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What Changed in the 5% Deposit Scheme?
Australia's 5% deposit scheme: understand new price caps, who qualifies, and simple steps to apply from 1 October 2025.
From 1 October 2025, Australia’s 5% deposit scheme expands with unlimited places, no income caps, and higher property price caps. This guide explains what the changes mean, where the new caps sit by state and territory, and how the process works. You will also see simple numbers that show the deposit and repayment impact for typical first home purchases across Australia.
Key takeaways
- Unlimited places and no income caps apply from 1 October 2025 for first home buyers.
- Property price caps rise in most locations: Sydney to $1.5m, Melbourne to $950k, Brisbane and ACT to $1m.
- The scheme allows a 5% deposit for first home buyers and a 2% deposit for eligible single parents or legal guardians.
- Avoiding Lenders Mortgage Insurance (LMI) lowers upfront costs, but a 95% loan means higher repayments: use the worked examples to stress test.
How the 5% Deposit Scheme Works
The Australian Government backs part of the loan so first home buyers can purchase with a small deposit and avoid Lenders Mortgage Insurance. Housing Australia describes the change simply: “From 1 October 2025, the Scheme will remove limits to the number of Government guarantees available, giving all Australian first home buyers the chance to enter the market with a deposit of as little as 5% and avoid Lenders Mortgage Insurance.” *
Alongside unlimited places, there are no income caps. A government explainer sums up the core features: “No income caps, no waitlists and no Lenders Mortgage Insurance, reduces your upfront costs and gets you on the path to home ownership sooner.” **
The mechanics are straightforward. An eligible buyer contributes a minimum deposit, a participating lender advances the balance up to 95% of the home’s value, and the government provides the guarantee to the lender. Buyers still need to meet lender credit checks, serviceability tests, and standard documentation.
Example: on a $700,000 purchase in Brisbane under the new cap, a 5% deposit is $35,000. With a 95% loan, even a small rate change matters. At a 5.8% interest rate, monthly repayments over 30 years are higher than if you contributed a 20% deposit. Stress test your budget with a buffer for rate moves and living costs.
Three practical levers to use well
Compare like-for-like repayments: check the impact of 95% vs 80% loans on monthly cash flow, including any package fees. A small rate difference grows over 30 years.
Target a clear buffer: build a few months of living costs plus repayments in savings. This helps manage rate rises or surprise expenses after moving in.
Match property type to cap: focus your search on suburbs and property types that sit below the cap in your state, to reduce time wasted on ineligible listings.
Checklist to prepare
- Proof of ID, income, liabilities, and genuine savings
- Rough suburb shortlist that fits the local cap
- Current rent and living cost breakdown
- Two repayment scenarios: 95% vs 80% loan
What this means for Buyers
- Faster entry with a 5% deposit and no LMI
- More suburb options due to higher price caps
- Need to manage higher repayments from a 95% loan
Quick Q&A
Q: Does the guarantee cover my repayments?
A: No. The guarantee supports the lender. You are responsible for making repayments.
Q: Are interest rates discounted under the scheme?
A: Rates are set by each lender. Compare options and look at the true monthly cost.
Related reading: First Home Basics
- First Home Loan Deposit Scheme for First-Time Buyers
- Ultimate Guide to Loan Guarantor and the Family Guarantee
- Understanding How Home Loans Work: A Comprehensive Guide
New Price Caps From 1 Oct 2025
Price caps rise in most markets to reflect recent values. The official table lists capital city and regional centre caps, plus a separate “other” cap for each state and territory. Sydney lifts to $1.5m, Melbourne to $950k, Brisbane and the ACT to $1m, with other locations scaled to local conditions. *
These higher caps broaden the search for many buyers. The aim is to align the scheme with the homes people actually look at, so that fewer first home buyers hit a hard ceiling during inspections.
Use the table below to check the property price cap for your area. “Regional centres” include Illawarra, Newcastle and Lake Macquarie in NSW, Geelong in VIC, and Gold Coast and Sunshine Coast in QLD. *
Property Price Caps by Location
The table summarises current caps, the higher caps from 1 October 2025, and the 5% deposit needed at each new upper limit.
| Location | Cap Now | Cap From 1 Oct 2025 | 5% Deposit At New Cap |
|---|---|---|---|
| NSW: Greater Sydney and listed regional centres | $900,000 | $1,500,000 | $75,000 |
| NSW: Other areas | $750,000 | $800,000 | $40,000 |
| VIC: Greater Melbourne and Geelong | $800,000 | $950,000 | $47,500 |
| VIC: Other areas | $650,000 | $650,000 | $32,500 |
| QLD: Greater Brisbane and listed regional centres | $700,000 | $1,000,000 | $50,000 |
| QLD: Other areas | $550,000 | $700,000 | $35,000 |
| WA: Perth metro | $600,000 | $850,000 | $42,500 |
| WA: Other areas | $450,000 | $600,000 | $30,000 |
| SA: Adelaide metro | $600,000 | $900,000 | $45,000 |
| SA: Other areas | $450,000 | $500,000 | $25,000 |
| TAS: Hobart metro | $600,000 | $700,000 | $35,000 |
| TAS: Other areas | $450,000 | $550,000 | $27,500 |
| ACT: Territory-wide | $750,000 | $1,000,000 | $50,000 |
| NT: Territory-wide | $600,000 | $600,000 | $30,000 |
| Jervis Bay Territory and Norfolk Island | $550,000 | $550,000 | $27,500 |
* Regional First Home Buyer Guarantee scope: the greater capital city areas of each state, the Northern Territory, and the whole ACT are not included in this regional program.
** Regional centres for cap purposes are: NSW – Illawarra, Newcastle and Lake Macquarie; VIC – Geelong; QLD – Gold Coast and Sunshine Coast.
