Help to Buy vs 5% Deposit Scheme: Which First Home Buyer Path Is Better in 2026?

The quick answer

Help to Buy and the Australian Government 5% Deposit Scheme solve different problems.

If your income is modest and the loan you can service is the main thing blocking you from buying, Help to Buy may do more. The government contributes up to 30% of the purchase price for an existing home or 40% for a new home, which means your mortgage can be much smaller.

If you can service the loan but have not saved a 20% deposit, the 5% Deposit Scheme is usually the cleaner path. You keep 100% ownership, avoid lenders mortgage insurance, and buy with a smaller deposit, subject to property price caps and lender approval.

The real question is not which scheme is better. It is this: would you rather share ownership to reduce the loan, or keep full ownership and carry a larger mortgage?

What Help to Buy does

Help to Buy is the Australian Government shared equity scheme. You buy the home, live in it, and your name goes on title, but the government also holds a financial interest in the property.

Under the scheme:

• You need a minimum 2% deposit.
• The government can contribute up to 40% of the purchase price for a new home.
• The government can contribute up to 30% of the purchase price for an existing home.
• You do not pay rent or interest to the government while you live in the home.
• The government's share grows or falls with the value of the property.
• You can buy back the government's share over time or when you sell.

That last point is the part buyers need to sit with. Help to Buy can reduce your loan today, but the government shares in future gains or losses based on its equity share.

What the 5% Deposit Scheme does

The Australian Government 5% Deposit Scheme is not shared equity. The government does not buy part of the home with you.

Instead, the government provides a guarantee to a participating lender. That guarantee allows eligible buyers to borrow with a lower deposit and no lenders mortgage insurance.

Under the current scheme settings:

• First home buyers need a minimum 5% deposit.
• Eligible single parents or legal guardians may buy with a minimum 2% deposit.
• There are no income caps.
• There are no waitlists.
• There is no LMI.
• You keep 100% ownership of the property.
• The property must be within the location price cap.
• Both the purchase price and the lender's assessed value must sit at or below the relevant cap.

This makes it simpler than Help to Buy. The trade-off is that your mortgage is larger because the government is not contributing equity.

Side-by-side comparison

Worked example: $800,000 existing home

Assume a buyer is looking at an $800,000 existing home.

With Help to Buy, the government could contribute up to 30%, or $240,000. If the buyer contributes a 2% deposit of $16,000, the home loan could be around $544,000 before transaction costs.

With the 5% Deposit Scheme, the buyer contributes a 5% deposit of $40,000. The home loan could be around $760,000 before transaction costs.

That is a very different repayment profile. At the same interest rate, a $544,000 loan is much easier to service than a $760,000 loan. For a single buyer or lower-income household, Help to Buy may turn a no from the bank into a possible approval.

But if the home later sells for $1,000,000 and the government still owns 30%, the government share is worth $300,000. The buyer benefited from a smaller mortgage, but also gave up part of the upside.

When Help to Buy can make sense

Help to Buy is worth a close look if:

• Your income sits under the scheme threshold.
• You can save a small deposit but cannot service a large enough loan.
• You are comfortable with the government sharing in the home's future value.
• You plan to live in the property for a while.
• You are buying inside the relevant price cap.
• You have spoken with a participating lender before making an offer.

It can be especially useful for single buyers, single parents and households where rent is manageable but traditional borrowing power is the barrier.

Use the Borrowing Power Calculator to test the difference between borrowing 60%, 70% or 95% of the purchase price.

When the 5% Deposit Scheme is likely cleaner

The 5% Deposit Scheme may be the better fit if:

• You can service the full mortgage.
• You want to keep 100% of any capital growth.
• Your income would make you ineligible for Help to Buy.
• You want fewer long-term scheme obligations.
• You expect your income to rise and do not want to manage a government equity buyback.
• You have enough deposit and buying costs saved.

The scheme does not make the loan smaller. It mainly removes the LMI hurdle and lowers the deposit hurdle.

Run your numbers through the LMI Calculator and Mortgage Repayment Calculator before choosing this path.

Buying costs still matter

Neither scheme removes the normal costs of buying property.

You still need to budget for:

• Stamp duty, unless you qualify for a state concession.
• Conveyancing or legal fees.
• Building and pest inspections.
• Loan application or package fees.
• Mortgage registration and transfer fees.
• Moving costs.
• Insurance.
• A cash buffer after settlement.

The deposit is only one part of the transaction. A buyer with a 2% or 5% deposit can still be short of cash if they forget stamp duty, strata adjustments, council rates, lender fees or settlement adjustments.

Use the Property Purchase Cost Calculator before you bid, not after your offer is accepted.

Can you use both schemes together?

Do not assume so unless your lender and Housing Australia confirm it for your exact situation.

Help to Buy has rules around other government assistance, especially other shared equity schemes, loans or guarantees. The 5% Deposit Scheme is a government guarantee, while Help to Buy is shared equity. They are built for different pathways.

You may still be able to use state stamp duty concessions, grants or exemptions with Help to Buy, depending on your state or territory rules. That is a separate question from combining two federal pathways.

The safe approach is simple: ask the participating lender before you sign a contract or pay a deposit.

The serviceability trap

A small deposit does not guarantee approval.

Lenders still check whether you can afford the loan. They look at income, expenses, existing debts, dependants, credit limits, HELP debt, living costs and the assessed interest rate.

This matters for both schemes:

• Help to Buy reduces the mortgage size, which can help serviceability.
• The 5% Deposit Scheme avoids LMI, but the loan can still be around 95% of the property value.

That is why the same buyer can be approved under Help to Buy but declined under the 5% Deposit Scheme, even if both properties are under the relevant price cap.

Bottom line

Help to Buy is for buyers who need the loan itself to be smaller. The 5% Deposit Scheme is for buyers who can handle the loan but need to get past the deposit and LMI hurdle.

For a buyer who expects to stay in the home, has modest income and is blocked by borrowing power, Help to Buy can be the stronger pathway.

For a buyer with solid income, rising earnings and a preference for full ownership, the 5% Deposit Scheme is usually simpler.

Do not choose based on the smallest deposit. Choose based on the long-term cost, ownership outcome and repayment comfort.

Start with the Borrowing Power Calculator, then compare repayments with the Mortgage Repayment Calculator, LMI with the LMI Calculator, and total upfront costs with the Property Purchase Cost Calculator.

Sources: Housing Australia Help to Buy Scheme media release; Australian Government Help to Buy Scheme Fact Sheet dated 5 December 2025; Australian Government 5% Deposit Scheme Fact Sheet dated 1 October 2025; firsthomebuyers.gov.au scheme tools and price cap guidance. This article is general information, not personal financial, legal or credit advice.