Updated: November 2026
Saving a 20% home deposit can take years. The Australian Government 5% Deposit Scheme may help eligible first home buyers purchase sooner with a minimum 5% deposit and without paying Lenders Mortgage Insurance (LMI).
A separate minimum 2% deposit pathway is available for eligible single parents and legal guardians. Property-price caps, eligibility requirements and participating-lender credit criteria still apply.
If you are preparing to purchase your first property, our First Home Buyer home loan service explains how CBM Mortgages can help you assess your deposit, borrowing capacity and suitable loan options.
What is the Australian Government 5% Deposit Scheme?
The Australian Government 5% Deposit Scheme assists eligible buyers by providing a government guarantee to a participating lender.
For an eligible first home buyer, the Australian Government may guarantee part of the home loan so the participating lender can provide finance with a minimum 5% deposit without requiring the buyer to pay LMI.
The guarantee is provided to the lender. It is not a cash payment to the buyer, and the Australian Government does not acquire an equity share in the property.
Key features of the 5% Deposit Scheme
| Feature | How it works |
|---|---|
| Minimum deposit | Eligible first home buyers may apply with a minimum 5% deposit. |
| Lenders Mortgage Insurance | Eligible buyers using the scheme do not pay LMI. |
| Income limits | The scheme currently has no income caps. |
| Annual places | The scheme currently has unlimited places and no waiting list. |
| Property limits | The property must be priced at or below the applicable location price cap. |
| Participating lender | The home loan must be obtained through a lender authorised to participate in the scheme. |
| Loan approval | The applicant must still satisfy the participating lender’s credit policy and loan approval requirements. |
Check the current rules through the official Australian Government 5% Deposit Scheme website.
Who may qualify for the 5% Deposit Scheme?
Eligibility requirements include criteria concerning the buyer, property, deposit and proposed home loan.
An applicant will generally need to:
- be an Australian citizen or permanent resident;
- be at least 18 years old;
- have saved a minimum 5% deposit;
- be a first home buyer or not have owned property or land in Australia during the previous 10 years;
- purchase an eligible Australian property at or below the applicable location price cap;
- live in the property as an owner-occupier;
- apply alone or jointly with one other eligible person;
- obtain an eligible principal-and-interest owner-occupier home loan; and
- satisfy a participating lender’s lending and credit requirements.
Meeting the government scheme criteria does not guarantee home loan approval. The participating lender must still be satisfied that the applicant can afford the loan and meet its credit policy.
Use the official 5% Deposit Scheme eligibility checker to review the current requirements.
What properties can be purchased?
Eligible property types may include:
- an existing house, townhouse or apartment;
- a house and land package;
- an off-the-plan property;
- vacant land with an eligible building arrangement; or
- a newly constructed home.
The property must be located in Australia, be intended as the buyer’s owner-occupied home and fall within the relevant property-price cap.
Price caps vary by location and can change. Check the current Australian Government property-price caps before relying on the scheme for a particular purchase.
How does the government guarantee work?
A participating lender would commonly require LMI when lending more than 80% of a property’s value. LMI protects the lender rather than the borrower.
Under the scheme, the Australian Government provides a guarantee to the lender for part of the home loan. This may enable the participating lender to provide an eligible first home buyer with a loan of up to 95% of the property’s value without charging LMI.
The buyer remains responsible for:
- repaying the entire home loan;
- interest and fees charged under the loan;
- meeting the lender’s ongoing requirements;
- purchase expenses not covered by the scheme; and
- all ongoing property ownership costs.
The guarantee does not reduce the amount borrowed and does not protect the buyer from financial loss.
The separate 2% deposit pathway
A minimum 2% deposit pathway is available for eligible single parents and legal guardians.
This pathway has separate eligibility requirements. A buyer should not assume that the 2% deposit option applies simply because the buyer has a dependent child or is purchasing alone.
