The Australian Government 5% Deposit Scheme (previously known as the Home Guarantee Scheme) is a federal initiative that enables eligible first home buyers to purchase a property with a minimum deposit of 5 %, by having the government act as guarantor for a portion (commonly 15 %) of the home loan. This means successful applicants can avoid paying Lenders’ Mortgage Insurance (LMI), which often can run into tens of thousands of dollars.
If the buyer were ever to default on repayments, and selling the property didn’t cover the debt, the government guarantee would cover the shortfall.
From 1 October 2025, the scheme is formally rebranded and updated as the Australian Government 5% Deposit Scheme.
What changed on 1 October 2025?
On 1 October 2025, a number of key reforms took effect:
- No limit on places: There are now unlimited guarantee places — there is no cap on the number of applicants who can access the scheme.
- Income caps removed: The prior income thresholds (e.g. $125,000 for singles / $200,000 for couples) were abolished. Applicants of all income levels can apply.
- Higher property price caps: The maximum eligible property prices have been significantly increased across most states and territories.
- Regional scheme folded in: The prior separate “Regional First Home Buyer Guarantee” is being closed to new applicants, and regional buyers will simply use the standard first home buyer path under this scheme.
- Simplicity and rebrand: The scheme is now more streamlined under a single name.
These changes broaden access and simplify the scheme operation.
Who is eligible (and who isn’t)?
Basic eligibility criteria
To qualify under the new scheme (from 1 October 2025 onward), applicants generally must:
- Be an Australian citizen (in past versions, permanent residents were sometimes eligible, but the restructured scheme emphasises citizenship
- Be at least 18 years old
- Be a first home buyer (i.e. not have held property previously) and intend to live in the property (owner-occupier)
- Have saved at least 5 % deposit (excluding LMI, since LMI is waived under the scheme)
- Purchase a property that is within the relevant price cap for the area)
- Use a participating lender (not all lenders may participate)
What changed from the prior scheme
- Under the old scheme, there were income caps (singles capped at $125,000, couples at $200,000) — these have been removed.
- Previously, there was a limit on how many participants each year — that has now been removed.
- The separate regional guarantee has been discontinued for new applicants; regional buyers now use the general scheme.
Note: If an application was lodged before 1 October 2025, the old rules (income caps, place limits) may still apply.
What are the new property price caps?
Here is a summary of some of the updated caps, effective from 1 October 2025:
| State / Territory | Capital City / Major Regional | New Price Cap |
| NSW (capital city & regional centre) | Sydney etc. | $1,500,000 |
| NSW (other regional) | Other parts of NSW | $800,000 |
| Victoria (capital & regional) | Melbourne, Geelong | $950,000 |
| Victoria (other) | Rest of Victoria | $650,000 |
| Queensland (capital & regional) | Brisbane, Gold Coast, Sunshine Coast | $1,000,000 |
| Queensland (other) | Other QLD areas | $700,000 |
| Western Australia (capital) | Perth | $850,000 |
| Western Australia (other) | Regional WA | $600,000 ( |
| South Australia (capital) | Adelaide | $900,000 |
| South Australia (other) | Regional SA | $500,000 |
| Tasmania (capital) | Hobart | $700,000 |
| Tasmania (other) | Regional TAS | $550,000 |
| ACT | Canberra | $1,000,000 |
| Northern Territory (NT) | Darwin & region | $600,000 |
| Jervis Bay & Norfolk Islands | Islands | $550,000 |
| Christmas / Cocos Islands | Remote | $400,000 |
Under the old scheme, caps were much lower — for example, in NSW, the cap was $900,000. However, even with the higher caps, many median home prices still exceed them, particularly in major capitals.
How much deposit do you need (and what additional costs apply)?
