What is the scheme?
The Australian Government 5% Deposit Scheme is a federal government initiative designed to help first-home buyers (FHBs) enter the property market sooner. Under the scheme, eligible buyers can purchase a home with as little as a five per cent deposit, without needing to pay costly lenders mortgage insurance (LMI).
Nicola Powell, Domain’s chief of research and economics, explains: “The scheme removes two of the biggest financial hurdles for a first-time buyer: saving that 20 per cent deposit and paying thousands of dollars in mortgage insurance.”
Who can qualify?
The scheme is open to Australian citizens and permanent residents who haven’t owned property in Australia in the past 10 years. “They’re widening the eligibility,” adds Powell. “There are no longer income caps and there are no longer limits on the number of places available. The way they’ve described this scheme is that it’s for all Australians.”
There are, however, property price caps that vary by location. For example, in Sydney, eligible buyers can purchase a property up to $1.5 million, while in Melbourne the cap is $950,0001. Regional and smaller-city thresholds are generally lower but still reflect local market conditions.
Powell stresses that FHBs should avoid taking a short-term view when considering the scheme. “To really get the best out of it, you need to think about staying in that home for multiple years in order to see equity growth. Check that you can comfortably afford the repayments and make sure you’re not stretching yourself too thin.”
Why it matters now
Saving a 20 per cent deposit can feel impossible. By reducing the deposit hurdle, the scheme allows FHBs to act faster and potentially avoid being priced out further. According to Domain data, the average time it takes to save a 20 per cent deposit on a median-priced home in Sydney is more than 11 years. With the scheme, that timeline shrinks dramatically. “The biggest benefit of the five per cent deposit scheme is definitely speed. It brings first time buyers to market sooner,” says Powell.
Practical tips for buyers
If you’re considering using the scheme, here are some smart steps to take:
- Check eligibility early. Demand is high so apply as soon as possible through participating lenders.
- Research property caps. Use Domain Price Estimates to understand property values in your target areas and if they fall under the scheme’s thresholds.
- Factor in costs. While LMI may be off the table, remember to budget for stamp duty, legal fees and moving expenses.
- Get pre-approval. Knowing your borrowing power up-front makes house-hunting more focused and less stressful.