To help make home ownership more achievable, the Australian Government currently offers several initiatives designed to support eligible Australians and first home buyers into the property market.
With multiple schemes available, each with different eligibility criteria and benefits, it’s important to understand which option best suits your circumstances.
Today, we’re taking a closer look at the Australian Government’s 5% Deposit Scheme and how it could help you secure your new home sooner.
What is the 5% Deposit Scheme?
Traditionally, most lenders require buyers to save a 20% deposit before purchasing a home. For many Australians, this can be one of the biggest barriers to entering the property market.
The 5% Deposit Scheme helps reduce that hurdle by allowing eligible buyers to purchase a home with as little as a 5% deposit, provided they can comfortably service their mortgage repayments.
This means you may be able to stop spending years saving a larger deposit and enter the market sooner.
The Key Benefits
Enter the Market Sooner
Saving a smaller deposit can significantly reduce the time it takes to buy your first home, helping you secure a property earlier and potentially benefit from future market growth.
Avoiding Lenders Mortgage Insurance (LMI)
Normally, if you purchase a home with less than a 20% deposit, lenders charge an additional fee known as Lenders Mortgage Insurance. This fee is intended to protect the lender in case of a loan default, as lower-deposit loans are considered higher risk. LMI can cost thousands of extra dollars and is often added to your loan amount or paid upfront. Under the 5% Deposit Scheme, the Australian Government acts as a guarantor for the reduced deposit, allowing eligible buyers to avoid paying lenders mortgage insurance altogether.
How Does the Australian Government 5% Deposit Scheme Work?
While the Government goes guarantor for the loan, your mortgage remains entirely between you and your lender. You still make your repayments as normal and own the home yourself.
Importantly, the Government does not contribute money towards your repayments or own a portion of your property under this scheme.
However, because you are borrowing a larger amount with a smaller deposit, your loan repayments are higher than they would be with a larger upfront deposit contribution. Many homeowners opt to make additional repayments over time to reduce their loan balance faster and build more equity in the home sooner.
Things to Keep in Mind
Previously, this scheme was limited by annual applicant caps and stricter income thresholds. Since October 2025, many of these restrictions have now been relaxed, making the scheme accessible to more Australians.
Property price caps have also increased, although these limits still vary depending on your state, capital city or regional location.
Before applying, it’s a good idea to speak with a lender or mortgage broker to confirm your eligibility and understand what property price caps apply to your area.
You can also learn more about the scheme on the Australian Government website:
https://firsthomebuyers.gov.au/australian-government-5-percent-deposit-scheme
Interested in learning more? Contact our team for help buying your first home or to discuss if this scheme is right for you.
Phone 1300 983 889 or via email at info@banyanplaceofficer.com.au.
