5% Deposit (Home Guarantee Scheme)
The Home Guarantee Scheme, also known as the 5% Deposit Scheme, is a game-changing Australian Government programme that allows first home buyers to purchase property with as little as a 5% deposit without paying Lenders Mortgage Insurance (LMI).
Quick overview: This comprehensive guide explains how the Home Guarantee Scheme works, who's eligible, and how first time home buyers across Sydney, regional NSW, and Australia can access this programme to enter the property market sooner with less upfront cost.
What is the Home Guarantee Scheme?
Government guarantee explained: 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. This guarantee means you can avoid paying expensive Lenders Mortgage Insurance whilst still borrowing up to 95% of the property value.
How it works
Under a traditional home loan:
- You need a 20% deposit to avoid LMI
- With less than 20% deposit, you pay LMI worth $10,000 to $50,000+
- LMI protects the lender if you default
Under the Home Guarantee Scheme:
- You can purchase with just a 5% deposit
- The government guarantees up to 15% of the property value
- You avoid paying expensive LMI
- You can enter the market years earlier
Real example on a $700,000 property:
- Traditional 20% deposit: $140,000 required
- Home Guarantee Scheme: $35,000 deposit (5%) + $0 LMI
- You save: $105,000 in deposit plus approximately $27,947 in LMI
Home Guarantee Scheme programmes
Programme options: the Home Guarantee Scheme includes distinct programmes for different buyers, each designed to help specific groups enter the property market with reduced deposits and no LMI costs.
First Home Guarantee
The First Home Guarantee is specifically for first home buyers purchasing their first property.
Key features:
- Minimum deposit: 5% deposit minimum
- Eligibility: must be first home buyer or haven't owned a property in the last 10 years
- Property types: can purchase new or established properties
- Applicants: available to individuals, couples and friends
Property price caps (2025–26):
- Sydney: $1,500,000
- Regional centres in NSW (Illawarra, Newcastle, Lake Macquarie): $1,500,000
- NSW – other areas: $800,000
Family Home Guarantee
Designed for single parents or legal guardians with dependents.
Key features:
- Minimum deposit: 2% deposit minimum
- Eligibility: must be single parent with at least one dependent child or a legal guardian
- Previous ownership: can be first home buyer or previous owner
- Purpose: helps single parents and legal guardians to enter or re-enter property market
Eligibility requirements for Home Guarantee Scheme
Must meet all criteria: to access the First Home Guarantee, you must meet ALL of these criteria. Understanding each requirement helps you determine if you qualify and prepares you for the application process.
First home buyer status
- You currently don't own a property in Australia, including investment properties
- Your spouse, partner or co-borrower doesn't own a property in Australia
- Or have not owned a property or land in Australia in the last 10 years
Citizenship requirements
- Australian citizen, or
- Permanent resident
Age requirement
- Must be at least 18 years old
- No upper age limit
Property requirements
- Property type: must be residential property, such as house, apartment, townhouse
- Condition: can be new or established (built, not off-the-plan for established)
- Price caps: must be within price caps for your region
- Occupancy: property must be your primary place of residence
- Land restriction: cannot be vacant land unless accompanied with a construction contract
Deposit requirements
- Minimum amount: minimum 5% deposit required
- Genuine savings: deposit must meet genuine savings requirements
- Acceptable sources: can use savings, gift from family, First Home Super Saver Scheme
Benefits of the Home Guarantee Scheme
Key advantages: understanding the benefits helps you maximise your purchasing power and make informed decisions about using the Home Guarantee Scheme for your first home purchase.
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
- Start building equity sooner
- Stop paying rent and start paying off your own home
- Benefit from potential capital growth earlier
Save thousands on LMI
Avoiding Lenders Mortgage Insurance provides substantial savings:
$600,000 purchase with 5% deposit ($30,000):
- Without HGS: LMI cost approximately $23,955
- With HGS: LMI cost $0
- Savings: $23,955
$800,000 purchase with 5% deposit ($40,000):
- Without HGS: LMI cost approximately $31,940
- With HGS: LMI cost $0
- Savings: $31,940
$1,500,000 purchase with 5% deposit ($75,000):
- Without HGS: LMI cost approximately $65,861
- With HGS: LMI cost $0
- Savings: $65,861
Access competitive interest rates
Despite the smaller deposit, you typically access standard variable or fixed rates:
- No "high LVR" rate premiums
- Competitive rates from participating lenders
- Same features and flexibility as standard loans
Combine with other benefits
The Home Guarantee Scheme can be combined with other first home buyer benefits:
- NSW stamp duty concessions: save up to $30,529 in stamp duty
- First Home Owner Grant: $10,000 for new homes
- First Home Super Saver Scheme: use super for deposit
Understanding genuine savings requirements
Critical requirement: 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 genuine savings accumulated over time.
