Australia 5% Deposit Scheme 2026: Caps & Rules
Australia's First Home Guarantee in 2026: How to Buy With a 5% Deposit Without Lenders Mortgage Insurance
Australia | October 23, 2026
Buying a first home in Australia can require a substantial amount of savings.
A property priced at $600,000 would require a $120,000 deposit if the buyer aimed for a conventional 20% deposit.
Saving that amount while also paying rent can be difficult.
But eligible buyers may be able to purchase with a minimum deposit of $30,000 through the Australian Government's 5% Deposit Scheme.
The difference is significant.
It does not mean that the government pays the other $90,000.
Instead, the government provides a guarantee to a participating mortgage lender, allowing an eligible buyer to obtain a home loan with a smaller deposit without paying lenders mortgage insurance.
The program was formerly known as the Home Guarantee Scheme, which included the First Home Guarantee.
Since October 1, 2025, the expanded program has operated under the name Australian Government 5% Deposit Scheme.
The updated rules removed the previous income caps, increased property price caps and eliminated the limits on available places.
However, buying with a smaller deposit also means borrowing more money.
This guide explains the verified 2026 rules, eligibility, property price caps, mortgage calculations and risks that first-home buyers should assess before signing a contract.
1. What is the Australian Government 5% Deposit Scheme?
The Australian Government 5% Deposit Scheme is a housing-finance initiative administered by Housing Australia.
The program helps eligible purchasers obtain an owner-occupier mortgage with a smaller deposit.
For qualifying first-home buyers, the minimum deposit is generally 5% of the lender-assessed property value.
For eligible single parents and single legal guardians, a separate pathway can allow a minimum 2% deposit.
Housing Australia provides a guarantee to the participating lender.
This guarantee reduces the lender's need for separate lenders mortgage insurance under the scheme.
The borrower still receives a mortgage from the lender and must make the required repayments.
The scheme is not a tax refund, cash grant, shared-equity contribution or promise of mortgage approval.
2. What changed on October 1, 2025?
Several changes make older First Home Guarantee articles outdated.
The Home Guarantee Scheme was renamed the Australian Government 5% Deposit Scheme.
Income caps were removed.
Limits on the number of available guarantees were removed.
There is no waiting list for eligible applicants.
Property price caps were increased.
The separate Regional First Home Buyer Guarantee closed to new applicants, with eligible regional purchasers instead accessing the expanded scheme through the relevant buyer pathway.
Consequently, 2026 buyers should not rely on articles that continue to impose the older $125,000 individual or $200,000 joint-income limits.
Those older income caps do not describe the current general scheme.
3. Who is eligible for the 5% deposit pathway?
Housing Australia's published eligibility requirements include:
Being an Australian citizen or permanent resident.
Being at least 18 years old.
Having the required minimum deposit.
Being a first-home buyer or having not owned property or land in Australia during the previous ten years, under the scheme's definition.
Purchasing an eligible residential property within the applicable location-specific price cap.
Intending to occupy the property as an owner-occupier.
Obtaining an eligible principal-and-interest home loan through a participating lender.
Satisfying the participating lender's credit and borrowing-capacity assessment.
A person may apply alone or jointly with one other eligible person, including a partner, friend or family member.
The fact that two buyers apply together does not remove the requirement for each relevant applicant to satisfy the scheme rules.
4. Does the scheme have an income limit in 2026?
No.
Housing Australia states that the expanded scheme does not impose an income cap.
This differs from the former program.
However, no income cap is not the same as unlimited borrowing.
Mortgage lenders still assess income, expenses, existing debts, credit history and the ability to meet repayments.
A higher-income applicant may be eligible for the scheme but still fail the lender's credit standards for a particular property.
Likewise, a buyer whose income meets all scheme rules may not qualify for the loan amount needed.
The bank's serviceability decision remains essential.
5. Can someone who previously owned a home apply?
Potentially.
The first-home buyer pathway includes people who have not owned a home or land in Australia within the preceding ten years, subject to the scheme's specific definitions.
Housing Australia's FAQ explains that the relevant ten-year period is measured from the previous property's sale to the date the new home loan agreement is entered into.
