The Australian Government 5% Deposit Scheme is the biggest change to first home buying in years. Since 1 October 2025, eligible buyers can purchase with a deposit of just 5% and pay no lenders mortgage insurance. Here is how it works and whether you qualify.

What is the 5% Deposit Scheme?

Normally, if your deposit is less than 20%, the lender charges lenders mortgage insurance (LMI). On a $700,000 home with a 5% deposit, LMI can easily cost $20,000 to $30,000. Under the scheme, the government guarantees up to 15% of the property's value to the lender, so you can buy with 5% down and no LMI.

The scheme is run by Housing Australia and was previously called the First Home Guarantee. You still borrow from a normal lender, and you still need to meet that lender's credit criteria.

What changed in October 2025

• No income caps. Previously singles had to earn under $125,000 and couples under $200,000. These limits were removed.
• Unlimited places. There is no longer an annual cap on the number of guarantees.
• Higher property price caps. Caps were raised in every state and territory.

Property price caps

The home must be at or below the price cap for its location. Examples of the capital city caps:

• Sydney and NSW regional centres: $1,500,000
• Melbourne and Victorian regional centres: $950,000
• Brisbane and Queensland regional centres: $1,000,000
• Perth: $850,000
• Adelaide: $900,000
• Canberra: $1,000,000

Lower caps apply in the rest of each state. Check the current cap for your area with Housing Australia or ask us before you start searching.

Who is eligible?

• Australian citizens or permanent residents aged 18 or over
• First home buyers, or people who have not owned property in Australia in the past 10 years
• Buying as an individual or with one other person (spouse, partner, friend or family member)
• Planning to live in the home as your principal residence
• A genuine deposit of at least 5%

The Family Home Guarantee: 2% deposit

Single parents and single legal guardians with at least one dependent child can buy with a deposit of just 2% under the Family Home Guarantee, also with no LMI. You do not need to be a first home buyer, but you cannot own property at the time of settlement.

Is a 5% deposit always a good idea?

Buying sooner can mean you stop paying rent and start building equity. But a smaller deposit means a larger loan, higher repayments and more interest over time. You also start with less equity, which matters if prices fall. Use our repayment calculator to compare a 5% and a 20% deposit on the same home.

How to apply

1. Check you meet the eligibility criteria and the price cap for your area.
2. Choose a participating lender. Many major banks and smaller lenders take part, and brokers can access the scheme.
3. Get pre-approval with the guarantee attached.
4. Find a home within the cap and buy within the guarantee's time frame.

Can I combine it with other help?

Yes, in many cases. You can usually combine the scheme with state stamp duty concessions and first home owner grants. You cannot combine it with the federal Help to Buy shared equity scheme. Read our first home buyer guide for the full picture.

Let us check your eligibility

We will confirm whether you qualify, compare participating lenders and help you get pre-approved. Visit our first home buyers page or book a free call.

This article is general information only and does not take into account your objectives, financial situation or needs. Government schemes, tax rules and lender policies change, so check current details before acting. Propple Pty Ltd is an Australian Credit Representative (537767) of AFSL 384704.