If you've been saving for a 20% deposit, you already know how it goes. Prices move, rent goes up, and the finish line keeps drifting away. The Australian Government 5% Deposit Scheme was designed for exactly that problem, and since it was expanded on 1 October 2025 it's open to far more people than before.
Here's how it works, who can use it, and the things we check before recommending it to a client.
What the scheme actually does
Normally, if you borrow more than 80% of a property's value, the lender charges Lenders Mortgage Insurance (LMI). LMI protects the bank, not you, and it can easily run into tens of thousands of dollars on a typical Sydney purchase.
Under the 5% Deposit Scheme (previously called the First Home Guarantee), Housing Australia guarantees up to 15% of the property's value to your lender. You put in as little as 5%, the government's guarantee covers the gap to 20%, and the lender doesn't charge LMI.
The government doesn't give you any money and doesn't own any part of your home. You own 100% of it and repay the whole loan.
What changed in October 2025
The old scheme had a limited number of places each year and income caps of $125,000 for singles and $200,000 for couples. Places often ran out.
From 1 October 2025:
- Income caps were removed. Your income no longer rules you out.
- Places are unlimited. There's no annual allocation to chase.
- Property price caps went up. In Sydney and NSW regional centres the cap is now $1,500,000. In the rest of NSW it's $800,000.
Price caps in other states (capital city and regional centres / rest of state):
| State | Capital & regional centres | Rest of state |
|---|---|---|
| NSW | $1,500,000 | $800,000 |
| VIC | $950,000 | $650,000 |
| QLD | $1,000,000 | $700,000 |
| WA | $850,000 | $600,000 |
| SA | $900,000 | $500,000 |
| TAS | $700,000 | $550,000 |
| ACT | $1,000,000 | n/a |
| NT | $600,000 | n/a |
Always confirm the cap for your exact postcode on firsthomebuyers.gov.au before you sign a contract. Both the purchase price and the lender's valuation need to be at or under the cap.
Who's eligible
You'll generally need to:
- Be an Australian citizen or permanent resident, aged 18 or over
- Be a first home buyer, or not have owned property in Australia in the previous 10 years
- Buy a home you'll live in (not an investment)
- Have saved at least 5% of the purchase price
- Apply through a participating lender
You can apply alone or with one other person, such as a partner, friend or sibling.
A worked example
Say you're buying a $900,000 townhouse in Western Sydney.
- 5% deposit: $45,000
- Loan: $855,000 (95% of the value)
- LMI: $0 under the scheme
Without the scheme, a 95% loan of that size would attract LMI that can run into the high tens of thousands, depending on the lender. Most borrowers add it to the loan, which means paying interest on it for 30 years.
On top of the deposit, you'll still need money for stamp duty (if it applies), conveyancing, inspections and loan fees. In NSW, first home buyers pay no transfer duty on homes up to $800,000 and a reduced amount up to $1,000,000, which helps a lot. See our guide to the NSW first home buyer stamp duty exemption.
The catches nobody mentions at the open home
The scheme is excellent, but it isn't free money. A few things to weigh up:
You're borrowing 95%. That means a bigger loan and higher repayments than if you'd waited for a larger deposit. At an example rate of 6.49%, every $100,000 borrowed over 30 years costs about $631 a month.
You still have to pass the bank's assessment. The guarantee removes LMI. It doesn't change how much a lender will lend you. Lenders still test your income against a rate around 3% higher than the actual rate.
Not every lender participates. Participating lenders can have different rates, policies and turnaround times. A good broker will compare them for you rather than you being stuck with your own bank's offer.
Property values move both ways. With a thin deposit, a fall in values can leave you with little equity for a while. As at September 2026, Cotality reported national values had fallen for six straight months. That's not a reason to avoid buying, but it's a reason to buy a home you're happy to hold for years.
You must live in it. If you move out and rent it, the guarantee generally ends. Tell your lender before you do.
Can you combine it with other help?
Often yes. The 5% Deposit Scheme can usually be used with:
- State stamp duty concessions (like NSW's First Home Buyers Assistance Scheme)
- The First Home Owner Grant, if you're buying or building a new home
- The First Home Super Saver scheme, to help build your 5%
It can't be combined with the federal Help to Buy shared equity scheme. We explain the trade-offs in Can you combine first home buyer schemes?
How to get started
- Check your borrowing power so you know your realistic budget.
- Confirm the price cap for the suburbs you're looking in.
- Get pre-approval through a participating lender, with the scheme place reserved.
- Shop with confidence and include a finance clause in your contract.
The scheme is applied for through your lender or broker, not directly with the government. That's where we come in.
Frequently asked questions
Do I need to be a first home buyer to use the 5% Deposit Scheme?
Usually, yes. You can also qualify if you haven't owned property in Australia in the last 10 years. Previous ownership overseas doesn't count against you.
Is there an income limit?
Not any more. Income caps were removed on 1 October 2025.
Can I buy an apartment or a new build?
Yes. Houses, townhouses, apartments, house-and-land packages and land with a building contract can all qualify, as long as the price is under the cap and you'll live there.
If you'd like us to check your eligibility and compare participating lenders, call Finfident on 0424 545 654 or start your free assessment online. There's no cost to talk to us.
This article is general information only and doesn't take into account your objectives, financial situation or needs. Figures, rates and scheme rules are current as at October 2026 and can change. Finfident Finance Brokers (ABN 94 679 280 801) is Credit Representative 569374 of Outsource Financial Pty Ltd (ACN 131 090 705), Australian Credit Licence 384324.