The Australian Government 5% Deposit Scheme explained

The Australian Government 5% Deposit Scheme allows eligible buyers to purchase a home with a deposit of 5 per cent, or 2 per cent for single parents and legal guardians, without paying lenders mortgage insurance. It was known as the Home Guarantee Scheme until 1 October 2025, and Housing Australia states that more than 320,000 Australians have been assisted since it commenced in 2020.

The scheme is a guarantee rather than a grant or a loan. No money is paid to the buyer. Housing Australia guarantees part of the loan to the participating lender, which is what allows the lender to advance up to 95 per cent of the property value without requiring mortgage insurance. The borrower remains responsible for the entire loan, all repayments and all costs.

What changed on 1 October 2025

The scheme was substantially expanded from that date, and the changes altered who can realistically use it.

• Income caps were removed. Previously the general stream applied income tests. Housing Australia now states there are no income caps.
• Place limits were removed. The scheme previously released a fixed number of places each financial year, which were commonly exhausted. There are now unlimited places and no waiting list.
• Property price caps were increased across all streams and regions.
• The scheme was renamed from the Home Guarantee Scheme, and the First Home Guarantee, Regional First Home Buyer Guarantee and Family Home Guarantee branding was consolidated.

The practical effect is that eligibility now turns almost entirely on the price of the property and on whether a lender will approve the loan, rather than on income or on securing a place before they ran out.

The two streams

There are two paths into the scheme.

The first home buyer stream requires a minimum deposit of 5 per cent. It is open to first home buyers and, importantly, to anyone who has not owned a property or land in Australia in the last 10 years. That second limb is easily missed and brings a substantial group of previous owners back into the scheme, including people who sold after a relationship breakdown or who have been living overseas.

The single parent and legal guardian stream requires a minimum deposit of 2 per cent and is open to eligible single parents or guardians with at least one dependant. Treasury notes that participants in this stream may have previously owned property, or be divesting a property interest, and are not required to be first home buyers.

Eligibility criteria

Housing Australia lists the following criteria for the first home buyer stream. Every criterion must be met, and meeting them does not guarantee a loan.

• Australian citizen or permanent resident, at least 18 years of age.
• A saved deposit of at least 5 per cent.
• A first home buyer, or has not owned a property or land in Australia in the last 10 years.
• Buying a home in Australia priced at or below the price cap for that location.
• Planning to live in the home as an owner-occupier. Investment properties are excluded.
• Applying for an owner-occupier loan with principal and interest repayments from a participating lender, for a term of up to 30 years, plus up to three years to build a new home.
• Applying alone or jointly with one other person, who may be a partner, friend or family member.

Housing Australia states expressly that applicants must also meet the participating lender's credit policy and loan approval criteria, and that a person eligible for the scheme may still be declined a home loan. The scheme removes the deposit obstacle. It does not remove the serviceability assessment described in the guide to how much you can borrow.

Property price caps by state and territory

The caps are the constraint that most often determines whether the scheme can be used. Both the purchase price and the lender's assessed value of the property must be at or below the cap. Where a buyer purchases vacant land and builds under separate contracts, the total of the land price and the build cost must also be within the cap.

State	Capital city and regional centres	Other areas
New South Wales	$1,500,000	$800,000
Victoria	$950,000	$650,000
Queensland	$1,000,000	$700,000
Western Australia	$850,000	$600,000
South Australia	$900,000	$500,000
Tasmania	$700,000	$550,000

Territory	All areas
Australian Capital Territory	$1,000,000
Northern Territory, capital city	$750,000
Northern Territory, rest of Territory	$600,000
Jervis Bay Territory and Norfolk Island	$550,000
Christmas Island and Cocos (Keeling) Islands	$400,000

The regional centres that attract the higher cap are defined narrowly. In New South Wales they are the Central Coast, Coffs Harbour and Grafton, the Illawarra, the Mid North Coast, Richmond and Tweed, and Newcastle and Lake Macquarie. In Victoria the only regional centre is Geelong. In Queensland they are the Gold Coast and the Sunshine Coast. Everywhere else in those states falls under the lower cap, and the difference is large: $1,500,000 against $800,000 in New South Wales, and $950,000 against $650,000 in Victoria.

Housing Australia warns that some suburbs span more than one postcode and that different caps may apply as a result, and that the buyer is responsible for ensuring the purchase price is within the cap for the specific suburb, state and postcode. The postcode search tool on the scheme website should be treated as a guide and confirmed with the lender for any specific property. Suburb level context is available in the suburb guides.

What the guarantee is actually worth

The saving is the mortgage insurance premium that would otherwise be charged at a 95 per cent loan to value ratio, and it is substantial. Using the indicative premium table behind this site's calculator, and assuming an owner-occupied purchase with principal and interest repayments, the avoided premium at a 5 per cent deposit is roughly as follows.

