Let’s talk about something that might genuinely change your life: you may not actually need a 20% deposit to buy a home anymore, and I know that sounds a bit too good to be true because most of us have been told since forever that we need to save up this massive amount before we can even think about buying, but the Australian Government 5% Deposit Scheme has actually changed the game and I’m super excited to tell you about it.
What is the 5% Deposit Scheme?
The Australian Government 5% Deposit Scheme has replaced the First Home Guarantee Scheme (as of 1 October 2025) and does exactly what the name suggests, which is it potentially lets you buy your first home with just a 5% deposit, or if you’re a single parent, you only need 2%. Here’s the best part: you don’t have to pay Lenders Mortgage Insurance, which is a savings benefit!
Here’s How It Works
The government steps in as your guarantor for up to 15-18% of your property value, which basically means your lender feels comfortable giving you the loan even though you’ve got a smaller deposit – because you’ve got the government backing you. This means you can get into your home sooner with less deposit up front, and you’re not paying that extra LMI fee on top of everything else.
If you’ve been sitting there with your 5% deposit thinking “this isn’t enough, I need to keep saving,” I’m here to tell you that it actually might be enough and you could potentially be closer to buying than you realise.
Who’s This For?
First Home Buyers
If you’re buying your first home, or if you haven’t owned property in Australia for the last 10 years, you can apply with a 5% deposit and you can do it on your own or with one other person, like your partner, a friend, or a family member.
The thing that really stands out about this scheme is that there are no income caps, which means you won’t be told you earn too much or too little to qualify, and honestly, that makes such a difference because your salary doesn’t automatically rule you out.
This is genuinely helpful because so many other schemes have income limits that end up excluding people who are earning good money but still can’t afford a massive deposit in today’s property market. This scheme actually acknowledges that reality, instead of making assumptions about your financial situation based purely on your income.
Single Parents
If you’re a single parent or legal guardian of one or more dependent children, you can buy a home with just a 2% deposit, and again, there are no income caps, no waitlists to join, and unlimited spots available.
This part of the scheme is really important because single parents often work incredibly hard but find it almost impossible to save a big deposit while managing everything else, and the government has recognised that and made it easier.
Being a single parent doesn’t mean you should miss out on the security and wealth-building opportunity that comes with owning your own home, and this scheme is designed to make that actually achievable rather than just a distant dream.
What Are the Benefits?
Let me walk you through why this scheme is genuinely worth looking into, because it’s not just about needing less deposit money (though that’s obviously a huge help).
Low Deposit
You get to buy with a lower deposit of either 5% for first home buyers or 2% for single parents. Which means you could potentially buy a lot sooner than if you were saving up for the traditional 20%.
Avoid Extra Costs
You don’t have to pay Lenders Mortgage Insurance (LMI), which has a big savings benefit – leaving you extra that you can use for other expenses like furniture, renovations, or just keeping a healthy savings buffer.
No Income Caps
There are no income caps, which is really refreshing because it means the scheme is genuinely available to more people rather than just those in specific income brackets.
Wide Choice of Home Types
You’ve got quite a wide choice of properties you can buy, including houses, townhouses, apartments, house and land packages, off-the-plan properties, or vacant land with a building contract.
Government Backed Support
The government provides backing for your loan, which gives lenders the confidence to approve you with a smaller deposit.
Unlimited Spots and No Waiting List
There are unlimited spots available, so you don’t need to stress about missing out or being on a waitlist for ages.
Am I Eligible?
Here’s what you need to meet to be eligible for the scheme:
All Applicants
- Everyone who applies needs to be an Australian citizen or permanent resident and needs to be at least 18 years old
- You need to be buying a home to actually live in, rather than as an investment property.
- You’ll need an owner-occupier home loan with Principal and Interest repayments from a Participating Lender (which is just a bank or lender that’s approved to offer this scheme),
- And the property you want to buy needs to be at or below the price cap for your area (state specific).
