The Australian Government 5% Deposit Scheme lets an eligible first home buyer purchase with a deposit of 5% and pay no Lenders Mortgage Insurance (LMI). The government, through Housing Australia, guarantees the lender up to 15% of the property value. It used to be called the First Home Guarantee. The catch is a bigger loan, and a strict set of rules on price, occupancy and lenders.
I see this most with Sydney professionals who earn well but have not saved 20%. For many, it is the first door to check.
What the scheme is
You put in at least 5%. Housing Australia guarantees the lender up to 15% of the property value. That lets you borrow up to 95% of the value without LMI.
The guarantee protects the lender, not you. It does not cover missed repayments. If the home is sold because you cannot pay, you can still owe money after the sale.
The scheme has two streams now:
The main stream. For first home buyers, in cities and regions alike. The separate Regional First Home Buyer Guarantee closed to new applicants from 1 October 2025, so regional buyers use the main stream.
Single Parents and Legal Guardians. This replaced the Family Home Guarantee. The deposit is 2% and the guarantee is up to 18%. You do not need to be a first home buyer. You must apply alone and own no other property after settlement.
Who is eligible
For the main stream, you need to be:
- An Australian citizen or permanent resident when the loan is signed. A pending visa does not count.
- 18 or older.
- A first home buyer, or someone who has not held an interest in Australian property in the past 10 years.
- Buying a home to live in. You must move in within 6 months of settlement (or of the occupancy certificate for a new build) and keep living there while the guarantee is in place.
- Taking a principal and interest loan of up to 30 years (interest-only is allowed only in limited cases, such as construction).
You can apply alone or with one other person. That can be a partner, a friend or a family member. Both of you must qualify.
Since 1 October 2025 there is no income test and no limit on places. A high salary no longer shuts you out.
Price caps
The purchase price and the lender's valuation must both be at or under the cap for the location.
Price caps as at 1 July 2026. Caps change. Check the current caps on the official property price caps page before you make an offer.
| State or territory | Capital city and 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 | $1,000,000 |
| NT | $750,000 (Darwin) | $600,000 |
| Jervis Bay Territory and Norfolk Island | $550,000 | $550,000 |
| Christmas Island and Cocos (Keeling) Islands | $400,000 | $400,000 |
Regional centres that share the capital city cap:
- NSW: Central Coast, Coffs Harbour-Grafton, Illawarra, Mid North Coast, Richmond-Tweed, Newcastle and Lake Macquarie.
- VIC: Geelong.
- QLD: Gold Coast and Sunshine Coast.
The trade-off
The upside is simple. You pay no LMI, and you can buy years sooner than if you waited to save 20%. The government describes the LMI you avoid as "tens of thousands of dollars".
The cost is a bigger loan.
- about $630 a month more
- $120,000+ more interest
- No LMI
Illustrative example only. A $700,000 purchase. An assumed rate of 6.0%, 30 years, principal and interest. This is not a lender rate or a quote.
| 5% deposit | 20% deposit | |
|---|---|---|
| Loan | $665,000 | $560,000 |
| Monthly repayment | about $3,987 | about $3,357 |
| Total interest over 30 years | about $770,000 | about $649,000 |
That is roughly $630 a month more, and more than $120,000 extra in interest over the life of the loan.
A bigger loan also means:
- Tighter servicing. The lender has to be satisfied you can repay a loan of up to 95% of the value.
- Rate rises hit harder.
- Less equity buffer if values fall.
Lenders
Only Participating Lenders can offer the scheme. There are more than 30. The official list of participating lenders is the one to trust.
Being eligible for the scheme is not loan approval. Each lender still applies its own rules on servicing, deposit, valuation, pricing and products.
A few scheme rules apply across the board:
- No interest-only loans, except in limited cases such as construction.
- No top-ups after settlement.
Features like offset accounts and fixed rates vary by lender.
Common traps
- The cap covers the valuation too. If the price is under the cap but the valuation comes in over it, you have a problem. For land plus a separate build contract, the combined cost counts.
- Occupancy. Not moving in within 6 months, or moving out or renting it out without an exemption, can end the guarantee. The lender may then charge LMI.
- The 10-year look-back is wide. It covers freehold, leases of 50 years or more, and company title, anywhere in Australia and of any type, including commercial and investment.
- The guarantee ends. It stops when your scheduled loan balance reaches 80% of the original property value. Extra repayments you can redraw do not count. It also ends if you top up, sell, or refinance to a non-participating lender. Moving to another participating lender can keep it, if the loan is not increased and the term is not extended.