This does not mean that selling an investment property recently automatically restores first-home buyer status.
Past property and land ownership must be disclosed.
The lender will examine eligibility under the official requirements.
The single-parent pathway uses different prior-ownership conditions and should not be confused with the standard ten-year rule.
6. Australian property price caps for 2026
The program limits both the property's purchase price and its value as assessed by the participating lender.
The current published caps are:
| State or territory | Capital city and specified 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 |
| Australian Capital Territory | $1,000,000 | — |
| Northern Territory | $750,000 for capital city | $600,000 |
| Jervis Bay Territory and Norfolk Island | $550,000 | — |
| Christmas Island and Cocos (Keeling) Islands | $400,000 | — |
The higher regional-centre category applies only to the specifically designated centres.
Examples include Geelong in Victoria, the Gold Coast and Sunshine Coast in Queensland, and identified areas such as Newcastle and Lake Macquarie in New South Wales.
Not every regional town receives the higher capital-city cap.
Check the official postcode tool and confirm the result with a participating lender.
7. Sydney, Melbourne, Brisbane and Perth limits
A buyer interested in an ordinary eligible residence in Sydney should examine the New South Wales capital-city cap of $1.5 million.
For Melbourne, the Victoria capital-city cap is $950,000.
For Brisbane, the Queensland capital-city cap is $1 million.
For Perth, the Western Australia capital-city cap is $850,000.
These are scheme ceilings, not suggested budgets.
A buyer's actual borrowing capacity may be far below the relevant property cap.
The lender also assesses property value independently.
A purchase can fail the price-cap test if either relevant value exceeds the cap.
8. Does a property have to be below the cap in value and purchase price?
Yes.
The official rules require both the purchase price and the participating lender's assessed property value to be within the relevant cap.
Suppose a buyer offers $800,000 for a home in a location with an $800,000 cap.
The lender values it at $820,000.
The property may fail the scheme's price-cap requirements because the valuation exceeds the permitted cap.
Conversely, a low valuation can also affect the buyer's deposit and mortgage financing requirements.
Before signing an unconditional purchase agreement, ask the lender how the relevant cap and valuation conditions apply.
9. What kinds of homes can buyers purchase?
The scheme permits a variety of qualifying residential property types, including:
Existing houses.
New houses.
Townhouses.
Apartments.
House-and-land packages.
Off-the-plan homes.
Vacant land combined with an eligible building contract.
The property must satisfy the price cap and other relevant requirements.
Where a buyer purchases vacant land and builds under separate contracts, the total land and construction costs are considered for the cap.
The selected property must be intended as an owner-occupied home.
The scheme is not intended to fund an ordinary buy-to-let investment purchase.
10. How does a 5% deposit avoid lenders mortgage insurance?
Lenders mortgage insurance, or LMI, typically protects the lender against certain losses if a borrower defaults.
Conventional low-deposit loans often require LMI, though individual lender products vary.
Under this government scheme, Housing Australia provides an eligible guarantee to the participating lender.
This allows eligible borrowers to avoid the separate LMI requirement.
That can save an upfront cost that otherwise might be significant.
However, the guarantee is not personal mortgage protection for the homeowner.
If the borrower falls behind on repayments, the lender can still take action under the loan contract and applicable law.
The homeowner remains responsible for the debt.
11. How much money does the government provide?
The scheme does not generally provide cash toward the buyer's deposit.
The government supports the lender through a guarantee.
The buyer must contribute the required deposit from eligible funds, subject to the lender's assessment.
The lender supplies the home loan.
The guarantee covers the lender's specified exposure under the program, not the full cost of the property as a cash payment.
A buyer purchasing a $600,000 home with $30,000 down would ordinarily need to arrange a loan of approximately $570,000, before considering other transaction funding needs.
The buyer cannot treat the government's guarantee as equity personally owned in the home.
