5% Deposit (Home Guarantee Scheme)
This guide explains how the scheme works, who is eligible, the different programmes available, and how to apply. For a complete overview of all pathways to home ownership, including how the Home Guarantee Scheme fits alongside other government benefits, start with our first home buyers journey guide.
Quick summary: The government guarantees up to 15% of the property value to your lender, allowing you to buy with just 5% deposit and avoid LMI (saving $10,000 to $65,000+). The scheme covers new and established properties within price caps ($1,500,000 for Sydney). You must be a first home buyer, Australian citizen or permanent resident, and intend to live in the property.
What is the Home Guarantee Scheme?
The Home Guarantee Scheme is an Australian Government initiative that helps eligible home buyers purchase property with a smaller deposit by providing a guarantee to approved lenders. Under a traditional home loan, you need a 20% deposit to avoid LMI. With anything less than 20%, you pay LMI which can cost between $10,000 and $50,000+ depending on the loan size. LMI protects the lender if you default, but it is an additional cost you bear.
Under the Home Guarantee Scheme, you can purchase with just a 5% deposit. The government guarantees up to 15% of the property value to the lender, effectively making up the difference between your deposit and the 20% threshold. This means you pay $0 in LMI and can enter the market years earlier than if you were saving the full 20%.
Real savings example
On a $700,000 property, a traditional 20% deposit would require $140,000. Under the Home Guarantee Scheme, you need just $35,000 (5%) plus $0 in LMI. That is $105,000 less deposit required plus approximately $27,947 saved in LMI. On an $800,000 property, the LMI savings alone are approximately $31,940, and on a $1,500,000 Sydney property, you save approximately $65,861 in LMI.
Use our property deposit calculator to see exactly how a 5% deposit changes your numbers compared to 10% or 20%.
Home Guarantee Scheme programmes
The scheme includes distinct programmes for different buyer situations.
First Home Guarantee
The First Home Guarantee is specifically designed for first home buyers purchasing their first property. The minimum deposit is 5%, and you must be a first home buyer or have not owned a property in the last 10 years. You can purchase new or established properties, and the scheme is available to individuals, couples, and friends buying together.
The property price caps for 2025 to 2026 are $1,500,000 for Sydney and regional centres in NSW (including Illawarra, Newcastle, and Lake Macquarie), and $800,000 for other areas in NSW. These caps determine the maximum property price you can purchase under the scheme.
Family Home Guarantee
The Family Home Guarantee is designed for single parents or legal guardians with dependants. The minimum deposit is just 2%, and you can be either a first home buyer or a previous owner re-entering the market. The purpose is to help single parents and legal guardians who might otherwise struggle to save a larger deposit while supporting a family.
Eligibility requirements
To access the First Home Guarantee, you must meet all of the following criteria.
First home buyer status
You must not currently own a property in Australia, including investment properties. Your spouse, partner, or co-borrower must also not own a property in Australia. Alternatively, you may qualify if you have not owned a property or land in Australia in the last 10 years.
Citizenship, age, and property requirements
You must be an Australian citizen or permanent resident and at least 18 years old (no upper age limit). The property must be residential (a house, apartment, or townhouse), can be new or established, must fall within the price caps for your region, and must be your primary place of residence. Vacant land is only eligible if accompanied by a construction contract.
Deposit requirements
You need a minimum 5% deposit that meets genuine savings requirements. Acceptable sources for your deposit include personal savings held for 3+ months, the First Home Super Saver Scheme withdrawal, and in some cases a gift from family combined with genuine savings (lender policies vary).
Benefits of the Home Guarantee Scheme
Enter the market sooner
Instead of saving for years to reach a 20% deposit, you can purchase with just 5%. This means years less time saving, the ability to start building equity sooner, stopping rent payments and beginning to pay off your own home, and benefiting from potential capital growth earlier. Our mortgage repayment calculator can show you what your repayments would look like at different property prices with a 5% deposit.
Save thousands on LMI
Avoiding Lenders Mortgage Insurance provides substantial savings. On a $600,000 purchase with a 5% deposit, you save approximately $23,955 in LMI. On an $800,000 purchase, you save approximately $31,940. And on a $1,500,000 purchase in Sydney, the saving jumps to approximately $65,861. Understanding your Loan to Value Ratio (LVR) helps you see exactly why avoiding LMI at 95% LVR is so valuable.
Access competitive interest rates
Despite the smaller deposit, you typically access standard variable or fixed rates with no "high LVR" rate premiums. You receive competitive rates from participating lenders with the same features and flexibility as standard loans. Our choosing the right finance guide explains the different loan types and features available to you.
Combine with other benefits
The Home Guarantee Scheme can be combined with other first home buyer benefits for maximum impact. You can access NSW stamp duty concessions saving up to $30,529, claim the First Home Owner Grant worth $10,000 on new properties, and use the First Home Super Saver Scheme to build your deposit faster through superannuation. Read about the full benefits and risks of the Home Guarantee Scheme to make an informed decision.
Understanding genuine savings requirements
One critical aspect of accessing the Home Guarantee Scheme is meeting genuine savings requirements. Most lenders require that your 5% deposit demonstrates financial discipline through savings accumulated over time.
