The Australian Government 5% Deposit Scheme, explained

The Quick Version

• The scheme lets eligible first home buyers purchase with as little as a 5% deposit.
• Since October 2025 it has unlimited places, no income caps, and higher property price caps.
• It can help eligible buyers skip Lenders Mortgage Insurance (LMI), which can save a chunk of money.
• Buying with a smaller deposit means borrowing more, so it's worth understanding the trade-off.
• Whether it's a fit depends entirely on your situation. That's what a chat with a broker is for.

If you've been saving for your first home and quietly despairing at how long a 20% deposit takes to pull together, there's a government scheme worth understanding. It's been around in various forms for a few years, but it changed significantly in late 2025, and the new version opens the door to a lot more people.

Here's the plain-English version of how the Australian Government 5% Deposit Scheme works in 2026, who it's for, and the things worth knowing before you get excited.

What the scheme actually is

The 5% Deposit Scheme is a Federal Government program that lets eligible first home buyers buy a home with a deposit of just 5%, instead of the 20% that's traditionally been the goal.

It does this by guaranteeing the portion of your loan that would normally need to be covered by your deposit. In simple terms, the government acts as a kind of backer for part of your loan, which gives lenders the confidence to lend to you with a smaller deposit. And, crucially, without charging you Lenders Mortgage Insurance.

That last part is a big deal, and we'll come back to it.

What changed in October 2025 (and why it matters)

The scheme used to be far more restrictive. There were limited places each year, income caps that ruled out higher earners, and property price caps that were often too low to be useful in the more expensive capital cities.

From 1 October 2025, that changed. The updated scheme brought in three significant differences:

1. Unlimited places

Previously, the scheme had a capped number of spots each financial year, and they ran out. People would miss the window and have to wait. Now there's no cap on the number of places. Eligible first home buyers can access it whenever they're ready, rather than racing a queue.

2. No income caps

The old scheme excluded buyers earning above a certain threshold. The updated version removed income caps entirely for first home buyers. That means higher-earning professionals can now qualify, even though they were often locked out before despite still finding it hard to save a full deposit in expensive markets.

3. Higher property price caps

Each area has a maximum property price you can buy under the scheme. These caps were lifted in the update, which makes the scheme genuinely usable in more suburbs and cities, rather than only in the cheapest pockets of the market.

Put together, these three changes turned a narrow, hard-to-access program into something a much broader group of first home buyers can realistically use.

Who's eligible?

Eligibility rules can shift, and the finer details are set by Housing Australia, but the general criteria look like this:

• You're an Australian citizen or permanent resident (this can vary, so it's worth checking your specific status).

• You're a first home buyer, or you haven't owned property in Australia for a set period.

• You intend to live in the home, it's for owner-occupiers, not investors.

• The property you're buying sits within the price cap for your area.

• You meet the lender's normal serviceability checks, in other words, you can comfortably afford the repayments.

Eligible single parents may also be able to access an even lower deposit threshold under a related part of the scheme. The rules here are specific, so it's one to check properly for your own situation.

The honest part: a smaller deposit means a bigger loan

This is the bit that gets glossed over in a lot of the excitement, and we'd rather be straight with you about it.

Buying with a 5% deposit instead of 20% doesn't make the property cheaper. It means you're borrowing a larger percentage of the purchase price. A bigger loan means higher repayments and more interest paid over the life of the loan.

That’s not a reason to avoid the scheme. It gets people in earlier, and for plenty of buyers that's the whole point. However, a smaller deposit means a bigger loan and bigger repayments, so your income stability, your budget and your plans all come into it.

This is exactly the kind of trade-off worth talking through properly before you commit to anything.

How the scheme works alongside other support

The 5% Deposit Scheme isn't the only form of help available to first home buyers. Depending on your state and your situation, you might also be able to access the First Home Owner Grant, stamp duty concessions, or other state-based programs. Some of these can be used together.

There's also the Help to Buy scheme, a separate program where the government can contribute toward the purchase price of a home in exchange for an equity share. It works very differently to the 5% Deposit Scheme, and the two suit different situations.

Working out which combination of support applies to you, and which actually makes sense for your goals, is genuinely fiddly. It's one of the most useful things a broker can help you untangle.

So, is it worth using?

For a lot of first home buyers, the updated scheme is one of the most useful pieces of support available now. The removal of income caps and the lift in price caps, in particular, together make it accessible to people who were shut out before.

But 'useful in general' and 'useful for your situation' are two different things. The scheme means a bigger loan and bigger repayments, and it only stacks up if those repayments sit comfortably within your budget and your plans. That's the part no online article can answer for you, because it depends on numbers that are unique to you.

If you're curious whether it's a fit, that's the perfect thing to bring to a free discovery call. We'll look at where you're at, talk through what the scheme would actually mean for you, and help you understand your options, whether that ends in working with us or not.

We'll help you understand whether the 5% Deposit Scheme suits your situation.

No pressure, no obligation, just an honest conversation about where you're at.

Disclaimer

This article is general information only. It doesn't take into account your personal objectives, financial situation or needs, and it isn't financial, credit or tax advice. Before acting on anything here, consider whether it's right for your situation and seek advice from a licensed professional.