12. Deposit chart: property prices from $400,000 to $1 million
| Property price | 5% deposit | Illustrative loan at 95% | Conventional 20% deposit |
|---|---|---|---|
| $400,000 | $20,000 | $380,000 | $80,000 |
| $500,000 | $25,000 | $475,000 | $100,000 |
| $600,000 | $30,000 | $570,000 | $120,000 |
| $700,000 | $35,000 | $665,000 | $140,000 |
| $750,000 | $37,500 | $712,500 | $150,000 |
| $800,000 | $40,000 | $760,000 | $160,000 |
| $900,000 | $45,000 | $855,000 | $180,000 |
| $1,000,000 | $50,000 | $950,000 | $200,000 |
The figures assume a straightforward 5% contribution and matching lender valuation.
The examples do not include state-based transfer duty, conveyancing, inspections, moving costs or other settlement expenses.
Some buyers may qualify for separate first-home buyer stamp-duty concessions or grants, but those programs have their own eligibility and limits.
13. Worked example: buying a $600,000 home
Suppose a qualifying first-home buyer purchases a $600,000 property.
Under a 5% deposit arrangement:
Deposit: $30,000.
Illustrative loan: $570,000.
Under a 20% deposit arrangement:
Deposit: $120,000.
Loan: $480,000.
The 5% pathway reduces the initial deposit requirement by $90,000.
But the borrower takes on an extra $90,000 of mortgage principal.
That means potentially higher repayments and more total interest over the loan's life.
Avoiding LMI is valuable, but it does not eliminate the cost of borrowing the additional principal.
14. Mortgage repayments: 5% versus 20% deposit
Assume a fictional $600,000 home purchase, a 30-year principal-and-interest loan, and a fixed comparison rate of 6% for the full period.
These are modelling assumptions, not an actual current Australian bank quote.
At 5% down:
Loan principal: $570,000.
Approximate monthly repayment: $3,417.
At 20% down:
Loan principal: $480,000.
Approximate monthly repayment: $2,878.
The difference is approximately $539 each month.
The smaller deposit has saved $90,000 of upfront deposit cash, but it has also increased the monthly mortgage obligation substantially.
The calculation excludes fees and other housing ownership costs.
Real variable interest rates can change.
15. What happens if mortgage rates rise?
A smaller deposit means a larger loan and therefore greater exposure to interest-rate movements.
The Reserve Bank of Australia's published cash-rate target stood at 4.60% effective September 30, 2026.
This does not mean every mortgage is priced at 4.60%.
Banks charge their own interest rates and apply individual lending criteria.
For an illustrative $570,000 loan over 30 years:
At 6%, the starting principal-and-interest repayment is approximately $3,417 per month.
At 7%, the comparable repayment is approximately $3,792 per month.
Difference: roughly $375 per month.
The comparison models alternative constant interest rates from the beginning of the loan.
An actual rate change after several years would require recalculation using the remaining principal and loan term.
16. Why negative equity is a risk
Negative equity occurs when the outstanding mortgage exceeds the property's market value.
Consider a buyer purchasing a $600,000 home with a $30,000 deposit and a $570,000 mortgage.
If the home's market value immediately falls 10% to $540,000, the property would be worth $30,000 less than the assumed outstanding mortgage balance before accounting for principal repayments.
That can make selling or refinancing more difficult.
With a 20% deposit, the starting loan would instead be $480,000, providing a larger equity buffer.
This illustrates a central trade-off of small-deposit home ownership.
The scheme reduces the time needed to save the initial deposit but does not protect the buyer from property-price declines.
17. What if house prices are falling?
A falling market does not automatically make buying a first home a bad decision.
But it changes the risk calculation.
Someone purchasing with a 5% deposit has relatively little initial equity.
Transaction costs can reduce the effective financial buffer further.
If the buyer expects to move again after only a short time, selling costs and price movements can be especially important.
A buyer intending to remain in the home for many years may evaluate those risks differently.
The useful comparison includes mortgage affordability, rental alternatives, cash reserves, expected ownership period and willingness to absorb temporary declines in home value.
Do not rely on a national house-price trend to predict the future price of an individual property.
18. Does the scheme guarantee mortgage approval?
No.
A participating lender must approve the mortgage.
The lender may assess income stability, employment type, existing debts, household spending, credit history and savings.