The official scheme information and a participating lender can confirm whether the 2% pathway applies to a buyer’s circumstances.
Potential benefits of the 5% Deposit Scheme
Possible benefits include:
- purchasing without waiting to accumulate a 20% deposit;
- avoiding the upfront cost of LMI;
- access to established and new properties within the applicable price cap;
- no income cap under the current scheme rules;
- no annual place limit or waiting list; and
- the ability to combine the scheme with some other eligible first-home-buyer assistance.
The benefit will vary between buyers. Avoiding LMI should not be confused with saving the difference between a 5% and 20% deposit. The lower deposit generally means the buyer borrows more.
Risks and trade-offs of buying with a smaller deposit
The scheme can reduce an upfront barrier, but a smaller deposit also creates important trade-offs.
These may include:
- a larger home loan and higher total interest costs;
- a higher loan-to-value ratio (LVR);
- less equity in the property at the beginning;
- greater exposure if the property’s value falls;
- potentially fewer suitable lenders or home loan products;
- less flexibility when refinancing before sufficient equity has been built; and
- higher repayments than would apply with a larger deposit and smaller loan.
Buyers should allow for changes in interest rates, income and living expenses rather than assessing affordability only against the initial repayment.
Can the 5% Deposit Scheme be combined with other assistance?
Potentially. Eligible buyers may be able to use the scheme alongside other federal, state or territory assistance.
These programs may include:
- the First Home Owner Grant;
- state-based transfer-duty exemptions or concessions;
- the First Home Super Saver Scheme; and
- other assistance available in the buyer’s state or territory.
Each program has separate criteria. Receiving one benefit does not automatically establish eligibility for another.
For NSW buyers, our guide to first home buyer grants and transfer-duty assistance in NSW explains the current state programs.
Our broader first-home-buyer schemes guide compares the main Australian assistance options.
Costs the scheme does not remove
Even when LMI is not payable, buyers still need to budget for other purchase and ownership costs.
These may include:
- the minimum deposit;
- conveyancing or legal fees;
- building and pest inspections;
- transfer duty where an exemption does not apply;
- loan, valuation or settlement fees where applicable;
- insurance;
- adjustments for council rates, water and strata levies;
- moving expenses; and
- ongoing repayments, maintenance and property costs.
Review our guide to the upfront costs of buying your first home in Sydney when preparing your purchase budget.
How to apply for the 5% Deposit Scheme
Applications are made through a participating lender rather than directly to the Australian Government.
A practical process is:
- Check the current scheme rules and property-price cap.
- Review your deposit, debts, living expenses and borrowing capacity.
- Compare suitable participating lenders and home loan options.
- Prepare the documents required for a credit assessment.
- Seek pre-approval where appropriate before making an offer.
- Confirm that the chosen property meets the scheme and lender requirements.
- Complete the lender’s scheme and home loan application process.
Pre-approval is not unconditional approval. The lender will generally need to assess the property, supporting documents and final application before approving the home loan.
How CBM Mortgages can help
CBM Mortgages can help you assess whether the Australian Government 5% Deposit Scheme may be suitable alongside your home loan application.
We can help you:
- review your deposit and likely purchase costs;
- estimate your borrowing capacity and repayments;
- identify suitable participating lenders;
- compare relevant home loan features and costs;
- prepare the documents required for an application; and
- work through pre-approval, purchase and settlement.
The Australian Government determines the scheme rules, and participating lenders make their own credit decisions. CBM Mortgages can help you understand the lending requirements and identify issues before you make an offer.
Considering buying with a smaller deposit? Visit our First Home Buyer home loan service or contact CBM Mortgages to discuss your deposit, borrowing position and suitable participating lenders.
Frequently asked questions
Disclaimer: This article provides general information only and does not constitute personal financial, legal, tax or credit advice. Government programs, property-price caps and eligibility requirements can change. Check current official information and consider obtaining advice appropriate to your circumstances before acting.