Accepted sources of genuine savings include bank account savings held for 3+ months, term deposits held for 3+ months, shares or managed funds held for 3+ months, and First Home Super Saver Scheme withdrawals. Sources that are not always accepted include recently received cash gifts, tax refunds, irregular bonuses, proceeds from selling assets such as cars or jewellery, and borrowed funds.
Important: Different lenders have different policies on what counts as genuine savings. Some may accept gifts from family if accompanied by substantial genuine savings of your own. Working with a mortgage broker who understands each lender's specific requirements is crucial for a smooth application.
How to apply for the Home Guarantee Scheme
You cannot apply directly to the government. You must apply through a participating lender, which is where a mortgage broker adds significant value by accessing multiple lenders on your behalf.
The process begins with confirming your eligibility by checking you meet all criteria, reviewing income thresholds and property price caps, ensuring you have genuine savings for a 5% deposit, and verifying the property will be your primary residence.
Next, you engage a mortgage broker or participating lender. We work with 35+ lenders and can find participating lenders with available places, match you with lenders whose criteria you meet, and handle the application process efficiently. We then help you gather required documents including proof of identity, recent payslips (last 2 to 3 months), tax returns (most recent, or two years if self-employed), bank statements showing 3 to 6 months of savings, employment verification, and details of your assets and liabilities.
Your lender assesses your application and submits it to the government for guarantee approval. Once the government confirms a place is available and approves the guarantee, the lender issues your pre-approval. You can then search for a property within your budget and the scheme's price cap. Whether you buy through private treaty, auction, or off the plan, the property must meet the scheme's requirements. Once you find a property and exchange contracts, your lender conducts a bank valuation, issues final loan approval, and you proceed to settlement.
Get expert guidance on the Home Guarantee Scheme
We help first home buyers across Sydney and NSW access the Home Guarantee Scheme through participating lenders, with 35+ lenders compared at $0 cost to you.
Alternatives and complementary options
If the Home Guarantee Scheme does not suit your situation, or you want to explore additional options, several alternatives are available. The Help to Buy (Shared Equity) Scheme in NSW allows you to purchase with just a 2% deposit, with the government co-owning up to 40% of a new property or 30% of an existing one. A family guarantee lets parents use their property equity to help you avoid LMI without providing cash. Some lenders offer professional LMI waivers for doctors, lawyers, and accountants. And the traditional approach of saving a 20% deposit avoids LMI entirely. Our comprehensive guide on deposit options for first home buyers explores all possibilities, and our property purchase and valuation guide explains how each buying method works in practice.
Frequently asked questions
How many times can I use the Home Guarantee Scheme?
You can only use the Home Guarantee Scheme once in your lifetime. Once you have purchased a property using the scheme, you cannot access it again, even if you sell that property and would otherwise qualify as a first home buyer again.
What happens if I need to sell within a few years?
You can sell whenever you need to. However, with only 5% equity initially, you may face challenges if property values have not increased. You will need to cover selling costs including agent fees and marketing, plus any shortfall if you owe more than the sale price. This is why understanding market conditions and having an emergency buffer is important. Read our benefits and risks guide for a full picture.
Can I rent out part of my home?
Yes, as long as the property remains your principal place of residence. You can rent out a room or granny flat while living there yourself. However, you cannot move out and rent the entire property without breaching the scheme requirements. Contact Housing Australia for the most current information on occupancy rules.
Are new builds or established homes better under the scheme?
Both are eligible, and each has advantages. New builds may qualify for the First Home Owner Grant worth $10,000, while established homes offer immediate occupancy and known neighbourhood characteristics. The best choice depends on your personal circumstances, budget, and preferences. Our guide on how to buy the right property covers detailed comparisons.
Can I use a cash gift from family for my deposit?
This depends on the lender. Most lenders require a portion of your deposit to be genuine savings held for 3+ months. Some may accept a gift if you also have substantial genuine savings of your own. Your mortgage broker can guide you to lenders whose policies accommodate your situation.
Can I refinance later?
Yes. Once you have purchased under the Home Guarantee Scheme, you can refinance to another lender later. The government guarantee remains with the original loan, but you are free to refinance once you have sufficient equity, subject to approval from the new lender.
What if the property value falls after I buy?
The government guarantee protects the lender, not you. If property values fall and you need to sell, you are still responsible for the full loan amount. This is one of the key risks of buying with a 5% deposit that you should understand before committing.
Can I buy an investment property under the scheme?
No. The property must be your principal place of residence. You must move in within 12 months and intend to live there as your primary home. The scheme is specifically designed to help people into home ownership, not investment.
Take the next step
The Home Guarantee Scheme represents a significant opportunity for first home buyers to enter the property market sooner and more affordably. Use our property deposit calculator to see how a 5% deposit changes your numbers, our home equity calculator to understand LVR at different deposit levels, and our mortgage repayment calculator to model your ongoing costs.
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Related resources for first home buyers
Continue building your knowledge with our genuine savings requirements guide to understand what lenders expect, our Home Guarantee Scheme benefits and risks guide for the full picture, our First Home Super Saver Scheme guide to accelerate your deposit through superannuation, our deposit options guide for every pathway to your first deposit, and our Loan to Value Ratio guide to understand how your deposit affects loan terms.
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