5% Deposit Scheme (formerly Home Guarantee Scheme)
By Ali Hasani, Founder and Principal Mortgage Broker at Buyvest, MFAA accredited. Last updated July 2026. Scheme settings verified against firsthomebuyers.gov.au and Housing Australia.
This guide covers who qualifies, how the guarantee works, what it saves you, and where applications come unstuck. For the wider picture see our pathways to home ownership guide, or the pre-approval to settlement walkthrough.
The short version: Buy with 5% deposit, or 2% as a single parent, and pay no LMI. Housing Australia guarantees up to 15% of the property value to your lender. There are no income caps, no limit on places and no waiting list. The NSW price cap is $1,500,000 for Sydney, the Illawarra, Newcastle and Lake Macquarie, and $800,000 elsewhere in the state. You must be buying a home to live in.
Who is eligible for the 5% Deposit Scheme?
You must be an Australian citizen or permanent resident aged 18 or over, buying a home to live in, within the price cap for your area. You need to be a first home buyer, or not have owned property or land in Australia in the last 10 years.
You do not have to be a first home buyer
This is the condition most people get wrong. The test is that you are either a first home buyer, or you have not owned a property or land in Australia in the previous 10 years. Anyone who sold up after a separation, or who moved overseas and has been renting since, may qualify even though they have owned before.
There are no income caps
The scheme has no income test at any level, whether you buy alone or with someone else. If you were previously knocked back because you earned too much, it is worth checking your position again.
Citizenship and age
You must be an Australian citizen or permanent resident and at least 18. There is no upper age limit. Other visa types are not covered, and your participating lender confirms your residency status as part of its assessment.
The property and the price cap
The home must be residential and must be your place of residence, so investment purchases are excluded. Eligible property types are broad, covering houses, townhouses, apartments, house and land packages, off the plan purchases and building on vacant land with a construction contract.
In NSW the cap is $1,500,000 for Sydney, the Illawarra, Newcastle and Lake Macquarie, and $800,000 for the rest of the state. Caps are set by location and reviewed, so check your postcode against the government price cap tool before you start searching.
Applying alone or together
You can apply on your own or jointly with one other person, and that person does not have to be a partner. A friend or a family member counts. Everyone on the application has to meet the eligibility rules.
Your deposit
You need at least 5% of the property value. Separately from the scheme, most lenders apply their own genuine savings policy, typically wanting to see 5% of the purchase price held in your own account for at least three months. Savings, term deposits, shares held for three months and a First Home Super Saver Scheme release generally count. A family gift usually does not, though it can still form part of your deposit alongside genuine savings.
What is the Australian Government 5% Deposit Scheme?
It is a programme administered by Housing Australia where the government guarantees part of your loan to a participating lender. That guarantee replaces Lenders Mortgage Insurance, so you can borrow up to 95% without paying a premium.
Normally a deposit below 20% triggers LMI. Under the scheme, Housing Australia guarantees up to 15% of the property value, bridging the gap between your 5% and the 20% lenders want. The government does not give you money and does not take a share of your home. You own 100% of it from settlement, you still borrow 95%, you pay interest on the full balance, and every repayment is yours.
More than 300,000 Australians have bought or built through the scheme since it began in January 2020. Since 1 October 2025 it has run with no income caps, no limit on places and no waiting list, and the separate Regional First Home Buyer Guarantee was folded into it.
The two streams
First home buyers use the 5% deposit stream described above. Single parents and single legal guardians of dependent children use a 2% deposit stream, where the guarantee runs to 18% of the property value. That stream was previously called the Family Home Guarantee. It carries the same price caps and the same absence of income caps, but applications are solo only, with no joint applicants.
How much does the scheme save you?
The saving is the LMI premium you avoid, plus the years of saving you skip by putting down 5% instead of 20%. LMI premiums vary by insurer, lender, loan size and borrower profile, so treat any figure as indicative until your lender quotes one.
On a $600,000 purchase with a 5% deposit, published estimates typically fall somewhere around $11,000 to $18,000. On a $900,000 purchase, they typically run in the region of $25,000 to $35,000. Closer to the $1.5 million cap the premium climbs substantially higher again. These are ranges, not quotes. Two buyers at the same price can be quoted materially different premiums.
