The First Home Guarantee Explained — How to Buy With a 5% Deposit in 2026

If you've looked into first home buyer schemes before and felt like there were too many hoops to jump through, it's worth taking another look. The Australian Government's 5% Deposit Scheme, formerly known as the Home Guarantee Scheme, has had some significant changes that make it much more accessible than it used to be.

Here's what's changed, what it means for you, and how it works.

What Is the 5% Deposit Scheme?

The scheme allows eligible first home buyers to purchase a property with as little as a 5% deposit, without having to pay Lenders Mortgage Insurance (LMI). Normally, if you're borrowing more than 80% of a property's value, lenders require you to pay LMI which can add tens of thousands of dollars to your costs. The government essentially steps in as a guarantor for the remaining portion, which removes that requirement.

Single parents and legal guardians get an even better deal — they can access the scheme with as little as a 2% deposit.

What's Changed From 1 October 2025

This is the big one. From 1 October 2025, the scheme had some major changes that removed barriers that were previously stopping a lot of buyers from qualifying.

• No more income caps. Previously there were income limits of $125,000 for singles and $200,000 for couples that cut a lot of buyers out of the scheme. Those have been removed entirely. It doesn't matter what you earn anymore, as long as you meet the other eligibility requirements.

• No more waitlists. The scheme used to be capped at a limited number of places each financial year, which meant buyers who were ready to go sometimes missed out simply because spots had run out. That's gone. There's no longer a waitlist or an annual cap on places.

• No LMI. This hasn't changed, but it's worth repeating. You still pay no Lenders Mortgage Insurance under the scheme, which can save you a significant amount depending on your loan size and deposit.

These are meaningful changes. The income cap and the waitlist were the two biggest friction points for buyers who were otherwise eligible. Removing both makes this a genuinely useful scheme for a much wider range of first home buyers.

Property Price Caps — Updated for NSW

The scheme has location specific property price caps. The good news is these have also been lifted significantly, which matters a lot in Sydney where median prices have been rising.

For New South Wales, the current caps are:

Sydney and major regional centres including Illawarra, Newcastle and Lake Macquarie: $1,500,000

Other areas of NSW: $800,000

The $1.5 million cap for Sydney is a significant increase from earlier years and now covers a much wider range of properties across the city, including suburbs in South West Sydney like Camden, Campbelltown and the surrounding growth area, where house prices in many suburbs still sit well under that threshold.

If you're buying in Camden LGA, Campbelltown, or the broader South West Sydney Growth Area, the $1.5 million cap gives you a lot of room to work with.

What Types of Properties Are Eligible?

The scheme covers a range of eligible property types which include existing houses, townhouses and apartments, new builds, house and land packages, off the plan purchases, and vacant land with a building contract. The purchase price and the lender's assessed value of the property both need to come in under the cap.

How to Access the Scheme

You can't apply directly to the government. The scheme is accessed through participating lenders as part of a home loan application. That means when you're ready to apply, you need to go through a lender that is signed up to the scheme.

As part of the application you'll need standard documents including proof of identity, proof of citizenship or residency, and a completed Home Buyer Declaration form. Once pre approved, you have 90 days to find a property and sign a contract of sale.

It's also worth knowing there are ongoing obligations. The scheme is designed for owner occupiers, so you need to live in the property. If that changes, the guarantee conditions may no longer apply.

What If You Haven't Saved 5% Yet?

The 5% Deposit Scheme is a great option if you've saved your deposit, but what if you're not quite there yet?

This is where a guarantor loan can help. A guarantor loan allows a family member, usually a parent, to use the equity in their own property as additional security for your loan. This means some lenders will lend you up to 100% of the purchase price, and in some cases up to 110% to cover home related costs like stamp duty, legal fees and moving costs.

Here's how it works in simple terms. Instead of needing a cash deposit upfront, your guarantor provides a limited guarantee secured against their property. The guarantee is usually limited to the shortfall amount, so your parents aren't putting their entire home on the line, just a portion of it. Once your loan reduces to a certain level, typically 80% of the property value, the guarantee can be released and your parents' property is no longer attached to your loan.

It's a common pathway for first home buyers who have the income to service a loan but haven't had enough time to save. If you'd like to explore whether a guarantor loan suits your situation, you can read more about our guarantor loan service here.

Which Option Is Right for You?

Both the 5% Deposit Scheme and a guarantor loan can get you into your first home with a smaller deposit, but they work differently and suit different situations.

The 5% Deposit Scheme works well if you've saved at least 5% and want to buy without relying on family support. The removal of income caps and waitlists means it's now accessible to more buyers than ever.

A guarantor loan works well if you haven't saved 5% yet but have a family member with equity in their property who is willing to help. It can also cover your purchase costs, which the scheme doesn't do on its own.

Talk to Us

Whether you're ready to buy or just starting to work out what's possible, we can walk you through both options and help you find the right path into your first home.

The best way to understand your options is to talk it through with someone who works with multiple lenders every day and knows how each one assesses your situation, that's exactly what we do!

Get in touch today and let's see which option is best for you.