Purchase price	Deposit at 5 per cent	Loan	Indicative premium avoided
$650,000	$32,500	$617,500	about $22,800
$800,000	$40,000	$760,000	about $28,100
$950,000	$47,500	$902,500	about $33,400
$1,000,000	$50,000	$950,000	about $35,200

These are indicative figures, not quotations, and actual premiums differ by lender and insurer. The order of magnitude is the point: at these price levels the guarantee is worth roughly as much as the deposit itself. The mechanics of the premium avoided are set out in the guide to lenders mortgage insurance, and the LMI calculator can be used to test other prices.

What the scheme does not do

Three limitations are worth stating clearly, because the scheme is frequently described in terms that imply more than it provides.

• It does not increase borrowing power. The lender still applies its serviceability assessment, including the requirement set by the Australian Prudential Regulation Authority to test repayments at an interest rate at least three percentage points above the product rate. A buyer who can only service $600,000 cannot buy at the Sydney cap because the guarantee exists.
• It does not reduce repayments. Borrowing 95 per cent rather than 80 per cent means a larger loan. On an $800,000 purchase at an assumed 6.00 per cent over 30 years, a $760,000 loan requires about $4,557 a month against about $3,837 on a $640,000 loan, a difference of roughly $719 each month for the life of the loan.
• It does not protect the buyer against a fall in prices. The guarantee protects the lender. A buyer who purchases at $800,000 with a 5 per cent deposit has a $760,000 loan. A 5 per cent fall in value eliminates their equity entirely, and a 10 per cent fall leaves them roughly $40,000 in negative equity, which would need to be funded in cash if the property had to be sold.

The application process and the 90 day window

Applications cannot be made directly to Housing Australia. The scheme is accessed only through a participating lender as part of a home loan application. The sequence Housing Australia sets out is as follows.

1. Check eligibility using the scheme's online tool and read the published Information Guide.
2. Contact a participating lender, which assesses eligibility and submits the application. Documents typically required include full name, date of birth, Medicare number or PMKeyS number, proof of citizenship or residency, and a completed Home Buyer Declaration form.
3. Once pre-approved, find a home and sign a contract of sale within 90 days.
4. Complete settlement through the lender.

The 90 day window is the element most likely to catch buyers out. It is a firm period in which a contract must be signed, not merely a period in which to start looking, and in a slow market or a tightly held suburb it can lapse. Buyers should treat pre-approval as the start of an active search rather than a preliminary step, and the guide to the home loan pre-approval process explains what pre-approval does and does not commit a lender to.

Ongoing obligations

The guarantee is not unconditional and does not necessarily last for the life of the loan. Housing Australia states that obligations must be met on an ongoing basis, including living in the property as an owner-occupier, and that if those obligations are not met the guarantee may no longer apply and the lender may require the borrower to pay lenders mortgage insurance or other additional costs.

This matters for anyone who may move for work, travel for an extended period, or convert the home to a rental. The decision to move out is not simply a tax and lending question, as it would be for an ordinary owner-occupier loan; it may also trigger a cost under the guarantee. Any such plan should be discussed with the lender before it is acted upon.

Combining the scheme with other assistance

The scheme is generally compatible with other forms of assistance, each of which has separate eligibility tests that must be satisfied independently. In combination these commonly include a state First Home Owner Grant, where the purchase is a new home; a state transfer duty exemption or concession, which is often worth more than the grant, as set out in the guide to stamp duty on property purchases; and a withdrawal under the First Home Super Saver Scheme, covered in the First Home Super Saver guide.

The interaction that requires care is timing. Grants are generally paid at settlement and duty relief is claimed at the transaction, whereas a First Home Super Saver release must be requested from the Australian Taxation Office and can take time to arrive. The guide to combining grants, guarantees and concessions sets out the sequencing, and the government grants section summarises what is available.

Help to Buy as an alternative

Buyers who cannot service a 95 per cent loan may find the Help to Buy shared equity scheme more useful. Under that scheme the Commonwealth takes an equity interest in the property, contributing up to 30 per cent of the price of an existing home or up to 40 per cent of a new home, which reduces the loan required rather than merely insuring it. Applications opened on 5 December 2025 and the scheme is intended to assist 40,000 households. It is open to buyers who have previously owned a home as well as to first home buyers.

The trade-off is that the Commonwealth shares in the capital growth and its contribution must be repaid. The guide to Help to Buy and shared equity examines how that affects the total cost of ownership.

Whether a low deposit purchase is appropriate

The scheme removes a real obstacle. It also makes it easier to buy with a thin equity buffer at a larger loan size, and both of those consequences are genuine. A buyer using the scheme should be satisfied that the repayment is sustainable at an interest rate several percentage points above the current one, that they have a cash reserve after settlement for the costs set out in the guide to upfront costs of buying a home, and that they can hold the property through a period of flat or falling prices without being forced to sell.

Figures in this article are indicative and current as at the date shown. Caps and scheme settings are set by the Australian Government and change, so the scheme website should be checked before any purchase is relied upon. This is general information and not personal advice. Buyers who would like their position assessed against the scheme's criteria may request a free assessment from an accredited broker.