The deposit gap is the larger number for most people. On a $700,000 property, 20% is $140,000 and 5% is $35,000. That $105,000 difference is usually several years of saving, during which prices may move.
Our property deposit calculator shows what a 5% deposit buys compared with 10% or 20%, and the mortgage repayment calculator shows what the resulting loan costs each month. A 95% loan means larger repayments and more interest over the life of the loan, which is the trade for getting in earlier.
Stack it with the NSW benefits. The scheme sits alongside the NSW stamp duty exemption on homes up to $800,000, and the $10,000 First Home Owner Grant on new homes under $600,000. You can also use the First Home Super Saver Scheme to build the deposit itself.
What stops applications going through?
Two things catch people who are otherwise eligible. The lender's valuation must also sit under the price cap, not just the price you agreed. And meeting the scheme rules is not the same as being approved by a lender.
The valuation has to clear the cap too
Both the purchase price and the lender's assessed value must be at or below the cap for your area. Where they differ, the lower figure is the one that matters. Buying right at $1,500,000 in Sydney leaves no room, and a bank valuation that lands differently from your contract price can put the purchase outside the scheme. Buying with a margin below the cap is the simplest protection.
Scheme eligibility is not loan approval
Housing Australia sets the scheme rules. Each participating lender then applies its own credit policy on top, and those policies vary. Serviceability assessment, treatment of casual or contract income, acceptable property types, minimum apartment sizes and postcode restrictions all differ between lenders. You can satisfy every scheme rule and still be declined on a lender's own criteria, or approved by one lender after another says no.
This is where comparing lenders matters most. More than 30 lenders are authorised on the panel, including all four major banks, and their appetites are not the same. Choosing the wrong one first can cost you weeks and leave a mark on your credit file.
Find the lender that fits your situation
We compare 35+ lenders, work out which participating lender's policy actually suits you, and handle the application. $0 cost to you.
How do you apply for the 5% Deposit Scheme?
You cannot apply to the government directly. You apply through a participating lender as part of your home loan application, and the lender confirms your eligibility and secures the guarantee.
Step 1: Check your position
Confirm the ownership test, your residency, the price cap for the postcodes you are searching, and that you have a 5% deposit that will satisfy a lender's genuine savings policy.
Step 2: Choose the right participating lender
This is the step that decides the outcome. A broker can match your income type, deposit source and property type to a lender whose policy fits, rather than starting with whoever you already bank with.
Step 3: Gather your documents
Proof of identity, recent payslips, your most recent tax return, or two years of returns if you are self employed, three to six months of bank statements, employment verification, and a list of your assets and liabilities.
Step 4: Application and pre-approval
The lender assesses your application and reserves the guarantee. Once pre-approval is issued you have 90 days to find a home and sign a contract of sale.
Step 5: Property, valuation and settlement
Buy by private treaty, at auction or off the plan. Your lender completes its valuation, issues unconditional approval and you proceed to settlement.
What are the alternatives?
Help to Buy allows a 2% deposit with the government taking an equity share of up to 40% on a new home or 30% on an existing one. Income limits apply and you cannot use it alongside the 5% Deposit Scheme, so it is one or the other.
A guarantor loan lets a family member use equity in their own property to remove LMI without giving you cash. Some lenders also waive LMI for particular professions, covered on our no LMI home loan page, with dedicated pages for doctors, dentists, lawyers, accountants, physiotherapists and others. And a 20% deposit avoids LMI outright, with the widest lender choice. Our deposit options guide compares them all.
Frequently asked questions
Do income caps still apply to the 5% Deposit Scheme?
No. There is no income test at any level, for singles or for couples. There is also no limit on the number of places and no waiting list, so eligible applicants are not competing for an annual allocation.
Do I have to be a first home buyer?
No. You qualify if you are a first home buyer, or if you have not owned a property or land in Australia in the last 10 years. You still need to be buying a home to live in and meet the other criteria, and a participating lender confirms your eligibility.
Can I use the scheme more than once?
