Australian Government 5% Deposit Scheme: A Simple Guide for First Home Buyers
Buying your first home is a big step, and for many Australians, saving a 20% deposit can feel like the biggest obstacle. The Australian Government has introduced and expanded programs to make home ownership more achievable, with one of the most important being the Australian Government 5% Deposit Scheme.
This article explains how the 5% Deposit Scheme works, who it is designed for, what property price caps apply, and how first home buyers can use it in real‑world situations.
What Is the Australian Government 5% Deposit Scheme?
The Australian Government 5% Deposit Scheme, formerly known as the Home Guarantee Scheme and commonly referred to as the First Home Guarantee, allows eligible home buyers to purchase a home with a lower deposit and no Lenders Mortgage Insurance (LMI).
Under the scheme:
- First home buyers can purchase with a minimum 5% deposit
- Single parents may be eligible with a minimum 2% deposit
- Lender Mortgage Insurance (LMI) is not required
- The loan is assessed and provided by a participating lender
The Government supports the lender by providing a guarantee, which reduces the lender’s risk and removes the need for LMI.
Who Is the Scheme Designed For?
According to the Australian Government, the scheme is designed to support:
- First home buyers
- People re‑entering the property market
- Aspiring homeowners who have saved a deposit but are just short of buying
Importantly, the scheme is not limited by income caps, unlike previous versions, making it accessible to more buyers across Australia.
Deposit Requirements
Minimum deposit amounts under the scheme are:
- 5% deposit for first home buyers
- 2% deposit for single parents
The deposit must be genuine savings and held in your name for the required time period, depending on lender policy.
Property Types You Can Buy
The Australian Government 5% Deposit Scheme can be used to buy:
- Houses
- Townhouses
- Units or apartments
- Existing homes or new builds
The property must be owner‑occupied, meaning you must live in the home. Investment properties are not eligible.
Property Price Caps
Property price caps apply and vary by state and location. The caps effective from 1 October 2025 are: Lagos Financial
- 🏙️ New South Wales (Sydney + regional centres) — $1,500,000
- 🏙️ Queensland (Brisbane, Gold Coast, Sunshine Coast) — $1,000,000
- 🏙️ Victoria (Melbourne + Geelong) — $950,000
- 🏙️ South Australia (Adelaide) — $900,000
- 🏙️ Western Australia (Perth) — $850,000
- 🏙️ Northern Territory (Darwin, from 1 July 2026) — $750,000
- 🌿 Northern Territory (rest of NT) — $600,000
- 🌿 Regional & smaller areas — lower caps apply based on postcode tier
Before making an offer, confirm the cap for your specific suburb using the postcode search tool at firsthomebuyers.gov.au — some suburbs span multiple postcodes with different caps.
A Practical Example
Example:
A first home buyer is purchasing a home for $650,000 and has saved a 5% deposit of $32,500.
Without the scheme:
- The buyer would normally need to pay LMI, which could cost many thousands of dollars.
With the Australian Government 5% Deposit Scheme:
- The buyer may proceed with the same deposit
- No LMI applies
- Upfront costs are significantly reduced
- The buyer can move into their home sooner
This is why the scheme has become a key pathway into home ownership for many Australians.
Lenders and the Application Process
The scheme can only be accessed through participating lenders approved by the Australian Government. There are more than 30 participating lenders nationally, including major banks and mutual banks.
Even though the Government supports the scheme, lenders still assess:
- Your income
- Living expenses
- Existing debts
- Borrowing capacity and repayment ability
Approval is not automatic, which is why preparation matters.
How Finance Broker Melbourne Helps First Home Buyers
At Finance Broker Melbourne, we help first home buyers:
- Understand whether the Australian Government 5% Deposit Scheme applies to them
- Confirm property price caps before they make offers
- Compare options within and outside the scheme
- Choose suitable participating lenders
- Structure home loans for affordability and future flexibility
Final Thoughts
The Australian Government 5% Deposit Scheme has opened the door to home ownership for many first home buyers who previously felt locked out of the market. By reducing deposit requirements and removing LMI, the scheme provides a practical pathway into buying a home sooner.
However, eligibility rules, property price caps, and lender criteria still apply. Getting clear advice early can help you avoid costly mistakes and approach your first home purchase with confidence.
Frequently Asked Questions
What happens if the property I want goes over the price cap?
If the purchase price exceeds the Government’s price cap for your location, the 5% Deposit Scheme cannot be used — even if you only exceed it by a small amount. In that situation, you would need to look at a standard home loan option, potentially with Lenders Mortgage Insurance (LMI), or adjust your buying strategy. This is why confirming price caps before making offers is critical.
Can I be pre‑approved under the scheme before I find a property?
Yes. You can obtain conditional pre‑approval under the scheme, which helps you understand how much you can borrow and whether a scheme place may be available. However, final approval still depends on the property meeting price caps, location rules, and lender criteria. A pre‑approval does not automatically guarantee a scheme spot at settlement.
What’s the biggest mistake first home buyers make with this scheme?
The most common mistake is focusing only on deposit size and ignoring long‑term affordability. While avoiding LMI is helpful, first home buyers still need to ensure repayments are comfortable, buffers are built in, and the loan structure works beyond the first few years. The scheme is a pathway into home ownership — not a shortcut that removes all risk.
If I move out of the property, could I need to pay LMI later?
Yes, potentially. The Australian Government 5% Deposit Scheme (formerly the First Home Guarantee) is strictly for owner‑occupied homes. One of the ongoing conditions of the scheme is that you live in the property as your principal place of residence.
