Buying your first home can feel out of reach, especially when you are trying to save a deposit while also paying rent, bills and everyday expenses.
That is where the Australian Government 5% Deposit Scheme may help.
The scheme is designed to help eligible first home buyers buy a home sooner with a smaller deposit. It does this by allowing eligible buyers to purchase a home with a deposit as low as five per cent, without paying Lenders Mortgage Insurance (LMI).
It is important to understand that the scheme is not a cash payment or grant. Instead, the Australian Government provides a guarantee to the lender. This helps the lender offer a home loan with a smaller deposit.
The scheme was formerly known as the Home Guarantee Scheme, so you may still see that name used by lenders or in past information.
How does it work?
Usually, when you buy a home, lenders like you to have a deposit of 20 per cent.
If your deposit is smaller than this, your lender may ask you to pay LMI. This insurance protects the lender if you cannot repay your loan. It does not protect you as the buyer.
The 5% Deposit Scheme works differently.
Under the scheme, the Australian Government provides a guarantee to the lender for part of your home loan. This means eligible first home buyers may be able to buy with a deposit from five per cent, without paying LMI.
For example, if you were buying an $800,000 home, a five per cent deposit would be $40,000. A twenty per cent deposit on the same home would be $160,000.
Without the scheme, buying with a smaller deposit may mean you need to pay LMI, which can add tens of thousands of dollars to the cost of buying. Under the 5% Deposit Scheme, eligible buyers can avoid this cost, which may make it easier to buy sooner.
However, the scheme does not mean everyone can buy with exactly a five per cent deposit. Some buyers may still need a larger deposit, depending on their financial situation, the property they want to buy and the lender’s assessment.
You still need to apply for a home loan and show the lender you can afford the repayments.
Who can use the scheme?
The scheme is available to eligible first home buyers and some single parents or single legal guardians.
To use the scheme, you need to meet the eligibility rules, including:
- Being an Australian citizen or permanent resident,
- Being at least 18 years old,
- Buying a home in Australia,
- Planning to live in the home as an owner-occupier,
- Buying a home within the location’s property price cap,
- Applying through a participating lender, and
- Applying for an owner-occupier home loan with principal and interest repayments.
There are also rules based on your buyer type:
- First home buyers must not have owned property or land in Australia in the past 10 years. They can apply on their own or jointly with one other person, such as a partner, friend or family member.
- Single parents or single legal guardians must have at least one dependent child. They may have owned property in the past 10 years, but must not have any property interest when the new home settles. They must apply on their own.
From 1 October 2025, the scheme was expanded to remove income caps, waitlists and LMI for eligible buyers.
What types of homes can you buy?
The scheme can be used for different types of homes, including new and established houses, townhouses, apartments, house and land packages, off-the-plan purchases, and vacant land with a building contract.
In WA, the property price cap is $850,000 for Perth, and $600,000 across regional WA. This means the home you buy must be priced at or below the relevant cap for the area where it is located. Check your postcode.
What should first home buyers check?
The 5% Deposit Scheme may help reduce one of the biggest barriers to buying your first home, saving a large deposit. But it doesn’t remove the need to plan carefully.
Before applying for the scheme, check:
- Whether you meet the eligibility rules,
- Whether the property is within the price cap,
- Whether your lender participates in the scheme,
- Whether you can afford the loan repayments,
- What other upfront costs you need to pay, such as settlement, conveyancing, inspections, moving costs and any duty that applies, and
- Whether you may also be eligible for other support, such as WA’s first home buyer stamp duty concessions or the First Home Owner Grant.
A smaller deposit may help you buy sooner, but you still need to qualify for a home loan and make sure the repayments fit your budget.
Before applying, speak with a participating lender or broker and check the official scheme requirements so you understand what applies to your situation.
