Saving a 20% deposit has traditionally been one of the biggest hurdles for first home buyers.
With property prices rising and the cost of renting making it harder to save, building a large deposit can take years—even when you have enough income to comfortably manage home loan repayments.
The Australian Government 5% Deposit Scheme is designed to help eligible first home buyers purchase a home sooner with a deposit of as little as 5%, without the cost of Lenders Mortgage Insurance.
So, how does the scheme work?
What is the Australian Government 5% Deposit Scheme?
The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase a home with a minimum 5% deposit.
Normally, when borrowing more than 80% of a property’s value, Lenders Mortgage Insurance may apply. Under the scheme, the Australian Government provides a guarantee to the participating lender for part of the home loan.
This allows an eligible buyer to borrow up to 95% of the property’s value without paying Lenders Mortgage Insurance.
Importantly, the Government does not contribute 15% towards your purchase and does not own part of your property.
You are still borrowing the money from your lender and remain responsible for the loan, associated costs and repayments.
What changed with the 5% Deposit Scheme?
The scheme was significantly expanded from 1 October 2025, making it available to a broader range of aspiring home buyers.
The expanded scheme includes:
- No income caps
- No waitlists
- Unlimited places
- Higher property price caps
The removal of the previous income limits is particularly significant for buyers who may previously have earned too much to qualify but still faced the challenge of saving a 20% deposit.
Who may be eligible for the scheme?
Eligibility depends on your individual circumstances, but the scheme may be available to buyers who:
- Meet the applicable citizenship or residency requirements
- Are at least 18 years old
- Have the required minimum deposit
- Are purchasing an eligible residential property
- Intend to live in the property as their home
- Meet the scheme’s previous property ownership requirements
The scheme is not necessarily limited to people who have never owned property.
People who have not owned property or land in Australia during the previous 10 years may also qualify, subject to the scheme requirements.
A participating lender will confirm your eligibility as part of the home loan application process.
What are the property price caps in WA?
The maximum property value permitted under the scheme depends on where you are buying.
For eligible buyers in Western Australia, the current caps are:
- Perth: $850,000
- Other eligible areas of WA: $600,000
The relevant cap depends on the property’s location and postcode. Both the purchase price and the lender’s assessed value must be within the applicable cap.
It is therefore important to confirm the relevant limit with your participating lender before making an offer.
What properties can you purchase?
The scheme is not limited to established houses.
Eligible properties can include:
- Existing houses, townhouses and apartments
- New homes
- House and land packages
- Off-the-plan apartments or townhouses
- Vacant land accompanied by an eligible building contract
The property must satisfy the scheme requirements and generally be purchased as a home to live in rather than as an investment property.
What does a 5% deposit look like?
As a simple example, consider a first home buyer purchasing a $700,000 property.
With a 5% deposit:
- Purchase price: $700,000
- Deposit: $35,000
- Potential home loan: $665,000
- Loan-to-value ratio: 95%
- Lenders Mortgage Insurance: No LMI under the scheme
Without the Australian Government 5% Deposit Scheme or another applicable LMI waiver, borrowing 95% of a property’s value would ordinarily mean Lenders Mortgage Insurance may apply.
The Government guarantee allows an eligible buyer to purchase with a smaller deposit without paying LMI. However, the buyer must still qualify for the $665,000 home loan under the participating lender’s normal lending requirements.
There may also be other purchasing costs to consider, so having a $35,000 deposit does not necessarily mean that $35,000 is all you will need to complete the purchase.
Do you need savings for other purchasing costs?
Yes. A 5% deposit is not necessarily the only money you will need.
Depending on the property and your circumstances, you may also need funds for:
- Transfer duty, where applicable
- Settlement or conveyancing costs
- Building and pest inspections
- Loan or valuation fees, where applicable
- Moving costs
- An appropriate financial buffer after settlement
First home buyers in WA may also qualify for transfer duty concessions and, when purchasing or building an eligible new home, the WA First Home Owner Grant.
Considering these programs together can provide a clearer picture of the amount you may need to save.
Does scheme eligibility guarantee loan approval?
No. This is an important distinction.
The Australian Government 5% Deposit Scheme helps address the deposit and LMI hurdle, but it does not replace a lender’s normal credit assessment.
You will still need to demonstrate that you can afford the proposed home loan.
When assessing your application, a lender may consider your:
- Income and employment
- Living expenses
- Existing debts
- Credit card limits
- HECS or HELP debt
- Dependants
- Credit history
Participating lenders can also calculate borrowing capacity differently.
You may therefore qualify for the Government scheme without necessarily qualifying to borrow the full amount required for your preferred property.
Is buying with a 5% deposit always the best option?
Not necessarily.
Being able to buy with a smaller deposit does not automatically mean you should borrow the maximum amount available.
A larger deposit generally means a smaller home loan, lower repayments and more equity in your property from the beginning.
On the other hand, waiting several more years to reach a 20% deposit may not suit everyone, particularly if property prices or rents continue to change during that time.
The appropriate approach depends on your income, savings, borrowing capacity, proposed purchase price and overall financial position.
How can a mortgage broker help?
Not every lender participates in the scheme, and participating lenders can have different policies when assessing the same applicant.
At FI Collective, we can help you understand whether the Australian Government 5% Deposit Scheme may be available to you, assess your borrowing capacity and compare suitable home loan options across participating lenders on our panel.
We can also help you understand how the scheme may interact with other first home buyer assistance available in Western Australia.
Thinking about buying with a 5% deposit? Speak with the FI Collective team to explore what your options could look like.
This information is general in nature and does not constitute financial, taxation or legal advice. Government scheme eligibility, property price caps and lender policies can change. Eligibility for the Australian Government 5% Deposit Scheme and any home loan remains subject to applicable scheme and lender requirements. Information current as at September 2026.