The property must satisfy valuation and eligibility requirements.
The buyer must also meet the relevant serviceability standards.
An applicant can be eligible for government guarantee support but ineligible for the desired loan amount.
A scheme pre-approval also does not guarantee that every later property will be approved.
Request clarity on lending conditions before committing to a purchase.
19. Can two people apply together?
Yes.
The first-home buyer pathway permits an eligible single applicant or two eligible joint applicants.
The second applicant may be a spouse, partner, friend or family member.
Both applicants must meet the relevant scheme criteria.
Their joint financial obligations should be understood carefully.
If the buyers later separate or one wants to sell their ownership interest, the mortgage, property title and guarantee obligations can become complicated.
A joint application should be treated as a serious financial and legal arrangement, not merely a way to increase borrowing capacity.
20. Single parents and legal guardians: the 2% pathway
The Australian Government 5% Deposit Scheme also has a distinct pathway for eligible single parents and single legal guardians with dependent children.
The minimum deposit is generally 2% of the property value.
Unlike the ordinary first-home buyer pathway, eligible applicants need not necessarily be buying their first-ever home.
However, they must satisfy the relevant current-property ownership restrictions.
This pathway requires applying alone rather than as a joint applicant.
The official rules also define what counts as being single and having a dependent child.
A separated but not divorced person may not satisfy the specific definition described by Housing Australia.
Applicants should check the complete single-parent guide rather than assuming the ordinary first-home buyer test applies.
21. Can a 5% deposit buyer purchase an investment property?
No.
The scheme is designed for owner-occupiers.
The property must be purchased as a home to live in.
Housing Australia states that buyers generally must move in within six months after settlement for an eligible existing home and continue living there while the guarantee remains active.
Different construction and off-the-plan timing provisions may apply.
If the buyer moves out or uses the property in a way that violates scheme conditions, the guarantee may be affected.
The lender may then require LMI or other changes, depending on the circumstances.
Contact the lender before changing the occupancy arrangement.
22. How long can the mortgage term be?
For the standard first-home buyer pathway, Housing Australia describes an eligible owner-occupier principal-and-interest mortgage with a term of up to 30 years.
An additional construction period of up to three years may be permitted under the relevant building provisions.
The exact loan structure must satisfy scheme and lender requirements.
A 30-year term can make the initial repayment more manageable than a shorter term.
But extending the period generally increases total interest if all other variables are equal.
Compare the mortgage's life-cycle cost rather than choosing the longest term solely because the monthly payment looks lower.
23. Documents needed for a scheme application
Housing Australia identifies documents and information including:
Applicant identity details.
Date of birth.
Medicare number or permitted alternative identification.
Evidence of Australian citizenship or permanent residency.
A completed Home Buyer Declaration.
Information about deposit funds.
Property ownership history.
For a joint application, corresponding details for the other applicant.
The participating lender may also require payslips, employment information, bank statements, existing debt records and normal home-loan documentation.
The precise checklist depends on the applicant and institution.
Single parents or legal guardians must provide additional evidence relevant to their status and dependent children.
Use the lender's current official requirements.
24. How to apply for the Australian Government 5% Deposit Scheme
Step 1: Check eligibility.
Use Housing Australia's official eligibility tool.
Step 2: Check the property cap.
Search by suburb and postcode using the official price-cap checker.
Step 3: Select a participating lender.
Choose an authorised institution listed by Housing Australia.
Step 4: Assess borrowing capacity.
The lender reviews income, debts, deposit and credit requirements.
Step 5: Submit required documents.
Complete the application and Home Buyer Declaration.
Step 6: Obtain pre-approval where available.
Confirm conditions and the approved price range.
Step 7: Find a qualifying property.
Housing Australia describes a 90-day period following relevant pre-approval in which to find a home and sign a contract.
Step 8: Arrange contract and valuation review.
Make sure the contract price and lender valuation satisfy the applicable scheme cap.
Step 9: Finalise the mortgage and settlement.
The participating lender manages the guarantee and final approval process.
Step 10: Move into the home and maintain the obligations.
Keep the property as the required owner-occupied residence while the guarantee remains active.
