Two federal government schemes are available to Melbourne first home buyers right now: the First Home Guarantee and Help to Buy. Both reduce the barrier to entry. Neither is automatically better. The right choice depends on your income, your deposit, how much you can borrow, and what kind of ownership structure you want.
This article explains how each scheme works mechanically, compares the eligibility rules side by side, and walks through the scenarios where one scheme clearly outperforms the other.
How the First Home Guarantee works
The First Home Guarantee (FHBG) lets eligible buyers purchase a property with a deposit of as little as 5% without paying Lenders Mortgage Insurance (LMI). The federal government guarantees up to 15% of the purchase price to the lender, bridging the gap to the standard 20% threshold that triggers LMI.
You own 100% of the property from day one. The government takes no equity stake. The guarantee is not a loan — it is a contingent liability the government holds with your lender. You never interact with it directly.
The scheme runs at 35,000 places per year nationally across its three streams:
- First Home Guarantee: 10,000 places for first home buyers purchasing any dwelling
- Regional First Home Buyer Guarantee: 10,000 places for buyers in regional locations
- Family Home Guarantee: 5,000 places for single parents purchasing with a 2% deposit
Income thresholds for the standard First Home Guarantee are $125,000 for single applicants and $200,000 for joint applicants. These are based on taxable income in the prior financial year.
The price cap for Melbourne (metropolitan Victoria) is $800,000. This is the ceiling on the purchase price — not the loan amount.
How Help to Buy works
Help to Buy is a shared equity scheme. Instead of guaranteeing part of your loan, the government co-purchases the property with you:
- 30% equity stake for established dwellings
- 40% equity stake for newly constructed homes
You contribute a minimum 2% deposit from genuine savings or a First Home Super Saver Scheme withdrawal. You borrow the remainder. Because the government is funding 30–40% of the purchase, your required loan is substantially smaller.
There is no rent on the government's share. There is no repayment schedule. The government recovers its equity stake when you sell, or earlier if you choose to voluntarily buy back increments of at least 5%.
Income thresholds are tighter: $90,000 for single applicants and $120,000 for joint applicants. The Melbourne price cap is $950,000 — $150,000 higher than the First Home Guarantee ceiling.
Eligibility compared side by side
| | First Home Guarantee | Help to Buy | |---|---|---| | Deposit required | 5% minimum | 2% minimum | | Ownership structure | 100% from day one | Shared equity (you own 70–100%) | | Single income limit | $125,000 | $90,000 | | Joint income limit | $200,000 | $120,000 | | Melbourne price cap | $800,000 | $950,000 | | Annual places (national) | 35,000 | 10,000 | | LMI waived | Yes | Not applicable | | Government equity stake | None | 30% (existing) / 40% (new) |
The most important distinction in this table: the FHBG allows significantly higher income — $200,000 combined — while Help to Buy cuts off at $120,000. Most dual-income professional couples in Melbourne will exceed the Help to Buy threshold. For that cohort, the FHBG is the only government scheme available.
When the First Home Guarantee is the better choice
You earn above $120,000 combined. If your household income is between $120,001 and $200,000, you are ineligible for Help to Buy. The First Home Guarantee is your only federal scheme option.
You want clean ownership. The shared equity structure of Help to Buy means the government has an interest in your property. That affects how you can renovate, refinance, and eventually sell. If you want no strings attached, the FHBG delivers full ownership from settlement.
You are buying under $800,000. If your target property is under the FHBG price cap, you may not need the higher ceiling that Help to Buy provides. Avoiding LMI on a $700,000 purchase saves approximately $14,000–$18,000 — a meaningful saving without ceding any equity.
You have a 5% deposit saved. The FHBG requires 5% genuine savings. If you already have that, and your income qualifies, the FHBG gives you full ownership at no ongoing cost.
When Help to Buy is the better choice
Your income is under $90,000 single or $120,000 joint. Help to Buy was designed for lower-to-middle income buyers who struggle with serviceability, not just deposit size. If your borrowing capacity is the constraint — not just the deposit — reducing your required loan by 30–40% is a more structural fix than avoiding LMI.
You can only save 2%. For buyers who cannot accumulate 5% genuinely saved, Help to Buy's 2% threshold is the meaningful difference between buying and not buying. This is particularly relevant for renters in expensive parts of Melbourne where saving faster than prices rise is difficult.
You are targeting the $800,001–$950,000 range. Properties in this band are ineligible for the First Home Guarantee entirely. If your suburb search lands here — parts of the south-eastern corridor, the outer east, or middle-ring suburbs with good school catchments — Help to Buy is the only federal scheme that applies.
Serviceability is your binding constraint. Buyers who earn below the income thresholds and qualify for Help to Buy will find that their borrowing capacity improves significantly when the required loan is 30% smaller. On a $900,000 established property, the government's 30% stake means your loan is $630,000 (before deposit) rather than $855,000. The monthly repayment difference at current rates is substantial — it can be the difference between qualifying for a loan or not.
Can you use both schemes together?
No. The First Home Guarantee and Help to Buy are mutually exclusive. You apply for one or the other through Housing Australia.
You can, however, combine either scheme with:
- Stamp duty concessions (Victorian state government — separate from federal schemes)
- First Home Super Saver Scheme withdrawals toward your deposit
- First Home Owner Grant for newly built properties valued under $750,000
State and federal supports stack independently. The federal scheme choice (FHBG or Help to Buy) does not affect your eligibility for Victorian stamp duty concessions.
The practical decision for most Melbourne buyers
For dual-income couples earning $120,000–$200,000 combined — the largest segment of Melbourne first home buyers — the First Home Guarantee is the only federal option. The focus becomes maximising that scheme: finding the best suburb within the $800,000 cap, choosing the right lender, and using stamp duty concessions to reduce total upfront cost.
For single buyers or lower-income couples under the Help to Buy thresholds, the decision is more nuanced. Help to Buy's serviceability advantage is real — but so is the long-term implication of government equity participation. Buyers who anticipate strong capital growth in their chosen suburb will progressively benefit less from the scheme as the value of the government's stake grows alongside the property.
The right answer depends on your specific numbers: income, savings rate, borrowing capacity, and target suburb. A scheme comparison is a starting point, not a final answer.
BurbSense earns nothing from your purchase — we charge subscribers only. Scheme details are correct as at June 2026 — income thresholds, price caps, and place allocations are subject to change. Always verify current eligibility with Housing Australia before applying.
Contains public sector data from the State of Victoria, licensed under CC BY 4.0.