The Australian Government 5% Deposit Scheme helps eligible buyers get into a home with a small deposit and no Lenders Mortgage Insurance (LMI). First home buyers need a deposit of at least 5% of the property value, while single parents and single legal guardians can qualify with 2%. Since 1 October 2025 the scheme has had no income caps and no limit on places.
The government guarantees part of your loan to the lender, which is why LMI is not charged. You still need to meet the lender’s normal credit rules, buy under the price cap for your area and live in the home. In NSW the cap is $1.5 million for Sydney and regional centres and $800,000 elsewhere.
What is the 5% Deposit Scheme?
The 5% Deposit Scheme, formerly known as the Home Guarantee Scheme, is run by Housing Australia on behalf of the Australian Government. The official website says it is for first home buyers with a minimum 5% deposit, or single parents or legal guardians with a minimum 2% deposit, and that from 1 October 2025 the changes meant no income caps, no waitlists and no LMI (First Home Buyers, checked 3 October 2026).
Normally, borrowing more than 80% of a property’s value means paying LMI. Under the scheme, the government guarantee covers the lender instead, so you can borrow up to 95% (or 98% on the single-parent pathway) without that premium.
Who is eligible for the 5% Deposit Scheme?
According to the scheme’s official information guide, first home buyers must (Information Guide, checked 3 October 2026):
- Be Australian citizens or permanent residents at the date they sign the home loan.
- Be at least 18 years old.
- Be a first home buyer, or not have owned property in Australia in the last 10 years.
- Have a deposit of at least 5% of the property value but less than 20%.
- Buy or build a home to live in, moving in within 6 months of settlement (or of the occupancy certificate for a new build).
- Take an owner-occupier, principal and interest loan with a term of up to 30 years from a participating lender.
You can apply alone or with one other person, such as a partner, friend or family member. Loans with three or more borrowers do not qualify.
How does the 2% single-parent pathway work?
The single-parent pathway, previously called the Family Home Guarantee, is for single parents or single legal guardians of one or more dependent children. You need a minimum 2% deposit. You do not have to be a first home buyer, but you must not hold any other property interest once the new home settles (Single Parents Guide, checked 3 October 2026). If you qualify as both a first home buyer and a single parent, the guide says you must apply as a single parent.
What are the NSW price caps?
Both the purchase price and the lender’s valuation must be at or below the cap for the location (Property Price Caps, checked 3 October 2026).
| NSW location | Price cap |
|---|---|
| Sydney and regional centres | $1,500,000 |
| Other areas of NSW | $800,000 |
The official page lists the NSW regional centres as Central Coast, Coffs Harbour - Grafton, Illawarra, Mid North Coast, Richmond-Tweed, and Newcastle and Lake Macquarie. Some suburbs span more than one postcode, so check the postcode search tool and confirm with your lender before you make an offer.
Which lenders offer the 5% Deposit Scheme?
You cannot apply to Housing Australia directly. Applications go through a participating lender, which assesses your eligibility and submits the guarantee request. The official participating lenders page says more than 30 lenders are authorised, including the major banks and many mutual banks and credit unions (Participating Lenders, checked 3 October 2026).
Being eligible for the scheme does not mean a lender will approve your loan. Each participating lender still applies its own credit policy, so the lender that suits your income type, deposit source and property matters. A broker can help compare participating lenders, although no broker’s panel covers every lender.
How does it compare with Help to Buy and paying LMI?
These are three different ways to buy with less than 20% saved.
| Feature | 5% Deposit Scheme | Help to Buy | Standard loan with LMI |
|---|---|---|---|
| Minimum deposit | 5% (2% single parents) | 2% | Depends on lender |
| LMI | Not charged to eligible buyers | Not required | Usually above 80% LVR |
| Income caps | None since 1 October 2025 | $103,000 single, $165,000 joint or single parent | None from the scheme |
| How it works | Government guarantees part of your loan | Government owns up to 30% (existing) or 40% (new) of the home | You borrow more and pay an insurance premium |
| Who shares future value | You keep all of it | Government shares gains and losses in proportion | You keep all of it |
| Investment property allowed | No | No | Possible, depending on lender |
Help to Buy figures are from the Help to Buy page (checked 3 October 2026). The two government schemes cannot be used together, according to the 5% Deposit Scheme information guide.
Paying LMI can still suit buyers above the price cap or who may rent the property out later.
What happens after settlement?
The guarantee is not permanent. The information guide says it ends if, for example, you rent the property out, refinance to a lender that is not a participating lender, borrow more against the property, sell, or your scheduled repayments bring the loan down to 80% or less of the property value. If the guarantee ends while your loan is still above 80% LVR, your lender may charge LMI or other costs.
Common 5% Deposit Scheme mistakes
- Ignoring the valuation. A lender valuation above the cap can rule the property out, even if your contract price fits.
- Having too much saved. If you have 20% or more left after purchase costs, the guide says the loan will not be eligible.
- Moving savings to look eligible. The guide warns against restructuring finances, such as transferring money to someone else, to meet the deposit rules.
- Forgetting other costs. No LMI does not mean no costs. Duty, legal fees and a buffer still apply.
- Missing the deadline. Once pre-approved, the official website says you have 90 days to find a home and sign a contract.
- Assuming approval is automatic. The lender still checks your income, debts, living expenses and repayment capacity.
What should you do next?
Start by checking your eligibility, then work out how much you can borrow and your full funds to complete. Our first home buyer loan checklist for NSW covers the documents and steps in order, and how much can I borrow for a home loan explains how lenders work out your limit.
To compare this scheme with NSW duty help, the new homes grant and FHSS, read first home buyer schemes in NSW. If you are deciding between a 5%, 10% or 20% deposit, see how much deposit you need in Sydney. For help matching the scheme to a participating lender, visit our first home buyer support page. All lending is subject to lender approval.