- You must put in your savings. You are expected to contribute as much as you can. If you have 20% or more after costs, you are not eligible. Moving money to someone else to get under 20% breaches the intent of the scheme.
- Costs sit on top. Stamp duty, legal fees and bank fees are on top of the 5%.
- State help. State grants and stamp duty concessions can generally be used alongside the scheme. The rules differ by state.
How it differs from Help to Buy and a private 2.5% facility
With the 5% Deposit Scheme, the government guarantees part of your loan to the lender. It takes no stake in your home. You keep all the growth.
Help to Buy is federal shared equity. The government owns a share of your home. It opened on 5 December 2025. More in my Help to Buy explainer.
HAS SmartShare is a private product, not a government scheme. I covered it in buying with a tiny deposit.
| 5% Deposit Scheme | Help to Buy | HAS SmartShare (private) | |
|---|---|---|---|
| Who runs it | Australian Government (Housing Australia) | Australian Government | HAS, a private provider |
| Minimum deposit | 5% (2% single parents) | 2% | 2.5% plus costs |
| How it works | Guarantee to your lender, up to 15% | Government owns up to 30% (existing) or 40% (new) | 17.5% second mortgage, main lender at 80% |
| Who owns the home | You | You and the government | You. HAS is not on title |
| Growth | All yours | Shared with the government | HAS takes an agreed share of growth above 10% |
| Losses | All yours | Shared with the government | All yours. HAS does not share losses |
| Income test | None | $103,000 single, $165,000 joint or single parent (2026-27) | Not a scheme test |
| Price range | Caps by location | NSW $1.3m / $800k, NT $600k, other states match the 5% scheme | Properties $600k to $1.6m |
| Places | Unlimited | 10,000 a year | Not a scheme limit |
Help to Buy is for citizens only, and you cannot own property in Australia or overseas. Only a few lenders offer it: Bank Australia, CommBank, the Teachers Mutual group and Queensland Country Bank. You cannot combine it with the 5% Deposit Scheme.
HAS SmartShare is fixed rate and interest-only on its portion for the first 5 years. It has a 3-year minimum term with an early-exit fee, and independent legal advice is required.
When it suits a Sydney professional, and when to leave it
It tends to suit you when:
- Your income is strong but your savings are not. Servicing a 95% loan is realistic, saving 20% is years away.
- The place you want is under the $1.5 million Sydney cap, and the valuation is likely to land there too.
- You plan to live in the home for years, not rent it out soon.
It may be worth leaving when:
- You are already close to 20%. If you have 20% or more after costs, you are not eligible anyway. If you are just under, the extra interest on a bigger loan may outweigh waiting a few months.
- The property is over the cap, or close enough that a valuation could tip it over.
- A move or posting elsewhere is likely soon, which would put the occupancy rule at risk.
- The repayment on 95% only works if rates never rise.
FAQ
What is the Australian Government 5% Deposit Scheme? It is a government scheme that lets eligible first home buyers buy with a 5% deposit and no Lenders Mortgage Insurance. Housing Australia guarantees the lender up to 15% of the property value. It was formerly called the First Home Guarantee.
Is there an income limit for the 5% Deposit Scheme? No. Since 1 October 2025 there is no income test and no limit on the number of places.
What is the price cap for the 5% Deposit Scheme in Sydney? As at 1 July 2026, the cap for Sydney and NSW regional centres is $1,500,000. The rest of NSW is $800,000. Both the price and the lender's valuation must be at or under the cap. Check current caps on firsthomebuyers.gov.au.
Does the guarantee protect me if I can't make repayments? No. The guarantee protects the lender. It does not cover missed repayments, and you can still owe money if the home is sold.
Can I use the 5% Deposit Scheme with Help to Buy? No. You cannot combine the two. The 5% Deposit Scheme is a guarantee to your lender. Help to Buy is shared equity, where the government owns part of the home.
When does the guarantee end? When your scheduled loan balance reaches 80% of the property's original value, or if you top up the loan, sell, or refinance to a lender that is not participating.
Talk it through
If you earn well and have a small deposit, book a 30-minute call with me. Bring your income, your savings, and a rough price and suburb. I will tell you whether the 5% Deposit Scheme is likely to be open to you and what the bigger loan means for your repayments.
For the wider picture, see high income, small deposit. If family wants to help, read how banks see the Bank of Mum and Dad.
Sources
General information only, not credit advice. Scheme eligibility and lender credit policy apply.