In practice, no. Once you buy through the scheme you own property in Australia, which means you no longer meet the ownership test. The 10-year rule is measured from when you last owned, so a second use is not something to plan around. Check your position with a participating lender if your circumstances are unusual.
What happens if I need to sell within a few years?
You can sell whenever you need to. With only 5% equity at the start, though, you carry the risk if values have not moved. You cover selling costs including agent fees and marketing, plus any shortfall if you owe more than the sale price. Our benefits and risks guide covers this in full.
What if the property value falls after I buy?
The guarantee protects the lender, not you. If values fall you remain responsible for the full loan amount, and with a 5% deposit you reach negative equity faster than a buyer with 20%. This is the main risk of a low deposit purchase.
Can I rent out part of my home?
Renting a room or a granny flat while you live there yourself is generally acceptable, because the home remains your place of residence. Moving out and renting the whole property is not. Confirm the current occupancy rules with your participating lender or Housing Australia before you arrange anything.
Can I use a cash gift from family for my deposit?
Partly. Most lenders want a portion of the deposit to be genuine savings held in your own account for at least three months. A gift can sit alongside that but usually will not satisfy the genuine savings test on its own. Policies differ between lenders, which is one reason lender choice matters.
Can I refinance later?
Yes. You can refinance to another lender once you have built enough equity, subject to that lender's approval. The guarantee attaches to the original loan rather than following you, so refinancing early at a high LVR may reintroduce LMI. Waiting until you are below 80% avoids that.
Can I buy an investment property under the scheme?
No. The home must be one you live in. The scheme exists to help people into home ownership, and investment purchases are excluded.
Calculators and next steps
Run the numbers before you commit. The property deposit calculator shows what a 5% deposit supports. The mortgage repayment calculator models the repayments on a 95% loan. The home equity calculator shows your position at different LVRs. Then read the benefits and risks guide before deciding, and our first home buyer tips for everything sitting around the scheme.
Learn more about our team, or see our service areas across 220+ Sydney suburbs.
Ready to buy with a 5% deposit?
We check your eligibility, match you to a participating lender whose policy fits, and stack the NSW benefits on top. 35+ lenders compared at $0 cost to you.
Email: hello@buyvest.com.au
Related resources
Benefits and risks of a low deposit | Genuine savings | First Home Super Saver | Deposit options | Loan to Value Ratio | NSW stamp duty | Help to Buy
Service areas: 220+ suburbs across Sydney including Ryde | Parramatta | Baulkham Hills | Gladesville | Penrith | Chatswood | Castle Hill | Epping | Hornsby | Blacktown | Bankstown | Hurstville | Sutherland | Manly | Bondi | Sydney CBD and more
This article is general information only and does not take your personal circumstances into account. Scheme rules, price caps and lender policies change, so confirm current settings with a participating lender or Housing Australia before relying on them. LMI figures are indicative ranges only and vary by insurer, lender and borrower. For tax questions, speak with your accountant or financial adviser. Ali Hasani is an Authorised Credit Representative (CRN 567392) of Connective Credit Services Pty Ltd (Australian Credit Licence 389328).
The comfort of a new home, made possible through the Home Guarantee Scheme.
Buyvest helps turn these moments into reality with expert guidance.
Important stuff:
Please note that the views and opinions expressed in this post are general information only, and this is not financial advice.
Any advice and information is provided by Buyvest Pty Ltd is general in nature, for educational purposes only and is not intended to constitute specialist or personal advice. This website has been prepared without considering your objectives, financial situation or needs. Therefore, consider the appropriateness of the advice for your situation and needs before taking any action. It should not be relied upon to enter into any legal or financial commitments. Specific investment advice should be obtained from a suitably qualified professional before adopting any investment strategy. If any financial product has been mentioned, you should obtain and read a copy of the relevant Product Disclosure Statement and consider the information contained within that Statement concerning your circumstances before deciding whether to acquire the product. You can obtain a copy of the PDS by emailing hello@buyvest.com.au. If you want to change your financial circumstances, such as applying for a loan, all loan applications are subject to credit approval.
All information on this website is subject to change without notice.