Key Highlights

  • Lower Deposit Requirement: Eligible first home buyers can purchase a property with a minimum 5% deposit without paying lenders Mortgage insurance.
  • Expanded Eligibility: From 1 October 2025, the scheme removed income caps and limits on the number of available places.
  • Government Loan Guarantee: Housing Australia provides a guarantee covering up to 15% of the property's value under the standard 5% deposit arrangement.
  • Location-Based Property Caps: Maximum eligible property prices vary across Australian states, territories and regional markets.

The Australian Government 5% Deposit Scheme provides eligible home buyers with an alternative to saving a traditional 20% property deposit. Administered by Housing Australia, the initiative allows qualifying purchasers to enter the housing market with a smaller upfront deposit while avoiding lenders mortgage insurance (LMI). Changes introduced on 1 October 2025 expanded eligibility by removing income thresholds and restrictions on available places. However, borrowers must still meet participating lenders' Credit assessments, deposit requirements and applicable property price limits.

How Does the Government Guarantee Work?

Under the scheme, Housing Australia guarantees part of an eligible home loan provided by a participating lender. For buyers contributing a 5% deposit, the guarantee can cover up to 15% of the property's value. Eligible single parents and single legal guardians with dependent children can purchase with a minimum 2% deposit, supported by a guarantee of up to 18%.

The guarantee protects the lender against an eligible shortfall if the borrower defaults. It is not a cash contribution, and borrowers remain responsible for repaying their mortgage. The scheme is available through more than 30 participating lenders, subject to individual lending assessments.

Who Is Eligible for the Scheme?

Applicants must be Australian citizens or permanent residents. Under the first home buyer arrangement, applicants must either be purchasing their first home or have not owned a home or land in Australia during the preceding 10 years.

First home buyers may apply individually or jointly with one other eligible person, including a partner, friend or family member. Single parents and legal guardians applying under the 2% deposit arrangement must apply individually and meet the relevant dependent-child requirements.

The property must be used as the buyer's principal residence. Generally, buyers must move in within six months of settlement and continue occupying the property while the government guarantee remains active.

What Are the Property Price Caps in 2026?

Property price limits vary by location. The scheme's published caps include AUD 1.5 million for Sydney and specified New South Wales regional centres, AUD 950,000 for Melbourne and Geelong, and AUD 1 million for Brisbane, the Gold Coast and Sunshine Coast.

Other capital-city limits include AUD 850,000 for Perth, AUD 900,000 for Adelaide, AUD 700,000 for Hobart and AUD 1 million for Canberra. Darwin has a cap of AUD 750,000, while other parts of the Northern Territory have a limit of AUD 600,000.

Eligible properties include existing houses, apartments, townhouses, off-the-plan purchases and certain residential construction arrangements. Both the purchase price and the lender-assessed property value must meet the applicable cap.

What Should Buyers Consider Before Applying?

Although the scheme reduces the minimum deposit requirement, purchasing with a smaller deposit generally means borrowing a larger proportion of the property's value. This can increase mortgage repayments and total interest costs compared with purchasing the same property using a larger deposit.

Buyers must also account for transaction expenses, including stamp duty where applicable, legal fees, property inspections and moving costs. State and territory concessions may reduce some expenses, depending on eligibility.

Applications must be submitted through participating lenders rather than directly to Housing Australia. Lenders assess borrowing capacity, financial circumstances, deposit availability and property eligibility before approving finance.

The scheme therefore changes the deposit requirements for eligible purchasers without removing their repayment obligations or the financial considerations associated with home ownership.