Australian Government 5% Deposit Scheme 2026: Eligibility, Price Caps and Real Costs

The short version

The Australian Government 5% Deposit Scheme is one of the biggest changes to first home buying in years. It lets eligible first home buyers buy with a minimum 5% deposit and no lenders mortgage insurance, because Housing Australia gives the lender a government guarantee for part of the loan.

That sounds simple. In real life, the question is not just "am I eligible?" It is "can I afford the whole purchase once stamp duty, repayments, rates, insurance, moving costs and a 95% loan are all on the table?"

This guide is built around that second question.

The scheme was expanded from 1 October 2025. Housing Australia and the Australian Government first home buyer site say the expanded scheme has no income caps, no waitlists, no lenders mortgage insurance and higher property price caps. Housing Australia also reported in March 2026 that more than 300,000 Australians had bought or built a home with support from the scheme since it began in 2020.

How the 5% Deposit Scheme works

Normally, a buyer with less than a 20% deposit either pays lenders mortgage insurance or uses a guarantor. LMI can run into the tens of thousands of dollars on a 90% to 95% loan, and it protects the lender, not the borrower.

Under the 5% Deposit Scheme:

• You save at least 5% of the property value.
• A participating lender assesses your home loan application.
• Housing Australia provides a guarantee to the lender for up to 15% of the property value.
• You can borrow up to 95% of the property value without paying LMI.
• You must buy a home to live in, not an investment property.

Single parents and single legal guardians may be able to use a related low-deposit path with a minimum 2% deposit, but this article focuses on first home buyers using the 5% deposit path.

You do not apply directly to Housing Australia. You apply through a participating lender as part of your home loan application.

Who can use the scheme in 2026

The core eligibility rules are:

• You must be an Australian citizen or permanent resident.
• You must be at least 18.
• You must be a first home buyer, or you must not have owned residential property in Australia in the previous 10 years.
• You must have at least a 5% deposit.
• The home must be owner-occupied.
• The property must be within the location price cap.
• The loan generally needs to be a principal and interest owner-occupier home loan through a participating lender.

That 10-year rule matters. The scheme is no longer just for people who have never owned property. Someone who owned a home years ago may qualify if they have not owned residential property in Australia in the 10 years before the home loan date.

Your lender still has to approve the loan. The scheme removes the LMI cost and deposit hurdle, but it does not remove serviceability checks, credit checks, valuation risk or normal lending policy.

Current property price caps

Both the purchase price and the lender-assessed property value must be at or below the cap for the location. If the bank valuation comes in above the cap or below the contract price in a way that affects the lender's numbers, speak to the lender before assuming the deal is safe.

Current caps listed on firsthomebuyers.gov.au include:

The regional-centre definition is specific. It includes Illawarra, Newcastle and Lake Macquarie in NSW, Geelong in Victoria, and Gold Coast and Sunshine Coast in Queensland. The official site also notes that from 1 July 2026, Darwin has a $750,000 cap while the rest of the Northern Territory remains $600,000.

Always check the official postcode tool before signing. Some suburbs and postcodes can sit in awkward boundary areas.

What deposit do you actually need?

The simple answer is 5% of the property value. The practical answer is 5% plus buying costs.

The scheme helps with the deposit and LMI. It does not magically pay stamp duty, conveyancing, building and pest inspections, strata reports, moving costs or your first insurance premium.

For example, a buyer in NSW purchasing a $900,000 established home might have the 5% deposit covered with $45,000. But if they are not fully exempt from transfer duty, they may still need tens of thousands more for upfront costs. First home buyer concessions can change this dramatically, which is why you should model the purchase with the stamp duty calculator before treating the deposit as the full savings target.

The LMI saving can be huge

The biggest cash benefit is often the avoided LMI.

