Australian Government 5% Deposit Scheme: What First Home Buyers Need to Know

The Australian Government 5% Deposit Scheme may allow an eligible first home buyer to purchase with a minimum 5% deposit without paying Lenders Mortgage Insurance.

The Scheme can reduce the amount a buyer needs upfront, but it does not mean the Government gives you the other 15% or owns part of your home. Housing Australia provides a guarantee to the participating lender. You remain responsible for the loan, repayments and all purchase costs.

From 1 October 2025, the Scheme has no income caps, no waiting list and no Lenders Mortgage Insurance for eligible Scheme loans. Property price caps, Scheme criteria and the participating lender’s normal credit assessment still apply.

What the 5% Deposit Scheme actually does

A buyer would commonly need a 20% deposit to avoid Lenders Mortgage Insurance. Under the Scheme, Housing Australia may guarantee up to 15% of the property value to the participating lender, allowing an eligible buyer to borrow up to 95%.

The guarantee protects the lender if the borrower defaults and the sale of the property does not cover the debt. It is not cash paid to the buyer, it does not assist with normal missed repayments and it does not remove the borrower’s responsibility for any debt that remains.

Minimum deposit examples

• $600,000 property: minimum 5% deposit of $30,000 and a loan up to $570,000

• $700,000 property: minimum 5% deposit of $35,000 and a loan up to $665,000

• $800,000 property: minimum 5% deposit of $40,000 and a loan up to $760,000

These are simple examples only. The minimum deposit is based on the property value assessed by the participating lender, which may differ from the purchase price. You also need to allow for purchase costs and the lender may require a larger contribution.

Who may be eligible?

Under the current first-home-buyer stream, the main criteria include:

• You are an Australian citizen or permanent resident and at least 18 years old.

• You have saved a minimum deposit of 5% of the property value, subject to lender and Scheme rules.

• You are a first home buyer or have not owned property or land in Australia during the previous 10 years.

• You are buying or building an eligible home in Australia and will live in it as an owner-occupier.

• Both the purchase price and lender-assessed value are at or below the location’s price cap.

• You apply alone or jointly with one other person.

• You use a participating lender and meet its normal credit policy and approval requirements.

The surprising 10-year rule

The Scheme is not limited only to someone who has never owned property. A person who has not held an eligible property interest in Australia during the previous 10 years may also qualify, provided all other criteria are met. For joint applicants, both people need to satisfy the prior-property-ownership test.

Property price caps: Tamworth versus Sydney

The cap depends on the property’s postcode and location. For Tamworth and NSW areas outside the capital city and listed regional centres, the current cap is $800,000. For Sydney and the listed NSW capital-city and regional-centre areas, the cap is $1.5 million.

Both the purchase price and lender-assessed property value must be at or below the cap. A property can fail the test if either amount exceeds the cap.

Can the Scheme be used for land and construction?

Yes, eligible house-and-land packages and vacant land with a separate building contract can be covered.

For separate land and building contracts, the combined land purchase price and build cost must remain under the location cap. Timing rules apply to the building contract, construction and moving into the completed home, so check the structure before settling the land.

What costs sit outside the 5% deposit?

• Transfer duty if a state exemption or concession does not cover the full amount

• Conveyancer or solicitor fees

• Building, pest or strata inspections

• Settlement adjustments and registration costs

• Moving and connection costs

• A buffer for expenses after settlement

In NSW, an eligible first home buyer may separately qualify for a duty exemption or concession. These are different programs, so eligibility for the 5% Deposit Scheme does not automatically create a NSW duty benefit.

How the application works

1. Check the main Scheme criteria and your likely funds position.

2. Apply through a participating lender as part of a home-loan application. You cannot apply directly to Housing Australia.

3. The lender assesses your eligibility and the home loan under its normal credit policy.

4. Once pre-approved, you generally have 90 days to find a home and sign a contract.

5. The lender confirms the property, valuation, Scheme cap and final approval before settlement.

5% Deposit Scheme FAQ

Does the Government own 15% of my home?

No. This Scheme is a guarantee to the lender, not shared equity. The Government does not receive an ownership share through the 5% Deposit Scheme.

Is there an income limit?

No income caps apply under the current Scheme settings. You still need sufficient income to meet the participating lender’s assessment.

Can I buy an investment property?

No. The first-home-buyer stream is for an eligible owner-occupied home.

Does a 5% deposit mean I will be approved?

No. Scheme eligibility and lender approval are separate. Income, expenses, debts, credit history, employment, the property and the loan structure are still assessed.

Work out the full amount you may need

Send me your target suburb, price range and approximate savings. I can help you check the property cap, minimum deposit, likely purchase costs and the next home-loan step.