Australian Government 5% Deposit Scheme 2026: A Guide for First Home Buyers
Important Note: Government scheme rules, eligibility requirements and property price caps can change. This article provides general information only and should not be treated as personal financial advice. Always confirm the current requirements with Housing Australia and a participating lender before making a property purchase or entering into a financial commitment.
For many Australians, buying a first home isn't necessarily about finding the right property — it's about getting the deposit together.
A 20% deposit on a $700,000 property would be $140,000. For someone paying rent, managing everyday expenses and trying to build savings at the same time, reaching that figure can take years.
That's where the Australian Government 5% Deposit Scheme can make a difference. The scheme allows eligible first home buyers to purchase an eligible home with a deposit of as little as 5% and avoid Lenders Mortgage Insurance (LMI), subject to the scheme's requirements and approval from a participating lender. The scheme was expanded from 1 October 2025, with unlimited places, no income caps and higher property price caps.
If you're planning to buy your first home in 2026, understanding how the scheme works can help you work out whether it could form part of your home-buying strategy.
What Is the Australian Government 5% Deposit Scheme?
The Australian Government 5% Deposit Scheme is a government-backed home ownership initiative designed to help eligible buyers purchase a home with a smaller deposit. Under the scheme, eligible first home buyers can purchase a property with a minimum 5% deposit without paying LMI.
The Government doesn't give you the deposit. Instead, it provides a guarantee to a participating lender, reducing the lender's risk when you borrow a larger percentage of the property's value.
The scheme was formerly known as the Home Guarantee Scheme and has been expanded to make it available to more Australians.
According to Housing Australia, key features now include:
Minimum 5% deposit for first home buyers
No income caps
No LMI for eligible participants
Unlimited scheme places
No waiting list
Existing homes and new builds
Houses, townhouses and units
Higher property price caps
For first home buyers who need help understanding their borrowing position, Richmond Residential also provides first home buyer home loan services.
How Does the 5% Deposit Scheme Work?
The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase an eligible property with a deposit of as little as 5%, subject to the scheme requirements and approval from a participating lender.
The Government does not provide the deposit or lend you the money to buy the property. Instead, it provides a guarantee to a participating lender, which then allows eligible buyers to borrow a larger percentage of the property's value without paying Lenders Mortgage Insurance (LMI).
For example, if you purchase a $700,000 property with a 5% deposit of $35,000, you would generally need to borrow around $665,000, before allowing for other purchasing costs.
The scheme does not guarantee that you will be approved for that amount. Your lender will still assess your income, expenses, existing debts, employment, credit history and ability to service the proposed loan.
Who Can Use the 5% Deposit Scheme?
The scheme is available to eligible first home buyers who meet the relevant requirements. These can include requirements relating to:
Age
Citizenship or residency
First home buyer status
Deposit
Property type and price
Owner-occupier requirements
Home loan structure
Participating lender requirements
Eligibility depends on your individual circumstances, and meeting the 5% deposit requirement alone does not guarantee access to the scheme.
Housing Australia also provides a separate 2% deposit pathway for eligible single parents, so the applicable scheme may depend on your circumstances.
What's Changed for First Home Buyers in 2026?
The scheme underwent significant changes from 1 October 2025, which continue to apply in 2026. Previously, the scheme had limits on the number of places available and income caps for applicants. The expanded scheme removed these restrictions.
No Income Caps
There is no longer an income cap for eligible first home buyers using the 5% Deposit Scheme. This means higher-income first home buyers may also be able to access the scheme, provided they meet the other eligibility requirements according to Housing Australia.
However, don't confuse no income cap with no income assessment. Your lender still needs to determine whether you can comfortably afford the proposed mortgage.
Unlimited Places
Housing Australia states that the expanded scheme has unlimited places and no waiting list. This removes one of the previous concerns for buyers who were worried about missing out on an available guarantee.
Higher Property Price Caps
Property price caps were also increased from 1 October 2025.
For example, the cap for NSW capital city and regional centres increased to $1.5 million, while the cap for other NSW locations increased to $800,000. Different caps apply across the states and territories.
