5% Deposit Scheme helps more than 300,000 Aussies buy a first home
Marc Adam • April 1, 2026
Want to get on board?
Buying a first home doesn’t have to mean years of eating beans on toast while you scrape together a 20% deposit. Here’s how you could break into the property market with just a 5% deposit.
The Australian government’s 5% Deposit Scheme has been around since 2020, and in that time it’s been a game-changer for more than 300,000 first home buyers.
That’s because the scheme offers a chance to buy a first home with a 5% deposit – or as little as 2% for single parents.
The scheme has also helped fund the construction of close to 30,000 new homes.
So, it’s no surprise that more than one-in-three first home buyers relied on the scheme to buy a place of their own in 2024-25.
If you’re unsure whether the 5% Deposit Scheme is the right pathway to home ownership for you, read on as we take a closer look at what’s involved.
How the 5% Deposit Scheme works
The scheme overcomes a key challenge for first home buyers – saving a 20% deposit at a time when property values in many areas are continuing to rise.
While plenty of lenders offer low deposit home loans, if you have a deposit below 20% you’ll typically be asked to pay lenders mortgage insurance (LMI) which can cost thousands of dollars.
That’s part of the beauty of the 5% Deposit Scheme – the federal government guarantees your home loan, meaning there’s no need to pay LMI.
There are also no waitlists, no income limits and no place limits.
You’re free to buy an established home or build a new place – as long the property falls within the price limits that apply in your area.
Long story short, if you meet eligibility criteria, and can chip in a minimum 5% deposit (or 2% if you’re a solo parent), the scheme could bring forward your savings timeline, and fast-track your journey to home ownership.
Mix and match with other first home buyer incentives
The 5% Deposit Scheme can be combined with other types of first home buyer assistance, no matter whether they are offered through federal, state or territory governments.
These incentives include the First Home Owner Grant (FHOG), which provides a one-off grant in most states and territories to first home buyers who buy or build a new home.
Stamp duty waivers or concessions may also be available to you. And the First Home Super Saver Scheme could let you grow a deposit using your super.
The possible downsides
The 5% Deposit Scheme may be a great help. But it still makes sense to talk to us.
A smaller deposit often means taking out a bigger loan. It can also mean it takes time to build a reasonable level of home equity, and this can make it harder to refinance to a different mortgage further down the track.
That’s why your choice of home loan is so important.
Call us to be sure you’re comfortable with the numbers, and for help finding a home loan that matches your needs.
Disclaimer:
The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
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How are you going with your mortgage?
Having loan pre-approval can be a smart move for home buyers. But the recent Reserve Bank cash rate hikes could leave your pre-approval in need of an update. There’s a lot to love about home loan pre-approval. It shows how much a bank will let you borrow for a home – that’s your ‘borrowing power’. Pre-approval also indicates you’re a serious buyer, providing extra bargaining clout in price negotiations. And while pre-approval typically only lasts for three to six months, that can be sufficient time for many buyers to find their ideal home. But there’s a catch. Pre-approval is not a guarantee. Rather, it is a guide of what you can borrow based on circumstances at the time pre-approval was issued. And the two rate cash rate hikes the Reserve Bank of Australia has implemented this year may have chipped away at your borrowing power. That can make it worth reviewing your mortgage pre-approval. Here’s what to weigh up. Your borrowing power may have altered Your borrowing power, also known as ‘borrowing capacity’, is a key factor when it comes to buying a home. It’s the amount a bank is willing to lend for a home loan, and it’s based chiefly on your income and living expenses. However, interest rates also play a role. A rise in interest rates will mean higher repayments, and this has the potential to reduce your borrowing power. As an example, Canstar says a solo home buyer on the average full-time wage ($106,950) will be able to borrow around $12,000 less as a result of the March 2026 rate rise. Add in the 0.25% February rate hike, and that same home buyer could be looking at a $25,000 cut to their borrowing power. A couple on the a verage wage may have seen their combined borrowing power drop by $49,000 since February. That’s why it’s so important to call us to understand your true borrowing power as it currently stands. Yes, there are online calculators available. But these may not consider every aspect of your personal situation. The risk of outdated pre-approval Taking a ‘she’ll be right’ approach to your loan pre-approval could work against you. You may find, for example, that after negotiating a great price on a place you’re keen to buy, you struggle to get the home loan you need. Worst case scenario: you risk being the winning bidder at auction but failing to get finance to complete the purchase – a situation that could mean losing your deposit. Here too, a call to us can confirm if you are good to go for a home loan before you start putting money on the table for a property purchase. How to boost your borrowing power The good news is that there are steps you can take to potentially boost your borrowing power – no matter what interest rates are doing. Here are a few ideas to get started. Review household expenses – even a small change in non-essential spending can make a difference. Lower the limit on your credit card – lenders often base your borrowing power on the assumption your credit card is maxed out. Think about asking your card issuer to trim your credit limit. Or close it altogether. Clear other debts – a lingering car loan, the remains of student debt, and even an ongoing buy now, pay later balance can impact your borrowing power. Knuckling down to clear the slate could see you rewarded with increased borrowing capacity. Know that rate matters – the rate you pay isn’t the sole decider of whether a loan is a good match for your needs. But the lower the rate, the more you may be able to borrow. Talk to us for up-to-date loan pre-approval Successful home buying doesn’t have to mean borrowing as much as you can. However, it makes sense to start the ball rolling with a clear idea of your current borrowing power. Talk to us to know if your loan pre-approval is out of date, or to organise new pre-approval on a loan that’s well-matched to your needs. Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.