From today, the expanded Australian Government 5% Deposit Scheme, formerly known as the Home Buyer Guarantee, officially comes into effect, helping more Australians buy a home sooner.
The scheme allows eligible buyers to purchase a property with just a 5% deposit and no Lenders Mortgage Insurance (LMI), removing one of the biggest upfront costs for first-home buyers.
“Buying with a smaller deposit and no LMI can make a real difference, especially for younger buyers or single-income households,” says NAB Executive, Home Ownership, Matt Dawson. “Saving for a deposit is tough, and this update helps ease that pressure.”
What is the expanded scheme?
From October 1, the Australian Government’s low-deposit home-buying program has been expanded and simplified, making more people eligible.
Previously, there were separate programs for different groups, such as the First Home Guarantee for city buyers and the Regional First Home Buyer Guarantee for those purchasing outside capital cities. These have now been merged into a single program called the First Home Buyers Scheme, making the process simpler and less confusing.
Under the new rules:
- You no longer need to meet income caps or price limits to qualify, opening eligibility to more Australians. Particularly, middle-income earners.
- Property price caps have been adjusted better to reflect actual home values in each state and region.
- Regional buyers still receive tailored support, but no longer need to navigate separate applications or eligibility criteria.
In short, the expanded scheme aims to make home ownership more accessible and straightforward.
“The changes give first-home buyers a fairer shot at entering the market, and help more Australians unlock the door to their own home sooner,” says Matt.
The trade-offs of a smaller deposit
While the thought of not paying LMI is music to many people’s ears, it will undoubtedly save them money. Is the new scheme too good to be true?
Mortgage broker Jack Magann says the expanded 5% deposit scheme will certainly help more first-home buyers enter the market sooner.
However, he cautions that buyers need to understand the potential trade-offs associated with a smaller deposit.
“A 5% deposit means taking on a larger loan amount,” Jack explains. “That increases your monthly repayments and can put more pressure on your household budget.”
He says the long-term cost is also higher.
“The interest paid over the life of the loan will be significantly more than if you had a 20% deposit,” he adds.
Better rates for first home buyers
Still, there’s some good news.
“Because the government guarantees the loan, lenders can offer competitive rates that are normally reserved for borrowers with higher deposits,” Jack says.
His final piece of advice: plan ahead.
“It’s important to think about how future life events, like having kids or changing jobs, might affect your finances,” says Jack.
“Until you’ve built at least 20% equity, refinancing or accessing your home’s equity can be difficult.”
While the scheme helps Australians buy sooner, experts warn that weighing short-term gains against long-term costs is crucial for sustainable ownership.
Who is eligible?
To access the Scheme, you need to meet the eligibility criteria, including:
- Australian citizens or permanent residents
- First-home buyers purchasing to live in the property
- Minimum 5% deposit (2% for single parents)
- Must meet the lender’s borrowing and serviceability checks
- Buying an eligible home—house, unit, townhouse, or off-the-plan
You can check further eligibility criteria HERE.
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