The Australian Government recently expanded the 5% Deposit Scheme, and if you've been waiting to buy your first home, it's worth understanding how it works and whether it could work for you.
What Is the 5% Deposit Scheme?
It's a government program that lets eligible first home buyers purchase with just a 5% deposit while avoiding Lender's Mortgage Insurance (LMI).
Normally, if you have less than 20% deposit, banks charge you LMI — insurance that protects the lender (not you) if you can't make repayments. It typically costs $20,000 to $30,000 or more depending on your loan size.
The Real Numbers: An $800,000 Property
Here's what buying an $800,000 property in Victoria looks like. With stamp duty and fees, total purchase costs are around $845,000.
| 20% Deposit | 5% Without Scheme | 5% With Scheme | |
|---|---|---|---|
| Upfront cost | ~$205,000 | ~$109,000 | ~$109,000 |
| Loan amount | $640,000 | $784,000 (incl. $24K LMI) | $760,000 |
| Monthly repayments | ~$3,600 | ~$4,500 | ~$4,300 |
With the scheme, you save over $120,000 in upfront cash compared to a 20% deposit, and avoid $24,000 in LMI compared to a regular 5% deposit.
What Changed in October 2025
The scheme has been around since 2020, but had limitations that excluded many buyers. Three things changed:
1. Unlimited access
The 35,000 spots-per-year cap is gone.
2. No income caps
Previously $125K for singles, $200K for couples. Now removed.
3. Higher property price caps
Updated to reflect current market prices (see tables below).
Property Price Caps by State
| State | Capital City & Regional Centres* | Other Areas |
|---|---|---|
| New South Wales | $1,500,000 | $800,000 |
| Victoria | $950,000 | $650,000 |
| Queensland | $1,000,000 | $700,000 |
| Western Australia | $850,000 | $600,000 |
| South Australia | $900,000 | $500,000 |
| Tasmania | $700,000 | $550,000 |
*Regional centres include: NSW (Illawarra, Newcastle, Lake Macquarie), VIC (Geelong), QLD (Gold Coast, Sunshine Coast)
Property Price Caps by Territory
| Territory | All Areas |
|---|---|
| Australian Capital Territory | $1,000,000 |
| Northern Territory | $600,000 |
| Jervis Bay Territory & Norfolk Island | $550,000 |
| Christmas Island & Cocos (Keeling) Islands | $400,000 |
Both the purchase price and the bank's valuation must be at or below the cap. If you're building, the land price plus build costs combined need to stay under the cap.
Eligibility Requirements
- Australian citizen or permanent resident, 18+
- Buying to live in (owner-occupier only)
- Haven't owned property in Australia, or 10+ years since you did
- Minimum 5% deposit saved
- Can apply solo or with one other person (partner, sibling, or friend)
What to Consider
A few things worth thinking through before using the scheme:
Lower equity buffer
With only 5% deposit, you have less margin if property values dip.
Higher repayments
Borrowing more means larger monthly repayments (~$700/month difference in our example).
Interest rate changes
If rates rise, your repayments increase accordingly.
Owner-occupier requirement
The property must be your home, not an investment.
The Bottom Line
For eligible buyers, this scheme can genuinely accelerate your path to homeownership. It lets you buy sooner and avoid significant LMI costs.
Whether it's right for you depends on your financial situation, the area you're looking in, and your comfort level with the repayments. The next step is getting your numbers assessed to see where you stand.
Disclaimer
This article provides general information only and doesn't take into account your personal circumstances. Property price caps, scheme eligibility, and lending criteria can change. Always speak with a licensed mortgage broker or financial adviser before making property decisions.
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