| FRD Explains |
First
Home
| FRD Explains |
5% Deposit
Scheme
+ FIRST-HOME
BUYERS
What is the Australian Government 5% Deposit Scheme?
Buying your first home can feel scary. Like… “Do I need a giant deposit?”
“What if I mess this up?”
“Isn’t property investing risky?”
Take a breath. This scheme exists to make your first home feel possible, not terrifying.
The Australian Government 5% Deposit Scheme helps first-time buyers get into a home without needing a huge deposit. If you’ve saved as little as 5% of the purchase price (or just 2% if you’re a single parent or legal guardian), the Government can step in and help you buy sooner.
Normally, people who don’t have a big deposit get hit with extra costs like Lenders Mortgage Insurance (LMI). This Scheme removes that. Less money upfront. Less pressure. More breathing room.
From 1 October 2025, the rules became even simpler:
There are no income limits, no long waitlists, and no LMI. Translation? More people can apply, and you don’t have to jump through hoops wondering if you qualify.
You can use the Scheme to buy:
A small apartment
A family home
Or even land to build on
And it’s available right across Australia, so you’re not limited to one type of lifestyle or location.
+ First-Home Buyers
What Is the 5% Deposit Home Guarantee Scheme?
The Australian Government’s Home Guarantee Scheme allows eligible first home buyers to purchase a property with as little as 5% deposit, without paying Lenders Mortgage Insurance (LMI).
Since 2020, more than 248,000 Australians have used the scheme to buy their first home.
It was previously known as the First Home Loan Deposit Scheme, but now operates under the broader Home Guarantee Scheme name.
How Does the 5% Deposit Scheme Work?
Normally, if you buy a home with less than a 20% deposit, you must pay Lenders Mortgage Insurance (LMI).
Under the Home Guarantee Scheme:
The government guarantees part of your loan.
You can buy with a 5% deposit.
You avoid paying LMI.
You still borrow through a participating lender.
This reduces the upfront cash required to enter the property market.
Who Is Eligible?
Eligibility generally depends on:
Being a first home buyer
Meeting income caps
Purchasing within regional price thresholds
Using an approved participating lender
Places in the scheme are limited each financial year.
Is the Scheme Still Available?
Yes but places are capped annually.
It’s important to check:
Current property price limits in your state
Income eligibility thresholds
Whether the property type qualifies
Some house and land packages may fall within the scheme limits, while others may exceed the price caps.
Is This a Good Option for First Home Buyers?
For buyers who:
Have stable income
Can manage repayments
Struggle to save a 20% deposit
…the scheme can significantly reduce the time needed to enter the market.
However, borrowing with a smaller deposit means:
Higher loan-to-value ratio
Larger repayments relative to purchase price
Greater exposure if prices fall
It’s important to assess borrowing capacity carefully.
What Types of Homes Qualify?
To qualify under the scheme:
The purchase price must fall below your state’s price cap
The property must be owner-occupied
It can include new homes, established homes, or house and land packages (if within thresholds)
Not all new builds will qualify — particularly in higher-priced markets.
In a nutshell
The Home Guarantee Scheme allows eligible first home buyers to purchase with a 5% deposit and avoid Lenders Mortgage Insurance.
More than 248,000 Australians have used the scheme since 2020.
If you’ve delayed buying because saving a 20% deposit feels out of reach, this program may help reduce that barrier – provided you meet eligibility criteria and purchase within your state’s price limits.