Australian Government 5% Deposit Scheme: how first home buyers can get on the property ladder

By Peter Terlato · Last updated Wednesday, 1 October 2025

Fact Checked

Expanded measures: 1 Oct '25
Eligibility for the Deposit Scheme
What types of homes are supported?
Property price caps across regions
5% Deposit Scheme vs. LMI
Pros and cons of the scheme
Application process: 3 simple steps

The Australian Government 5% Deposit Scheme – formerly the Home Guarantee Scheme (HGS) – is an initiative administered by Housing Australia that helps eligible home buyers purchase a home sooner. It operates by providing a guarantee to a participating lender, enabling buyers to get a home loan with a smaller deposit and avoid Lenders Mortgage Insurance (LMI).

Expanded measures: effective 1 October 2025

From 1 October 2025, the 5% Deposit Scheme was expanded to incorporate significant changes aimed at making it more accessible to a wider range of Australians and first-home buyers:

Unlimited places. The annual cap on the number of available places will be removed.
No income caps. The previous taxable income caps for applicants will be eliminated.
Increased property price caps. The maximum property prices will be significantly raised. For example, the cap in Sydney will increase to $1.5 million, and in Melbourne to $950,000.
Simplified regional access. The Regional First Home Buyer Guarantee has been consolidated, simplifying access for those in regional areas.

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Eligibility for the Deposit Scheme

The scheme is composed of two different components, each with specific eligibility criteria. Applicants must be Australian citizens or permanent residents and be at least 18 years of age. Additionally, the Regional First Home Buyer Guarantee was consolidated from 1 October, 2025.

1. First Home Buyers

Purpose: To help eligible first-home buyers purchase a home sooner.
Eligibility: Must be a first-home buyer or not owned property in Australia in the last 10 years.
Deposit required: Minimum 5%.

2. Single Parents or Guardians

Purpose: Exclusively for single parents or legal guardians with at least one dependent child.
Eligibility: Applicant can't have any other property interests upon settlement of new home.
Deposit required: Minimum 2%.

What types of homes are supported?

The 5% Deposit Scheme includes a variety of residential properties, new and existing, provided they are below the price cap for the specific location. Supported property types include:

An existing house, townhouse, or apartment.
A house and land package.
Vacant land with a separate contract to build a home.
An off-the-plan apartment or townhouse.

See how the First Home Owner Grant can help you buy sooner

Property price caps across different regions of Australia

To keep the scheme targeted at affordable housing, the government sets maximum purchase prices depending on where the property is located. If the price is above the cap, the loan won’t qualify for the scheme. From 1 October 2025, these limits were increased in many areas.

Location	Previous cap	Current cap
NSW – Sydney, Illawarra, Newcastle, Lake Macquarie	$900,000	$1,500,000
NSW – other	$750,000	$800,000
VIC – Melbourne, Geelong	$800,000	$950,000
VIC – other	$650,000	unchanged
QLD – Brisbane, Gold Coast, Sunshine Coast	$700,000	$1,000,000
QLD – other	$550,000	$700,000
WA – Perth	$600,000	$850,000
WA – other	$450,000	$600,000
SA – Adelaide	$600,000	$900,000
SA – other	$450,000	$500,000
TAS – Hobart	$600,000	$700,000
TAS – other	$450,000	$550,000
ACT	$750,000	$1,000,000
NT	$600,000	unchanged
Jervis Bay Territory and Norfolk Island	$550,000	unchanged
Christmas Island and Cocos (Keeling) Islands	$400,000	unchanged

Source: Housing Australia

5% Deposit Scheme vs. Lenders Mortgage Insurance

The scheme is often misunderstood as a type of insurance. The key difference lies in who is protected and who pays. Essentially, the 5% Deposit Scheme is a more direct and cost-effective government alternative to the private Lenders Mortgage Insurance (LMI) market for eligible first-home buyers. See the table below for more information.

Feature	5% Deposit Scheme	Lenders Mortgage Insurance
Purpose	To help home buyers purchase a home with a small deposit.	To protect the lender from financial loss if the borrower defaults.
Cost	The government provides a guarantee to the lender, so the borrower does not pay a fee.	The borrower pays a premium that can cost thousands of dollars, often added to the loan amount.
Beneficiary	The borrower benefits by avoiding a large upfront cost (LMI) and getting into the market sooner.	The lender is the sole beneficiary; the borrower is not protected by the policy.

Pros and cons of the expanded scheme

The expansion of the 5% Deposit Scheme has garnered a mix of support and criticism. The table below outlines the key arguments from various sources, including NAB, the Insurance Council of Australia, the Centre for Independent Studies, real estate bodies, and economic experts.

Pros	Cons
Increased accessibility. The removal of income and location caps makes the scheme available to a broader range of first-home buyers, including those with higher incomes.	Potential for price inflation. Critics, including the Insurance Council of Australia, warn that the expansion could drive up house prices by increasing demand, especially in markets preferred by first-home buyers.
Reduces time to save. The scheme allows aspiring homeowners to enter the market with a much smaller deposit (as little as 5%), significantly reducing the time it takes to save.	Minimal impact on ownership rate. Some experts argue the scheme will primarily benefit those who would have bought a home anyway, leading to a minimal increase in the overall home ownership rate.
Eliminates LMI. Participants can avoid paying Lenders Mortgage Insurance (LMI), which can save them tens of thousands of dollars in upfront costs.	Displaces private solutions. The government's expansion into the high-LVR lending market could reduce the role of private LMI providers, potentially making the system more fragile, while simultaneously shifting risk to taxpayers.
Financial flexibility. By not tying up a large amount of cash in a deposit, buyers have more financial flexibility for other expenses like moving costs and legal fees.	Harms lower-income earners. The potential rise in prices could price out the very buyers the scheme was initially designed to help, making it harder for them to enter the market.
Boosts market activity. The changes are seen as a timely measure that, combined with other market factors like easing interest rates, could stimulate buyer activity.	Encourages high-risk borrowing. By underwriting a high percentage of the loan, the scheme may encourage "reckless borrowing and bidding," as borrowers are given a "one-way bet" where taxpayers cover losses if prices fall.

The ‘Home Loan Date’ is a key term in the 5% Deposit Scheme. It refers to the date you sign your home loan agreement with your participating lender. This date is important for several eligibility criteria, such as proving your citizenship or residency status.

The application process: 3 simple steps

The application process is managed directly through a panel of over 30 participating lenders, not through Housing Australia. Follow these steps to apply:

1. Check eligibility. Use the Housing Australia website's eligibility tool as a guide, but remember that your chosen lender will make the final assessment.

2. Contact a participating lender. Choose an authorised lender, including institutions such as Commonwealth Bank, NAB, and Westpac, as well as many smaller banks and credit unions.

3. Apply for a loan. The lender will assess your eligibility and apply to Housing Australia for a reserved place. If successful, you'll typically have 90 days to sign a contract of sale on a property.

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Peter Terlato

RG146

Senior Money Writer

Peter is a journalist with 15 years of experience, writing extensively about finance, politics, travel and lifestyle – including a decade specialising in comparisons. Peter publishes news, guides and reviews across an array of topics; from credit cards and the cash rate to car loans and capital gains.

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Australian Government 5% Deposit Scheme: how first home buyers can get on the property ladder

Expanded measures: effective 1 October 2025