One of the biggest obstacles as a first home buyer is often saving for a deposit and the cost of lenders mortgage insurance (‘LMI’). The 5% Deposit Scheme (‘Scheme’) is a federal government initiative designed to help eligible home buyers to purchase a property without the need to save the traditional 10-20% deposit or pay LMI.
How does the Scheme work?
Traditionally, buyers will have to pay LMI if they wish to borrow more than 80% of the purchase price. LMI is typically up to 6.5% of the loan, which can become quite costly.
This Government guarantee:
- allows you to purchase a property with a deposit of 5% for first home buyers or 2% for single parents or legal guardians;
- allows the participating lender to lend you up to 95% or 98% of the property value; and
- does not require you to pay the cost of LMI.
Example: you buy a home for $700,000 with a 5% deposit ($35,000) instead of a 20% deposit ($140,000). You can apply to borrow the remaining 95% ($665,000) without needing to pay LMI.
This not only makes home ownership more accessible but also helps first home buyers and single parents or legal guardians to purchase a home sooner without needing to save for a larger deposit and upfront fees.
What recent changes have been made?
The Scheme used to have income caps and limited places available. This Scheme has been expanded and from 1 October 2025:
- There is no longer a limit on the number of places available;
- There are no income caps; and
- Property price caps have increased across all states and territories.
It is important to check whether your purchase price falls within the property price cap for your location and that your lender is a Participating Lender.
Who is eligible?
To access the Scheme, you must meet the following eligibility criteria:
- Be an Australian citizen or permanent resident over 18 years old;
- Have saved a minimum of 5% deposit for first home buyers or 2% for single parents or legal guardians;
- Buy a home in Australia priced at or below your location’s price cap;
- Live in the home as your principal place of residence;
- Apply for an owner-occupier home loan with principal and interest repayments from a Participating Lender, up to 30 years (plus up to 3 years to build a new home).
For first home buyers, you must also:
- have not owned a property or land in Australia in the last 10 years; and
- Apply individually or if jointly with another person, the other person must also meet the eligibility criteria.
For single parents or legal guardians, you:
- Do not have to be first home buyers but must not own any other property once your new property settles; and
- Cannot purchase a property with another person.
To see whether you qualify for the Scheme, you can use Housing Australia’s eligibility checker tool.
Note, your loan approval is still dependent on whether you meet the Participating Lender’s credit and approval criteria.
Need help?
If you would like more information, give our property lawyers a call at (03) 9590 6180 or email us at hello@wlegalgroup.com.au