Worked example: A Sydney buyer purchasing at the $1.5m cap with a 5% deposit needs $75,000 plus purchase costs. A 95% loan of $1,425,000 at 5.9% over 30 years produces significantly higher monthly repayments than an 80% loan. Test both scenarios before you shortlist suburbs.
How to use the caps in your search
Draw a cap-aware map: shortlist suburbs where recent sales and listings sit under the cap. Filter out streets that price above it to avoid wasted time.
Pick a “target price”: aim 3% to 5% below the cap to allow for bidding, inspections, and minor upgrades after settlement.
Adjust property type: in tighter markets, townhouses or older apartments can fit under the cap where new houses do not.
Checklist
- Confirm your state or territory cap
- Check if your suburb counts as a regional centre
- Filter portals to the cap level
- Keep a 3% to 5% buffer for negotiation
What this means for Sellers
- More first home buyers may qualify for your listing
- Price guides just under the cap can attract extra interest
- Clean building and pest reports help cap-conscious buyers act faster
Quick Q&A
Q: Are there price caps in every location?
A: Yes, but the level differs. Some territories have a single cap, others split caps by metro, regional centre, and other areas.
Q: Do caps include add-ons like furniture or upgrades?
A: Caps refer to the contract price of the home or package. Extras outside the contract are not counted.
Related reading: Plan and Calculate
- Deposit Savings Calculator
- Borrowing Capacity Calculator - How Much Can I Borrow?
- Calculate Loan to Value Ratio (LVR) & Impact on Repayments
Eligibility and How to Apply
The scheme is open to first home buyers who meet standard lending checks. From October 2025, applications are not limited by income and there is no waiting list. You apply through participating lenders who submit your application to Housing Australia for a guarantee assessment and pre-approval. *
There is also a pathway for single parents or legal guardians with a 2% deposit under the government’s umbrella programs. The government explainer highlights this minimum: “The Scheme is for aspiring home buyers just like you – first home buyers with a minimum 5% deposit, or single parents or legal guardians with a minimum 2% deposit.” **
Each lender still tests serviceability. Expect to show payslips or business income records, bank statements, liabilities, and a budget. If you have HELP debt, car finance, or buy-now-pay-later accounts, the lender will include them in calculations.
Example: a Melbourne buyer targets a $900,000 home (below the $950k cap). A 5% deposit is $45,000. If assessed at a 5.7% rate with a 3% buffer, the lender checks that income covers repayments at 8.7% plus living costs.
Three steps to get started
Check the cap and postcode: confirm the cap for your region and ensure the suburbs you like fit. If you are close to the cap, keep a small buffer.
Get documents ready: ID, income, liabilities, savings statements, and evidence of rental history can speed up pre-approval.
Talk to a participating lender: ask how the guarantee is applied, which products are available, and the steps to formal approval and settlement.
Checklist
- Confirm you are a first home buyer
- Choose suburbs that fit the cap
- Gather documents and bank statements
- Confirm lender timelines for pre-approval
What this means for Current borrowers
- Past property ownership within the last decade may affect eligibility
- Improved documentation speeds up approvals
- Clear savings history supports your application
Quick Q&A
Q: Do joint applicants qualify?
A: Yes. Many lenders accept joint first home buyer applications under the scheme.
Q: Can I use gifts as part of my deposit?
A: Lenders may accept gifts with a statutory declaration, but some want a portion of genuine savings. Ask upfront.
Worked Examples and Buyer Scenarios
Numbers make the scheme real. These scenarios show deposit sizes and simple repayment pictures across Australia. They do not account for state taxes or concessions. Always check the cap for your area and lender assessment rules.
Scenario 1: Adelaide house at $880,000 (under the $900k cap). A 5% deposit is $44,000. A 95% loan is $836,000. At 5.8% over 30 years, the estimated monthly repayment sits near the upper end of typical first home budgets. A 10% deposit lowers repayments but may need more time to save.
Scenario 2: Perth townhouse at $820,000 (under the $850k metro cap). A 5% deposit is $41,000. A 95% loan is $779,000. At 5.6%, repayments are sensitive to small rate moves. Consider a small buffer for strata or maintenance.
Scenario 3: Hobart unit at $680,000 (under the $700k cap). A 5% deposit is $34,000. A 95% loan is $646,000. At 5.9%, repayments may still beat rent in some areas, especially for long-term holders.
Four ways to plan with confidence
Stress test the rate: model repayments at your quoted rate plus 1% to 2% for safety. This reduces the risk of surprises after settlement.
Budget for on-costs: allow for legal fees, inspections, and moving. If eligible, state schemes may reduce stamp duty for first home buyers.
Fine-tune your shortlist: line up three properties under the cap to keep momentum if one falls through.
Build an emergency buffer: even 1 to 2 months of expenses helps manage repairs or income changes.
Checklist
- Run repayments at +1% and +2% buffers
- Account for state charges and concessions
- Shortlist three properties under the cap
- Keep a starter maintenance fund
Quick Q&A
Q: Can I avoid LMI under the scheme?
A: Yes. The government guarantee replaces LMI for eligible buyers and lenders.
Q: Does a higher cap mean I should buy at the top end?
A: Not necessarily. Caps are ceilings, not targets. Pick the price that fits your budget and buffer.
Sources
* Unlimited places, higher property price caps for first home buyers from 1 October 2025: Housing Australia; 2025
** Australian Government 5% Deposit Scheme: First Home Buyers (Gov); 2025
Disclaimer: The opinions expressed in this article are strictly for general informational and entertainment purposes only and should not be taken as financial advice or recommendations.
Written By
The Craggle Team