On a $750,000 purchase with a 5% deposit:

• Deposit: $37,500
• Base loan: $712,500
• LVR: 95%
• LMI without a guarantee: often tens of thousands of dollars, depending on lender, borrower and property type
• LMI under the scheme: $0

That saving can be the difference between buying now and waiting years. But it is not free money. You are still borrowing 95% of the property value, which means repayments are higher than they would be with a larger deposit.

Run the same scenario through the LMI Calculator, then compare repayments with the Mortgage Repayment Calculator.

Repayments are the part people underplay

A smaller deposit gets you in sooner. It also leaves you with a bigger loan.

Take a $800,000 purchase:

• With a 5% deposit, the loan is about $760,000.
• With a 20% deposit, the loan is about $640,000.
• The difference is $120,000 of extra debt.

At a 6.35% rate over 30 years, that extra $120,000 adds roughly $745 a month in principal and interest repayments. The exact number changes with rate and term, but the point is constant: avoiding LMI does not make the larger loan disappear.

This is where buyers should slow down. The scheme may make a purchase possible, but possible is not the same as comfortable. You still need a buffer for repairs, strata levies, rate rises, job changes and the general cost of living.

How it stacks with state first home buyer help

The 5% Deposit Scheme is federal. Stamp duty concessions and first home owner grants are state or territory based. In many cases, you can use the federal scheme and still claim state help if you meet the rules for both.

Common combinations include:

• 5% Deposit Scheme plus a state first home buyer stamp duty exemption.
• 5% Deposit Scheme plus a First Home Owner Grant for a new build.
• 5% Deposit Scheme plus the First Home Super Saver Scheme if you have saved voluntary contributions inside super.

The order matters less than the total cash required. A buyer with a 5% deposit and a stamp duty exemption is in a very different position from a buyer with a 5% deposit who still needs to pay full duty.

Start with Property Purchase Cost Calculator, then check Stamp Duty Calculator for your state.

Risks to check before you apply

The scheme is useful, but it has sharp edges.

Valuation risk. Lenders use their valuation, not just the contract price. If the valuation is lower than expected, your required cash contribution may rise.

Negative equity risk. A 95% loan leaves a thin equity buffer. If prices fall soon after purchase, you may owe more than the home is worth, especially after selling costs.

Repayment pressure. You avoid LMI, but you still carry a large loan. If rates rise or your income changes, the loan can feel tight.

Property cap risk. A home needs to be within the location cap. Near a boundary, confirm the exact suburb and postcode cap with the lender.

Owner-occupier obligations. You need to live in the property. If you move out or breach ongoing obligations, the guarantee may no longer apply and the lender may require LMI or other action.

A sensible buying checklist

Before you make an offer, work through this:

1. Check the official price cap for the suburb and postcode.
2. Confirm you meet the scheme eligibility rules with a participating lender.
3. Calculate deposit, stamp duty and purchase costs.
4. Check repayments at your actual rate and at a higher stress-test rate.
5. Keep an emergency buffer after settlement.
6. Get the contract reviewed before signing.
7. Avoid bidding at your absolute borrowing limit.

The buyers who get the most from the scheme are not necessarily the ones who buy the maximum property allowed under the cap. They are the ones who use the scheme to avoid dead money on LMI while still buying a property they can hold through a rough patch.

Bottom line

The 5% Deposit Scheme is a serious leg-up for first home buyers in 2026. It removes one of the biggest upfront barriers and can save a buyer a large LMI bill.

But it is not a shortcut around affordability. A 95% loan is still a 95% loan. The best use of the scheme is to buy a suitable home with a repayment you can live with, not to stretch to the biggest number a lender will approve.

Run the full picture before you commit: LMI Calculator, Stamp Duty Calculator, Borrowing Power Calculator and Mortgage Repayment Calculator.

Sources: firsthomebuyers.gov.au Australian Government 5% Deposit Scheme; firsthomebuyers.gov.au Property Price Caps; Housing Australia Home Guarantee Scheme; Housing Australia media release, 30 March 2026. This article is general information, not personal financial advice.