Buyers do not apply directly to Housing Australia for mortgage approval.
25. Which banks participate?
Housing Australia publishes an official participating-lender directory.
It includes major banks and other authorised lenders.
Examples appearing in the directory include Commonwealth Bank, National Australia Bank, ANZ and Westpac, alongside regional banks, mutual banks and credit unions.
The directory may change.
Only a lender participating in the scheme can process an eligible application through the required arrangement.
Compare several lenders if practical.
Participating does not guarantee the lender offers the same interest rate or serviceability assessment as another institution.
26. Does avoiding LMI mean there are no extra buying costs?
No.
Buying a home can involve additional expenditure.
Common costs include:
Transfer duty or stamp duty, where applicable.
Conveyancing or legal fees.
Property inspections.
Loan establishment or account fees, where charged.
Building insurance.
Removal and relocation.
Council rates and other ongoing ownership charges.
Utilities.
Maintenance.
Possible strata-related costs for apartments.
An eligible buyer may receive separate first-home transfer-duty concessions or grants under state or territory schemes.
Those benefits are not automatically included in the 5% Deposit Scheme.
Make a complete settlement budget before deciding how much deposit money is available.
27. What if a property's valuation is below the purchase price?
A lender's valuation can differ from the agreed purchase price.
The scheme calculates the minimum deposit in relation to the accepted property value and imposes requirements on both purchase price and valuation.
If a contract price exceeds the lender's valuation, the buyer may need additional funds depending on the lender's financing assessment.
Do not assume that a buyer can automatically borrow exactly 95% of an unusually high contract price.
Discuss valuation shortfalls and finance-condition protections with the lender and conveyancer before signing an unconditional contract.
28. Can the buyer refinance later?
Refinancing may be possible, but it can affect the government guarantee.
If the borrower moves to another lender, the availability or continuation of guarantee support must be checked under the applicable rules.
A borrower with limited equity should not assume that a new lender will waive LMI automatically.
Likewise, converting the property to an investment or changing loan structure can have consequences.
Before refinancing, request a comparison of interest rate, discharge fees, establishment costs, guarantee treatment and any new LMI requirement.
The lowest advertised refinance rate may not produce the lowest total cost.
29. 5% Deposit Scheme versus Help to Buy
These are different Australian housing programs.
Under the 5% Deposit Scheme, the government backs part of the lender's risk; it does not generally take an equity ownership stake in the property.
Help to Buy is a separate shared-equity initiative with distinct government contribution, income and property eligibility rules.
A prospective buyer should not combine figures from the two programs as though they are features of one scheme.
The 5% Deposit Scheme avoids LMI through a guarantee.
A shared-equity program changes the financial structure in another way.
Read the relevant official guidance before comparing borrowing and ownership obligations.
30. Does the 5% Deposit Scheme suit everyone?
No single borrowing arrangement is appropriate for every buyer.
The program can improve access for an eligible household with steady income and limited deposit savings.
But a household with uncertain income, major existing debts or little money left after settlement may be exposed to financial stress.
Likewise, a buyer purchasing at the edge of their borrowing capacity may struggle if rates, insurance or living costs increase.
A larger deposit can reduce the mortgage balance and strengthen the initial equity buffer.
The choice should reflect total affordability and risk, not merely the appeal of buying sooner.
31. First-home buyer risk checklist
Before committing to a 5% deposit purchase, confirm:
You meet the current citizenship or permanent-residency rules.
You meet the age and ownership-history conditions.
Your deposit is acceptable to the lender.
Both contract price and property value fall within the scheme cap.
The loan is an eligible owner-occupier product.
You can meet principal-and-interest repayments.
You have budgeted for all settlement costs.
You understand what the government guarantee actually covers.
You have an emergency reserve.
You have tested repayments at higher rates.
You can manage temporary falls in property value.
You understand the owner-occupancy requirement.
Any joint applicant understands the debt obligation.
The lender has confirmed valuation and approval conditions.
Building or strata inspections have been completed as relevant.
You understand the implications of later refinancing or moving out.
You have checked separate state-based grants and duty relief.