What counts as genuine savings?
Accepted:
- Savings in bank accounts held for 3+ months
- Term deposits held for 3+ months
- Shares or managed funds held for 3+ months
- First Home Super Saver Scheme withdrawal
Not always accepted:
- Recently received cash gifts
- Tax refunds
- Bonuses, unless regular
- Selling assets, such as cars or jewellery
- Borrowed funds
Important: different lenders have different policies. Some may accept gifts from family if accompanied by substantial genuine savings. Working with a mortgage broker who understands each lender's requirements is crucial.
How to apply for the Home Guarantee Scheme
Application process: you cannot apply directly to the government. You must apply through participating lenders, which include major banks, regional banks, credit unions, and non-bank lenders.
Step 1: Check your eligibility
- Confirm you meet all eligibility criteria
- Check income thresholds and property price caps
- Ensure you have genuine savings for 5% deposit
- Verify property will be your primary residence
Step 2: Engage a mortgage broker or lender
You cannot apply directly to the government. You must apply through participating lenders, which include major banks and credit unions, and non-bank lenders.
A specialist mortgage broker can:
- Access multiple participating lenders (we work with 35+ lenders)
- Find lenders with available places
- Match you with lenders whose criteria you meet
- Handle the application process efficiently
Step 3: Gather required documents
- Proof of identity, such as driver's licence or passport
- Recent payslips, last 2–3 months
- Tax returns, most recent or two years if self-employed
- Bank statements showing 3–6 months of savings
- Employment verification
- Details of assets and liabilities
Step 4: Submit application
- Lender assesses your application
- Lender submits to government for guarantee approval
- Government confirms place is available and approves guarantee
- Lender issues conditional approval
Step 5: Find a property
- Search within your budget and price cap
- Ensure property meets scheme requirements
- Make offer and exchange contracts
Step 6: Final approval and settlement
- Lender conducts property valuation
- Final loan approval issued
- Proceed to settlement
- Move into your new home!
Get expert guidance today
We help first home buyers across Parramatta, Baulkham Hills, and regional NSW access the Home Guarantee Scheme through participating lenders. Get started today.
Alternatives and complementary options
Other pathways: if the Home Guarantee Scheme doesn't suit your situation, or you want to explore additional options, consider these alternatives and complementary programmes available to first home buyers.
- Shared Equity Scheme (NSW): purchase with just 2% deposit, government co-owns up to 40%
- Family guarantee: parents use their property equity to help you avoid LMI
- Professional LMI waivers: some lenders waive LMI for doctors, lawyers, accountants
- Save larger deposit: traditional 20% deposit to avoid LMI entirely
Our comprehensive guide on deposit options explores all possibilities.
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've purchased a property using the scheme, you cannot access it again, even if you sell that property and become a first home buyer again technically.
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 haven't increased. You'll 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.
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 whilst living there yourself. However, you cannot move out and rent the entire property without breaching the scheme requirements. Please contact Housing Australia to get up-to-date information.
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, whilst established homes offer immediate occupancy and known neighbourhood characteristics. The best choice depends on your personal circumstances, budget, and preferences. Explore our guide on how to buy the right property for 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, typically held for 3+ months. Some may accept a gift if you also have substantial genuine savings. Your mortgage broker can guide you to lenders whose policies accommodate your situation.
Can I refinance later?
Yes. Once you've purchased under the Home Guarantee Scheme, you can refinance to another lender later. The government guarantee remains with the original loan, but you're free to refinance once you have sufficient equity subject to approval from the new lender.
What if property value falls?
The government guarantee protects the lender, not you. If property values fall and you need to sell, you're still responsible for the full loan amount. This is why understanding the risks is crucial.
Can I buy investment property?
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.
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. Connect with our team to review your borrowing capacity and start your first home buyer journey.
📧 Email: hello@buyvest.com.au
Related resources for first home buyers
Explore these related articles:
- Genuine savings requirements – building genuine savings to meet Home Guarantee Scheme requirements
- Home Guarantee Scheme benefits and risks – buy with low deposit and no LMI, understanding risks like higher repayments
- First Home Super Saver Scheme guide – use superannuation to grow deposit faster with tax advantages
- First home buyer deposit options – explore guarantor support, government schemes, and LMI options
- Loan to Value Ratio (LVR) guide – understanding LVR for better loan terms and avoiding extra costs
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The comfort of a new home, made possible through the Home Guarantee Scheme.
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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 ABN 91 684 841 496, Australia Credit Licence No. 567392 and 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.
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