What it actually is
The scheme was first called the First Home Guarantee. It’s now officially named the Australian Government 5% Deposit Scheme. It lets eligible first home buyers buy with a deposit as low as 5% — or 2% for eligible single parents or legal guardians — without paying Lenders Mortgage Insurance (LMI). LMI is a fee lenders normally charge when your deposit is small. The government guarantees part of your loan to the lender, which is why the lender can skip the LMI fee. It’s a guarantee, not a cash grant. You don’t get handed any money — your loan is simply set up differently.
What changed from 1 October 2025
- No income caps. The scheme used to exclude individuals earning over $125,000, or couples earning over $200,000 combined. That rule has been removed completely. Your income can no longer rule you out of the scheme itself — though it still affects how much you can borrow overall, through the lender’s normal check of what you can afford.
- No annual place limits. The scheme used to cap how many guarantees were available each financial year, so places could run out. That cap is gone. Every eligible applicant can now get a guarantee.
- Higher property price caps. Caps still apply, and they vary by location, but they were raised to better match current property prices in each area.
The basics of eligibility
Broadly, you need to be an Australian citizen or permanent resident. You need to be a genuine first home buyer, or not have owned property in Australia in the past ten years. You need to plan to live in the property yourself, and hold at least a 5% genuine deposit. You apply through a participating lender or their broker — not directly through the government.
Worth knowing before you rely on it
Being eligible for the scheme doesn’t automatically mean it’s the right choice for you. It also doesn’t override the lender’s own check of what you can afford — you still need to show you can repay the loan. A smaller deposit also means a bigger loan and more interest paid over time, compared to a larger deposit. It’s worth weighing that up against the benefit of getting into the market sooner.
Getting the deposit down to 5% also doesn’t mean 5% is all you’ll need upfront. Qualifying for the 5% Deposit Scheme doesn’t automatically mean you’ll qualify for a stamp duty exemption too — they’re separate schemes with their own price caps and rules, set federally and by your state respectively. You’ll also want to budget for conveyancing or solicitor fees and a building and pest inspection regardless. These costs can add up to a meaningful amount, so it’s worth getting a proper estimate — including checking both schemes against your actual price point — before you set your budget.
Sources
- Australian Government 2026, Australian Government 5% Deposit Scheme, firsthomebuyers.gov.au, viewed 9 October 2026, firsthomebuyers.gov.au.
- Housing Australia, 5% Deposit Scheme, housingaustralia.gov.au, scheme rules as published at the time of writing.