The applicable cap depends on the location of the property, so buyers should always check the current postcode-specific requirements before making an offer.
How Much Deposit Do You Need?
For eligible first home buyers, the minimum deposit is generally 5%.
Here's what that could look like:
Property price | 5% Deposit |
$500,000 | $25,000 |
$600,000 | $30,000 |
$700,000 | $35,000 |
$800,000 | $40,000 |
$900,000 | $45,000 |
$1,000,000 | $50,000 |
These figures are simple examples and don't include other purchasing costs.
Remember, your deposit isn't the only money you'll need when buying a property. You may also need to budget for conveyancing, inspections, insurance, government charges and other costs associated with purchasing a home.
What Properties Can You Buy?
The scheme can be used for eligible residential properties. Housing Australia states that eligible buyers can purchase:
Houses
Townhouses
Units
Existing properties
New builds
The property must also fall within the applicable price cap for its location. This is particularly important if you're looking at properties close to a price threshold. A property that appears affordable may not qualify if its purchase price or assessed value exceeds the applicable scheme limit.
What Are the Property Price Caps?
Property price caps vary depending on where you're buying.
For the expanded scheme introduced from 1 October 2025, Housing Australia published the following caps:
Location | Property Price Cap |
NSW capital city & regional centres | $1,500,000 |
NSW other areas | $800,000 |
VIC capital city & regional centres | $950,000 |
VIC other areas | $650,000 |
QLD capital city & regional centres | $1,000,000 |
QLD other areas | $700,000 |
WA capital city | $850,000 |
WA other areas | $600,000 |
SA capital city | $900,000 |
SA other areas | $500,000 |
TAS capital city | $700,000 |
TAS other areas | $550,000 |
ACT | $1,000,000 |
NT | $600,000 |
Housing Australia's definition of regional centres includes Illawarra, Newcastle and Lake Macquarie in NSW; Geelong in Victoria; and Gold Coast and Sunshine Coast in Queensland.
Because property price caps and scheme rules can change, check the current requirements for the specific property postcode before proceeding.
Do You Still Avoid Lenders Mortgage Insurance?
Yes. One of the key features of the 5% Deposit Scheme is that eligible buyers can purchase an eligible property with a deposit as low as 5% without paying Lenders Mortgage Insurance (LMI).
Normally, borrowers with a smaller deposit may need to pay LMI because the lender is financing a larger percentage of the property's value. Under the Government-backed scheme, the guarantee allows eligible buyers to avoid this additional cost.
However, a smaller deposit also means you generally need to borrow more. This can result in higher mortgage repayments and more interest paid over the life of the loan compared with buying with a larger deposit.
How Do You Apply for the 5% Deposit Scheme?
Applying for the 5% Deposit Scheme involves more than meeting the minimum deposit requirement. You also need to understand your borrowing capacity, prepare your finances and documents, and find a property that meets the scheme requirements.
Step 1: Check Your Eligibility
Before looking at properties, establish whether you meet the scheme requirements. Consider your deposit, first home buyer status, debts and intended property. It is also a good time to review your budget and regular expenses so you have a clearer idea of how much you could comfortably allocate towards mortgage repayments.
Step 2: Work Out Your Borrowing Capacity
Having a 5% deposit does not determine how much you can borrow. Your lender will assess your income, expenses, existing debts and other financial commitments to determine your borrowing capacity. Reducing unnecessary debts, such as credit card balances or personal loans, may help improve your borrowing position.
Step 3: Prepare Your Savings and Documents
Even if you've reached the 5% deposit threshold, keeping additional savings can provide a useful financial buffer for unexpected costs. You should also prepare documents your lender may require, including evidence of your income, savings, debts and identification. It's important to budget for other costs associated with buying a property, such as conveyancing, inspections, insurance and applicable government charges.
Step 4: Speak With a Participating Lender
The scheme is accessed through participating lenders rather than by applying directly to Housing Australia. Participating lenders assess your home loan application and determine whether you meet both their lending requirements and the scheme's eligibility criteria.
Step 5: Obtain Pre-Approval
Getting mortgage pre-approval can help you understand your potential borrowing position before you start making offers. Pre-approval can also give you a clearer budget when searching for properties, although it does not guarantee final loan approval.
