The short version: the Australian Government 5% Deposit Scheme lets eligible first home buyers purchase with as little as a 5% deposit, with the government guaranteeing the rest of the gap so you avoid lenders mortgage insurance (LMI). Since 1 October 2025 there are also no income caps and no place limits. There's also a 2% Deposit Scheme for eligible single parents.
Saving a full 20% deposit takes most first home buyers years, and property prices don't always wait. The Australian Government 5% Deposit Scheme was designed to close that gap. It doesn't hand you money; instead, it lets you borrow with a smaller deposit than most lenders would normally allow, without the usual LMI cost that comes with it.
What is the Australian Government 5% Deposit Scheme?
It's a scheme run through Housing Australia, part of the Home Guarantee Scheme (you may have seen it called the First Home Guarantee), that lets eligible first home buyers purchase a home with a deposit as low as 5% of the property value, rather than the 20% most lenders use as their LMI-free benchmark. The government guarantees the difference between your deposit and 20%, which is what lets you skip LMI even though you're borrowing at a higher loan-to-value ratio (LVR).
- Purchase with as little as 5% deposit: no LMI payable
- A 2% Deposit Scheme exists for eligible single parents
- The guarantee sits behind your loan - you still borrow from, and repay, a participating lender in the normal way
How it actually works
Normally, borrowing above 80% LVR (i.e. with less than a 20% deposit) means paying LMI, which protects the lender if you can't repay the loan. Under the scheme, the government guarantees the portion of your loan above 80% LVR, so participating lenders don't require LMI even though your deposit is much smaller. You still go through a normal home loan application and still need to meet the lender's own credit criteria - the scheme changes the deposit and LMI equation, not the rest of the assessment.
You apply through a participating lender as part of a normal home loan application. Since 1 October 2025 there are no income caps and no annual place limits, so you no longer have to race a yearly quota to get in.
Are you eligible?
Eligibility comes down to a few things: you need to be an Australian citizen or permanent resident, at least 18, buying or building a home to live in (not an investment), with a deposit of at least 5%. You also can't have owned a home or land in Australia in the last 10 years, so past owners who have been out of the market for a decade can qualify.
Property price caps vary by location and are updated over time, so rather than quote figures that could date quickly, we check your eligibility against the current caps as the first step.
Stacking it with other first-home help
The Australian Government 5% Deposit Scheme is one of several supports available to first home buyers, and eligible buyers can often combine them:
- Stamp duty concessions: state-based exemptions or discounts for eligible first home buyers
- First Home Owner Grant: a state government cash grant, generally for new builds, with amounts and rules that vary by state
- First Home Super Saver: voluntary super contributions withdrawn later to help fund your deposit
Each of these has its own eligibility rules, and not everyone qualifies for all of them. We map out the full picture for first home buyers, and the property purchase costs calculator models the concessions that apply in your state.
The trade-offs
Buying with a smaller deposit isn't automatically the right move for everyone. A larger loan balance generally means higher repayments and more interest paid over the life of the loan compared with a full 20% deposit.
And scheme rules, price caps and eligibility settings can change, so what applies today may not apply later. For some buyers, saving a little longer or using a family guarantor works out better - it depends on your numbers and your timeline.
Where to next
The scheme is just one part of a first-home strategy. If a 5% deposit is still out of reach, Help to Buy lets you buy with 2% down by giving the government an equity share. If you're weighing up buying your first home against investing first, see how much you can borrow for an investment property next. When you're ready, book a free discovery call and we'll check your eligibility properly.
Frequently asked questions
Do I have to be a first home buyer to use the scheme?
Not in the strict sense. You're eligible if you haven't owned a home or land in Australia in the last 10 years, so past owners who have been out of the market can qualify. It's for owner-occupiers only, so you must live in the home, and it isn't available for investment properties. You also need to be an Australian citizen or permanent resident aged 18 or over. We check whether you qualify as part of the assessment.
Can I combine the scheme with the First Home Owner Grant?
Often, yes. The Australian Government 5% Deposit Scheme, stamp duty concessions and the First Home Owner Grant are separate forms of support with their own eligibility rules, and many first home buyers qualify for more than one. We check which ones apply to you.
Is there a limit on how many places are available?
No. Since 1 October 2025 the scheme has no annual place cap or waitlist, so places are no longer rationed the way they were in earlier years. You apply through a participating lender when you're ready to buy.
Does using the scheme cost me anything extra?
There's no fee to use the scheme itself, but borrowing with a smaller deposit means a larger loan balance, so you'll generally pay more interest over the life of the loan than if you'd saved a full 20%. It's worth weighing that against the cost of waiting and renting in the meantime.
Official details, including current price caps and eligibility, are on the Australian Government 5% Deposit Scheme website.
Last updated: July 2026
This article is general information only. It doesn't take into account your objectives, financial situation or needs, and it isn't credit, financial or tax advice. Figures are indicative estimates that vary by lender, state and property and can change, so we confirm your real numbers before you act. For tax questions, speak to a registered tax agent or accountant. Scott Lung, credit representative 567904 of Purple Circle Financial Services Pty Ltd (Australian Credit Licence 486112).
5 finance decisions to get right before buying your first investment property
- Build your first investment with a long-term property strategy.
- Understand the finance decisions that shape your borrowing power and future options.
- Make smarter decisions around your deposit, cash flow and loan structure before you sign a contract.
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