You must provide a deposit equal to 5 % of the purchase price of the property. For example:
- For a $1,500,000 home in Sydney, a 5 % deposit is $75,000
- For a $950,000 property in Melbourne, a 5 % deposit is $47,500
Because the government backs part of the loan and no LMI is charged, eligible buyers can avoid paying tens of thousands in mortgage insurance premiums. (NAB)
But — there are still other fees and costs you must budget for, including:
- Stamp duty (varies by state/territory; some jurisdictions offer concessions or exemptions for first home buyers)
- Legal / conveyancing costs
- Building and pest inspections
- Loan establishment fees, valuation fees
- Ongoing interest and loan repayments
One caution: while you avoid LMI, servicing a 95 % loan means higher interest payments and more risk if property values decline.
Pros and cons of the scheme
Advantages
- Lower barrier to entry: You can enter the market with just a 5 % deposit rather than needing 20 % or paying LMI.
- Significant savings on LMI: For example, someone buying a $1 million home with a 5 % deposit may avoid an LMI fee of ~$34,000 (or more) depending on lender/insurer.
- More homes eligible: The higher price caps unlock more properties for access under the scheme.
- Increased competition / access: Unlimited places mean no waitlist or quota constraints.
- Speeds up home ownership: Reduces the time it takes to save a large deposit.
Risks and downsides
- Higher loan amount / interest cost: Because you’re borrowing 95 %, you’ll pay more interest over time.
- Risk of negative equity: If property values fall, you may owe more than the property is worth.
- Not all properties qualify: The scheme only applies to certain property types and values (within the price caps).
- Stamp duty still applies: Especially in high-value markets, stamp duty can be substantial.
- Market inflation concerns: Some analysts warn the scheme might push up house prices. Treasury modelling predicts a 0.5 % increase over six years, though critics argue increases could be sharper.
- Affordability stress: Even if you’re eligible, high repayments may stretch finances — some studies warn many qualifying buyers still can’t comfortably meet repayments.
How to apply (or prepare to apply)
- Check your eligibility using the government’s tool (at firsthomebuyers.gov.au) or via participating lenders.
- Confirm which lenders participate — not all lenders will join the scheme, so you must apply via a participating lender.
- Obtain loan pre‑approval via a participating lender, along with the scheme application.
- Find and contract a suitable property within your area and under the price cap.
- Submit your scheme application to Housing Australia (via your lender).
- If approved, settlement proceeds under the normal conveyancing processes.
If your contract was signed prior to 1 October 2025 but settlement is after, there are transitional provisions — your application might still qualify under the new rules depending on timing.
FAQs (Frequently Asked Questions)
- How has the First Home Buyer (Guarantee) Scheme changed?
- It is now rebranded as the Australian Government 5% Deposit Scheme.
- Income caps (which limited access by earnings) have been removed.
- There is now no limit on participants (no quota or places cap.
- Property value caps have been increased in most regions.
- The regional scheme has been merged, simplifying the scheme structure.
- Who is now eligible under the 5% Deposit Scheme?
- Australian citizens aged 18 or older
- First home buyers who intend to live in the property
- Applicants who have saved at least a 5 % deposit
- Buyers who purchase within the applicable local price cap
- Must use a participating lender
Importantly, income is no longer a barrier.
- Do I still need to provide my tax Notice of Assessment?
No — for applications submitted on or after 1 October 2025, you are no longer assessed against income caps. Thus, the requirement to produce a Notice of Assessment for income verification is no longer necessary for new applications after that date.
- If I signed a contract before 1 October but settle after, which rules apply?
If your scheme place is applied for on or after 1 October, your application will be assessed under the new rules. However, if your application was submitted before 1 October, the previous criteria (income caps, place limits) will apply.
- Does the scheme cover all types of property (houses, units, land)?
Generally yes — as long as the property’s value is under the cap, and it meets lender security standards (e.g. acceptable dwelling). Some properties, such as off-the-plan or certain uses, may have additional rules depending on the lender. Always check with your lender.
- Will this scheme push up house prices?
There is risk of upward price pressure. The government’s modelling estimates a 0.5 % increase over six years. However, some analysts warn the impact could be more significant.
- Can I stack this with other first home buyer concessions or grants?
Yes — in many states you can still apply for state/territory first home owner grants, stamp duty concessions, or exemptions, where available, in addition to this scheme. This varies by jurisdiction.
Source: Housing Australia, NAB
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