First Home Buyers
- Saved at least 5% of the property value as your deposit,
- To either be buying your very first home or you haven’t owned property in Australia in the last 10 years.
- Apply by yourself or together with one other person, and if you’re applying as a couple or with someone else, you both need to meet the eligibility requirements.
Single parents
- Saved at least 2% of the property value
- You need to be single which means you don’t have a spouse or de facto partner at the time you’re applying.
- You need to be the natural parent, adoptive parent, or legal guardian of one or more dependent children, and you can’t own another property or have any interest in property once your new home settles.
- Single parents need to apply on their own rather than jointly, which makes sense given the scheme is specifically designed to support single parent households.
Things to consider
The Scheme is for owner-occupiers. You, or both of you if applying jointly, need to declare in the Home Buyer Declaration that you will:
- Start living in the property within 6 months of either the loan settlement date or, for new builds, the issuance of an occupancy certificate, and
- Continue living there as long as your home loan is supported by the Scheme.
How to Apply?
Step 1: The process starts with checking your eligibility using the online tool at firsthomebuyers.gov.au which gives you a quick idea of whether you’re likely to qualify based on your circumstances.
Step 2: Once you’ve got a sense that you’re eligible, you reach out to a Participating Lender and they’ll walk you through their application process, looking at both whether you meet the scheme requirements and whether you can afford to repay the loan based on their lending criteria.
Step 3: If your application is approved, your Participating Lender will give you pre-approval and you’ll typically have 90 days to find a property and sign a contract of sale, which means you can start seriously house hunting knowing your finance is sorted.
But Here’s the Thing
You can’t just walk into any bank and apply for this scheme because not every lender is a Participating Lender. You need to work out which banks and lenders are actually approved to offer it, and then figure out which one is most likely to approve you based on your specific circumstances. Different Participating Lenders have different lending criteria, different interest rates, different fees, and different appetites for different types of borrowers, so what works perfectly for your friend might not be the right option for you.
This is genuinely where a mortgage broker can help, because instead of you having to research every Participating Lender, compare their rates and policies, fill out multiple applications, and potentially get declined by lenders that weren’t a good fit anyway, a broker does that legwork for you.
As a mortgage broker, we know which Participating Lenders are more likely to approve someone with your employment type, your deposit amount, your credit history, and your specific situation, and we can help you understand the whole process in plain English rather than bank jargon.
So Should You Actually Use This Scheme?
Honestly, it depends entirely on your circumstances and what you’re trying to achieve. While this scheme can be genuinely life-changing for some people, it’s not the right choice for everyone.
If you’re someone who’s been responsibly saving and you’re close to a 20% deposit anyway, it might make more sense to wait a bit longer and avoid having the restrictions and obligations that come with the scheme, particularly the requirement to keep living in the property as your main home.
On the other hand, if you’re someone who’s been paying rent for years and watching property prices climb faster than you can save, and you’ve got stable employment and a decent deposit saved but nowhere near 20%, then this scheme could be exactly what you need to get into the market sooner rather than later.
The key is being really honest with yourself about whether you can afford the repayments long-term, whether you’re prepared to commit to living in the property, and whether you’ve thought through what happens if your circumstances change.
It’s also worth considering that even with a smaller deposit, you’re still taking on a significant amount of debt that you’ll be repaying for decades. You also need to factor in the possibility of interest rate rises, unexpected expenses, job changes, and all the other curveballs that life can throw at you.
If you’re stretching yourself financially just to get into a property under this scheme, and you don’t have much buffer left over for emergencies or rate rises, that might be a sign that you need to either look at cheaper properties or wait a bit longer until you’re in a more comfortable financial position.
Want to talk through whether the 5% Deposit Scheme makes sense for your situation?
I’m here to help you work out what’s right for you rather than just pushing you towards any particular option, because my job is to make sure you’re making informed decisions that work for your life. Let’s have an honest conversation about your circumstances, your goals, and what pathway to homeownership makes the most sense for where you’re at right now. Book a free consultation today and let’s talk!