You are buying at a price supported by your actual repayment capacity.
Conclusion: 5% deposit access is valuable, but a larger loan remains a larger risk
Australia's First Home Guarantee has evolved into the Australian Government 5% Deposit Scheme.
Since October 1, 2025, the scheme has offered wider eligibility, removed income caps and eliminated limits on guarantee places.
Eligible first-home buyers can potentially purchase with a minimum 5% deposit without paying lenders mortgage insurance.
Current property price caps range widely by state, territory and designated regional category.
The scheme can reduce the time required to accumulate a deposit, but the buyer still needs a suitable mortgage and must repay the full debt.
A 5% deposit creates a larger loan than a 20% deposit, increasing repayments and exposure to rate rises or declining property prices.
The appropriate decision is not simply whether you qualify for the scheme, but whether the mortgage and overall cost of ownership remain affordable under realistic conditions.
FREQUENTLY ASKED QUESTIONS
1. What are the eligibility rules for Australia's First Home Guarantee in 2026?
The former First Home Guarantee is now part of the Australian Government 5% Deposit Scheme. Eligible first-home buyers generally must be Australian citizens or permanent residents aged at least 18, have a minimum 5% deposit, be first-time buyers or have not owned property or land in Australia in the previous ten years, and purchase an eligible owner-occupied property within the relevant price cap. The scheme has no income caps or waiting list, but applicants must still satisfy a participating lender's mortgage approval requirements.
2. What are the 2026 property price caps for Sydney, Melbourne, Brisbane and Perth?
Housing Australia's published capital-city property price caps are $1.5 million in New South Wales, $950,000 in Victoria, $1 million in Queensland and $850,000 in Western Australia. Other areas have separate caps. Both the purchase price and the lender-assessed property value must be at or below the relevant limit. These are maximum eligible property prices, not guaranteed borrowing amounts. Buyers should check their specific suburb or postcode through the official Housing Australia price-cap tool and confirm eligibility with a participating lender.
3. Does buying with a 5% deposit mean the government pays the other 15%, and what are the risks?
No. The Australian Government provides a guarantee to the participating lender, allowing eligible buyers to avoid lenders mortgage insurance. It does not ordinarily contribute the remaining 15% of a conventional 20% deposit as cash or take a corresponding equity share. A buyer purchasing a $600,000 home with $30,000 down may need an approximately $570,000 mortgage, excluding additional funding requirements. Compared with a 20% deposit, this means higher debt, potentially higher repayments and less protection if property values fall. The buyer remains responsible for all loan repayments.
VERIFIED OFFICIAL SOURCES
1. Australian Government — 5% Deposit Scheme Overview
https://firsthomebuyers.gov.au/australian-government-5-percent-deposit-scheme
2. Housing Australia — First Home Buyer Eligibility and Application
https://firsthomebuyers.gov.au/australian-government-5-percent-deposit-scheme/first-home-buyers
3. Housing Australia — Official Property Price Caps and Postcode Checker
https://firsthomebuyers.gov.au/australian-government-5-percent-deposit-scheme/property-price-caps
4. Housing Australia — Frequently Asked Questions
https://firsthomebuyers.gov.au/faqs
5. Housing Australia — Eligibility Checker
6. Housing Australia — Participating Lenders
7. Housing Australia — Single Parents and Legal Guardians
https://firsthomebuyers.gov.au/australian-government-5-percent-deposit-scheme/single-parents
8. Housing Australia — Scheme Tools, Guides and Forms
9. Reserve Bank of Australia — Official Cash Rate
10. Australian Government — Help to Buy Property Price Caps
https://firsthomebuyers.gov.au/help-buy-tools-and-resources/help-buy-property-price-caps
Editorial and financial disclaimer: Official program details checked October 22, 2026. The price-cap table reflects Housing Australia's published schedule; verify the postcode and property-specific cap with a participating lender before purchasing. Monthly mortgage repayments are hypothetical constant-rate examples, not market offers. The scheme does not eliminate borrowing, interest-rate risk, property-price risk or legal settlement costs. Individual mortgage approval remains subject to lender assessment and scheme compliance.
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