Struggling to save for a house deposit in today's competitive market? You're not alone.
With Australian property prices continuing to climb, the dream of homeownership feels increasingly out of reach for many first-time buyers. But there's good news: the Australian Government 5% Deposit Scheme (formerly the First Home Guarantee) helps eligible Australians buy their first home with a deposit as low as 5%.
As mortgage brokers working with first home buyers every day, we're seeing firsthand how this government initiative is making a real difference. Let's break down how the scheme works, who's eligible, and what changed on 1 October 2025.
What is the 5% Deposit Scheme?
The Australian Government 5% Deposit Scheme (formerly the First Home Guarantee) is an Australian Government initiative, administered by Housing Australia, designed to help eligible first home buyers purchase a property sooner. It was renamed on 1 October 2025. You may also see it called the Home Guarantee Scheme or, originally, the First Home Loan Deposit Scheme.
The key benefit: instead of saving the traditional 20% deposit, you can purchase with as little as 5% down without paying Lenders Mortgage Insurance (LMI).
How? The government guarantees up to 15% of the property's value to your lender. This means you can avoid LMI costs (which can add thousands to your loan) while still accessing competitive mortgage rates.
How much could you save on LMI?
LMI costs vary based on your loan amount, deposit size and lender. On a 5% deposit it can add thousands of dollars to your costs. Under the scheme, no LMI is payable. We can show you what LMI would cost on your own numbers so you can compare.
Current eligibility criteria
To qualify for the 5% Deposit Scheme, you need to meet these requirements:
- Be an Australian citizen or permanent resident
- Be at least 18 years old
- Be a genuine first home buyer (or someone who hasn't owned property in Australia in the past 10 years)
- Plan to live in the property as an owner-occupier
- Have a deposit of at least 5% (and less than 20%) of the property's value. Single parents and legal guardians may be eligible with a 2% deposit under the Family Home Guarantee stream
- Purchase a property at or below the price cap for your location
No income caps from 1 October 2025
From 1 October 2025 the scheme has no income caps. The old income limits for singles and couples no longer apply.
Lenders still assess your income and expenses to work out how much you can borrow. If you've had a significant change in income recently, it's important to discuss this with your broker.
Property price caps
The scheme has property price caps that vary by location to reflect different market conditions. Both the purchase price and the lender-assessed value of the property must be at or below the cap.
Current price caps (from 1 October 2025)
There is no longer a cap on the number of places and no waiting list. For the exact cap that applies to a suburb, use the postcode tool at firsthomebuyers.gov.au.
Single parents and regional buyers
Single parents and legal guardians can use the Family Home Guarantee stream, with a minimum 2% deposit. The Regional First Home Buyer Guarantee was folded into the main scheme from 1 October 2025, so regional buyers now use the same scheme with the regional price caps above.
How to apply for the 5% Deposit Scheme
You can't apply directly to the government. Applications go through a participating lender, and a mortgage broker like us can help you with this.
Application process
The process generally follows these steps. Timing depends on your circumstances and the lender:
- Initial assessment: check your eligibility using the official eligibility tool and meet with a broker to assess your borrowing capacity
- Documentation preparation: collect your documentation, including proof of income and savings
- Lender pre-approval: we'll help you submit your application to a participating lender
- Guarantee reservation: once pre-approved, the lender reserves your guarantee under the scheme
- Property search: find your property at or below the price cap for your area
- Formal approval and settlement: complete the purchase process
Required documentation checklist
To streamline your application, prepare these documents:
- ✓ Proof of identity (passport, driver's licence)
- ✓ Income evidence your lender asks for (such as your latest Notice of Assessment)
- ✓ Proof of deposit (bank statements showing genuine savings)
- ✓ Employment details (payslips, employment contract)
- ✓ Details of assets and liabilities
- ✓ Living expenses documentation
Eligible property types explained
Under the 5% Deposit Scheme, you can purchase:
Existing properties
- Established houses, townhouses, or apartments
- Must be within price caps for your region
- Settlement must occur within the scheme's time limit after your guarantee is reserved (your lender will confirm it)
House and land packages
- Combined contract for land and construction
- Total value must be within price caps
- Building must start and finish within the scheme's time limits
Land and separate construction contract
- Purchase vacant land and have a separate contract to build
- Combined value must be within price caps
- Construction must start and finish within the scheme's time limits
Off-the-plan apartments or townhouses
- Property must be within price caps
- Must be your first residential property purchase
- Settlement must occur within the scheme's time limit after your guarantee is reserved or construction is completed
5% Deposit Scheme vs standard home loans: a comparison
Is the 5% Deposit Scheme right for you?
