Australian Government 5% Deposit Scheme – 5% Deposit for First Home Buyers

Can I buy a house with a 5% deposit?

It’s possible to purchase a home with a 5% deposit in Australia, however, the tradeoff for this is that you may be asked to pay lenders mortgage insurance (LMI), which can cost thousands of dollars. You can potentially avoid LMI by participating in one of the Australian Government 5% Deposit Scheme.

What is the Australian Government 5% Deposit Scheme?

The Australian Government 5% Deposit Scheme (formerly known as the First Home Guarantee and the First Home Loan Deposit Scheme) is a government initiative that allows eligible first home buyers to purchase a property with a deposit as low as 5%, without paying costly LMI.

Previously, the scheme featured a number of strict caps and eligibility requirements, but from 1 October 2025, a new expanded scheme kicked in, doing away with a number of these in order to give more buyers a chance to enter the market.

What changed under the expanded scheme?

From 1 October 2025, you’ll still need to have at least a 5% deposit saved to put towards the purchase of your first home, however, the federal government has:

• Removed the annual limit of 35,000 places in the scheme
• Removed the $125k income cap for singles and $200k for joint applicants
• Increased property price caps
• Replaced the Regional First Home Buyer Guarantee

What are the Australian Government 5% Deposit Scheme eligibility criteria?

To be eligible to participate in the scheme, prospective homebuyer(s) must meet all of the following criteria:

Age and citizenship status

Applicants must be at least 18 years of age and must be Australian citizens.

Income

From 1 October 2025, no income caps will apply; previously, singles were required to have a taxable income of $125,000 or less and joint applicants of $200,000 or less.

Deposit

Applicants must have a deposit of at least 5% – but less than 20% – of the property’s value.

Individual or joint applications

Joint applicants for the scheme can be married, in a de-facto relationship, friends, siblings or other family members.

Owner-occupier status

Loans are only eligible for the scheme if they’re for the purchase of a ‘residential property’ for  owner-occupiers. Applicants must intend to move into and live in the property as their principal place of residence, typically within six months after settlement. They must also continue to live in the property for as long as their loan “has a guarantee under the Scheme”.

Repayments

Loans under the Scheme normally require scheduled repayments of the principal (as well as the interest) of the loan for the full period of the home loan contract. However, if the loan relates to the purchase of vacant land to build a house on, it may be eligible even if the terms of the loan agreement permit interest-only repayments for a specified period.

Previous home ownership

Applicants must be home buyers who have not owned nor part owned a property in the past 10 years anywhere in Australia. Applicants must also not have owned or held interests in body corporate and company-owned properties in the last 10 years, regardless of whether it was an investment or owner-occupied property and whether it was ever lived in.

What are the Australian Government 5% Deposit Scheme property price caps?

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via Housing Australia

What lenders are part of the Australian Government 5% Deposit Scheme?

Three of Australia’s big four banks – Commonwealth Bank, National Australia Bank and Westpac – participate in the First Home Guarantee scheme. The full list of lenders is extensive, but can be found on the Housing Australia website.

How do I apply for the Australian Government 5% Deposit Scheme?

• Step 1: Check your eligibility: Make sure you meet the criteria for the scheme, which you can do by using Housing Australia’s Eligibility Tool.
• Step 2: Contact a participating lender: The lender will then make an assessment of your eligibility and submit an application for the scheme.
• Step 3: Complete your application: Your lender will require documents like proof of ID and proof of savings and income, as well as a signed statutory declaration confirming that you are eligible to take part in the scheme.
• Step 4: Search for a home: You have 90 days after you receive conditional approval to find, negotiate for and sign a contract on a property.
• Step 5: Buy your home and move in: Once the house contract is settled and final approvals are made, you will be able to move in to your new home (unless the property is a new build, meaning different rules will apply).
• Step 6: Make sure you meet ongoing eligibility criteria: To retain the guarantee, you will need to keep living in your home as an owner occupier.

What are the rules around moving in?

Depending on the kind of property you’ve purchased, the rules around when you’ll need to move in are slightly different.

• Existing home: Move in within six months of settlement of your home loan.
• House and Land Package: Start building your home within 12 months and finish building your home within 24 months of the settlement date for your home loan, and you must move into the property within six months of an occupancy certificate being issued.
• Separate contracts for land purchase and home construction: Enter into an eligible building contract within six months, start building your home within 12 months, and finish building your home within 24 months of the settlement date for your home loan, and you must move in within six months of an occupancy certificate being issued.
• Off-the-plan purchase: You must have signed the contract of sale before the settlement date for your home loan, and you must move into the property within six months of the occupancy certificate being issued.

What happens if I can’t meet the contract conditions?

It is important to note that in most cases, scheme applicants must be living in their home six months after their loan settles (or a certificate of occupancy is issued). If this does not happen, Housing Australia states that the home loan would no longer be covered by the scheme. This could mean your lender may require you to pay fees and charges, and/or take out LMI.

What types of homes can I buy under the Australian Government 5% Deposit Scheme?

While the First Home Owner’s Grant scheme typically only applies to new or newly built homes, under the Australian Government 5% Deposit Scheme an eligible first home buyer could also purchase the following types of property, according to Housing Australia:

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

It’s worth noting there are price limits that apply to homes under the Australian Government 5% Deposit Scheme, which differ from region to region, and a list of eligibility requirements, too.

Can the Australian Government 5% Deposit Scheme be combined with other government incentives?

The Australian Government 5% Deposit Scheme can be combined with other first home buyer assistance available from the federal, state or territory governments. These could include the First Home Owners Grant (FHOG), a national scheme administered locally in most states and territories, which provides financial incentives for people to build or buy brand new homes, as well as the First Home Super Saver Scheme.

Stamp or transfer duty concessions could also apply to both new and existing homes.

Learn more about FHB assistance from each state

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