matched by more housing supply, greater buyer demand could worsen affordability in the long run
Tasmanian First-Time Buyer Tips
| Tip | Explanation |
|---|---|
| Calculate your budget carefully | Include extras—stamp duty, legal fees, moving costs—even with grants and LMI savings. |
| Stack incentives smartly | If planning a new build, layering FHOG, MyHome, and the FHBG can amplify your buying power. |
| Speak with local experts | Tasmanian brokers or lenders familiar with state-specific grants and regional caps can streamline the process. |
| Aim for pre-approval | Helps you act quickly—essential amid increased demand from the scheme rollout. |
| Monitor market activity | Even modest price growth might affect which suburbs remain within your cap. |
| Think long-term | Plan for future costs—interest rates, maintenance, insurance—to ensure sustainability. |
In Summary: A Tasmanian Homeownership Jump-Start
For first home buyers in Tasmania, the policy evolution is significant:
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Start your journey with just a 5 % deposit—no LMI needed.
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Potential to build with just 2 % deposit when combining state grants and equity schemes.
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The combination of federal and state support makes 2025 one of the most promising years in recent memory for Tasmanian first home buyers.
Want help finding your first home? Reach out to our team today we would love to help.