While the scheme offers significant benefits, it's important to consider:
Advantages
- Enter the market sooner: Purchase years earlier than saving for a 20% deposit
- No LMI: avoid Lenders Mortgage Insurance, which can cost thousands of dollars
- Competitive rates: access rates from participating lenders despite the lower deposit
- Build equity earlier: Start building wealth through property ownership sooner
- Stop saving sooner: buy your home without waiting years to build a 20% deposit
Considerations
- Higher loan amount: With a smaller deposit, you'll have a larger loan and higher repayments
- Interest costs: You'll pay more interest over the life of the loan
- Market fluctuations: Entering with less equity means less buffer if property prices fall
- Property restrictions: Must buy within price caps that might limit choices in some areas
Frequently asked questions
Can I use the 5% Deposit Scheme with other first home buyer benefits?
Yes, in most cases you can combine the 5% Deposit Scheme with:
- First Home Owner Grants offered by states and territories
- Stamp duty concessions or exemptions for first home buyers
- First Home Super Saver Scheme
However, eligibility criteria may differ between schemes, so it's important to check with your broker.
What happens if property prices fall after I purchase?
If property prices fall, you could find yourself in a negative equity position (owing more than the property is worth). This risk exists with any high LVR loan, but is heightened with a 5% deposit. However, if you plan to hold the property long-term, short-term fluctuations may be less concerning.
Can I use gifted funds as my 5% deposit?
Most participating lenders will accept gifted funds as part or all of your deposit, though many require a certain percentage to be genuine savings. Some lenders may also require a statutory declaration from the gift-giver stating the funds don't need to be repaid.
What if my income changes after I apply?
There are no income caps under the scheme, so a change in income won't affect your eligibility for the scheme itself. However, significant income changes might impact your loan approval with the lender.
Is it better to wait and save a larger deposit?
This depends on your individual circumstances, local property market, and financial goals. Factors to consider include:
- Rate of property price growth vs. your saving capacity
- Rent payments while saving vs. mortgage payments
- Career stability and income growth projections
- Life plans that might require flexibility
What are the main reasons applications get rejected?
Common reasons a 5% Deposit Scheme application is declined include:
- Credit issues or poor credit history
- Insufficient genuine savings history
- Employment instability or probationary periods
- Previous property ownership that doesn't meet the 10-year rule
Next steps: How we can help
As experienced mortgage brokers, we can:
- Check your eligibility for the current scheme
- Calculate your borrowing capacity and help you understand what you can afford
- Connect you with participating lenders offering competitive rates
- Guide you through the application process
- Help you understand how the October 2025 changes affect your plans
Free First Home Buyer Strategy Session
Book a complimentary strategy session with our team to:
- Assess your current financial position
- Determine your eligibility for the 5% Deposit Scheme
- Create a personalised roadmap to homeownership
Don't let the traditional 20% deposit requirement hold you back from homeownership. Book a consultation with us today to discover if the 5% Deposit Scheme could be your pathway to purchasing your first home with a 5% deposit.
Last reviewed: September 2026.
This information is general only and does not take your personal objectives, financial situation or needs into account. Consider whether it is right for you before acting on it. Felix Finance Pty Ltd ABN 79 664 494 615 is a credit representative (572079) of Finsure Finance and Insurance Pty Ltd, Australian Credit Licence 384704.