Step 6: Find an Eligible Property
Once you understand your budget, you can search for a property that meets your financial requirements and the applicable scheme price cap. Make sure you also consider the ongoing costs of owning the property and whether the proposed mortgage repayments remain manageable within your budget.
Step 7: Review Your Loan Options
The Government scheme is only one part of the home-buying process. You should also consider the interest rate, loan features, fees, repayment structure and overall suitability of the home loan.
Richmond Residential can help you compare home loan options and understand how the scheme may fit within your broader property purchase plans.
What Are the Risks of Buying With a 5% Deposit?
A smaller deposit can make entering the property market easier, but it also means taking on a larger mortgage.
For example, if you purchase a $700,000 property with a $35,000 deposit, you could potentially need to borrow around $665,000, before considering other costs.
That's a significant financial commitment. You should consider whether you could comfortably manage your repayments if:
Interest rates increase
Your household income falls
Your expenses increase
The property becomes temporarily unsuitable
Unexpected costs arise
Buying with a 5% deposit isn't automatically better than waiting and saving a larger deposit. The right decision depends on your personal financial position and long-term goals.
How Richmond Residential Can Help First Home Buyers
Buying your first home can feel complicated, particularly when you're trying to understand government schemes, deposit requirements, borrowing capacity and different mortgage options at the same time.
Richmond Residential can help you explore suitable first home buyer home loan options and understand the finance process.
We can assist with:
Assessing your borrowing position
Comparing suitable lenders
Exploring home loan options
Understanding deposit requirements
Preparing for pre-approval
Structuring your home loan
Understanding government scheme options
Planning your property purchase
If you're considering purchasing your first home, getting your finance organised before you start seriously looking at properties can make the process much easier.
Final Thoughts
The Australian Government 5% Deposit Scheme can help eligible first home buyers enter the market with a smaller deposit, but a lower deposit also means borrowing more.
Before buying, consider your borrowing capacity, repayments, ongoing property costs, interest rate risks and longer-term financial goals. The key question is not simply whether you can buy with a 5% deposit, but whether you can comfortably afford the home and mortgage over time.
If you're planning to buy your first home in 2026, Richmond Residential can help you understand your home loan options and assess what may suit your circumstances. Contact us today.
Frequently Asked Questions
What is the Australian Government 5% Deposit Scheme?
The Australian Government 5% Deposit Scheme helps eligible first home buyers purchase an eligible property with a minimum 5% deposit and avoid LMI, subject to the scheme and participating lender requirements.
Is the 5% Deposit Scheme available in 2026?
Yes. The expanded scheme commenced on 1 October 2025 and continues to support eligible home buyers in 2026.
Is there an income limit for the 5% Deposit Scheme?
No. The expanded scheme removed income caps for first home buyers. However, your lender will still assess your income, expenses and ability to service the proposed mortgage.
Do I need a 20% deposit to buy a home?
Not necessarily. Eligible first home buyers may be able to purchase with a deposit as low as 5% through the Australian Government 5% Deposit Scheme.
Does the Government give me the 5% deposit?
No. You need to provide the deposit yourself. The Government provides a guarantee to participating lenders rather than giving the buyer money for the deposit.
Do I still pay LMI with a 5% deposit?
Eligible buyers using the scheme can avoid LMI, subject to meeting the relevant requirements and obtaining finance through a participating lender.
Can I buy an existing property under the scheme?
Yes. Eligible buyers can purchase existing houses, townhouses and units, as well as eligible new builds.
Can I use the scheme to buy an investment property?
The 5% Deposit Scheme is intended to support eligible owner-occupier purchases rather than investment properties.
Can I use the scheme with other first home buyer assistance?
Potentially. Different government programs have their own eligibility requirements, and some may be used alongside other schemes. You should check the rules of each program and confirm your circumstances with the relevant authority or lender.
Should I wait until I have a larger deposit?
Not necessarily. A 5% deposit may allow you to enter the property market sooner, but a larger deposit can reduce the amount you need to borrow. Consider your borrowing capacity, cash flow, emergency savings and long-term financial goals before deciding.
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