The Australian Government 5% Deposit Scheme in 2026: What First Home Buyers Need to Know

The Quick & Dirty:

The Australian Government 5% Deposit Scheme lets eligible first home buyers purchase with a 5% deposit and no Lenders Mortgage Insurance (LMI). Since 1 October 2025, places are unlimited, there are no income caps, and property price caps have gone up across every stream.

In Sydney, the property price cap is $1,500,000. In Perth, the price cap is $850,000 in Melbourne the price cap is $950,000 and in Brisbane the price cap is $1,000,000. Your Broker will applyfor your spot through a participating lender (not the government) and you still need to pass the lender's normal credit assessment.

Why I love talking about this scheme

This is one of the most common questions I get from first home buyers, and honestly, it's one of my favourite conversations to have. For years, the rule was "save 20% or pay LMI", and for a lot of people in Sydney that meant a decade of saving while prices ran away from them.

The 5% Deposit Scheme changes that maths completely. But like anything in lending, the details really matter. Here's how it actually works in 2026, and we could potentially make it work for you.

So, what is the Australian Government 5% Deposit Scheme?

It's a government-backed guarantee that helps you buy with a small deposit. The scheme used to be called the Home Guarantee Scheme, so if you've heard that name, it's the same program with a new name and way better rules.

Here's how it works:

• You save a deposit of at least 5% of the purchase price.
• Housing Australia guarantees up to 15% of the property's value to your lender, which replaces the need for LMI that you would normally pay on a low-deposit loan.
• You own 100% of your home. The government doesn't take a share.

There's also a stream for single parents and legal guardians, who can buy with a minimum of 2% deposit.

Am I eligible for the 5% Deposit Scheme?

Well, lets see. The official criteria says you need to be:

• An Australian citizen or permanent resident, aged 18 or over
• A first home buyer, or someone who hasn't owned property or land in Australia in the last 10 years
• Buying a home at or below the price cap (mentioned above) for that location
• Planning to live in the home yourself (no investment properties)
• Taking out an owner-occupier loan with principal and interest repayments, for up to 30 years
• Applying on your own or with one other person, such as a partner, friend or family member

That 10-year rule is worth highlighting:

If you owned a place years ago and sold it, you still may be eligible again.

How does it work alongside stamp duty relief?

Stamp duty relief varies state to state. The 5% Deposit Scheme is a federal government initiative, but you may be able to combine it with the respective state's stamp duty relief which could give you a full stamp duty exemption or a concession depending on the purchase price.

What should I think about before using the 5% Deposit Scheme?

The scheme is genuinly an awesome head start, but it's worth asking questions.

Firstly, you're borrowing more. A 95% loan means higher repayments and more interest over time than a 20% deposit loan. Your lender will still check you can comfortably afford it without getting into hardship.

You need to live there. If you stop living in the home, the guarantee may no longer apply and your lender could ask you to pay LMI or other costs.

Watch the valuation. This is extremely important. If the bank values the property above the cap, you may lose access to the scheme even if your purchase price is under it.

Competition under the cap is real. Cotality research found homes priced under the cap grew 6.7% in the six months after the expansion, compared with 3.6% for higher-priced properties.

My suggestion - Buy a little under the property price cap which gives you some breathing room.

Frequently asked questions

Can I apply for the 5% Deposit Scheme directly with the government?

No. You can only apply through a participating lender as part of your home loan application. A broker can help you compare the participating lenders to find the right fit.

How long do I have to find a home once I'm pre-approved?

Once pre-approved, you have 90 days to find a home and sign a contract of sale.

Is there a limit on how many people can use the scheme?

Not anymore. Since the October 2025 changes, there are no waitlists and places are unlimited.

Can I buy off the plan or build?

Yes. Eligible homes include new or existing houses, townhouses, apartments, house and land packages, off-the-plan purchases, and vacant land with a building contract, as long as they're under the price cap.

As you can see, the 5% Deposit Scheme has opened the door for a lot of people who thought buying a property was well out of reach.

The key is knowing your numbers, understanding your caps, and choosing a loan that still feels comfortable in five years, not just on settlement day.

Ready to see if you qualify?

Let's chat! I do this all day, every day so here's what will happen:

• We'll jump on a call at a time that suits you (yes, i do after hours sessions too)
• I'll take a look at your individual situation including income, debts, savings etc
• I'll check which participating lenders suit your situation
• I'll show you what your borrowing capacity is and what your monthly repayments will be
• We get the ball rolling and commence an application for a pre-approval loan and apply for your spot in the scheme.

Are you excited? Me too! Book a free chat with me by clicking here.

Any information or advice contained on the April Six Pty Ltd website is general in nature only and has been prepared without considering your individual personal objectives, financial situation or requirements. Before acting or relying on this information, you must consider the appropriateness of this information with regard to your individual circumstances and objectives.

April Six Pty Ltd is a Credit Representative of Astute Financial Management Pty Ltd | Australian Credit Licence 364253

© April Six Pty Ltd | ACN: 667183735 | Credit Representative Number 554762

Eshanee Collins is the founder of April Six, a Sydney-based mortgage broker for first home buyers and first-time property investors across Australia.