Using the 5% Deposit Scheme: What First Home Buyers Should Check Before Applying
The scheme has changed substantially since most people last heard it explained. From 1 October 2025, the Australian Government 5% Deposit Scheme (previously delivered through the Home Guarantee Scheme/First Home Guarantee) expanded from 1 October 2025.
The question is no longer whether you qualify in theory. It is whether you have checked everything that affects the application in practice, including the things most people only discover after they have already committed to a purchase price.
The Pre-Application Checklist
✓ CHECK: Your citizenship or residency status
The scheme is open to Australian citizens and permanent residents. Temporary visa holders are not eligible. You must be at least 18 years old. Joint applicants may apply with one other eligible person, but each applicant must independently meet the scheme’s eligibility requirements. The scheme requires that neither applicant has owned a home or residential property in Australia within the previous 10 years.
Pass: Australian citizen or PR, aged 18+, with no prior property ownership in the last 10 years. | Watch: Joint applicants can apply with one other person, including a partner, friend or family member, but both applicants must meet the scheme’s eligibility criteria.
✓ CHECK: The property price cap for your location
Property price caps vary by state and region. For example, the current cap is $1,500,000 for NSW capital cities and regional centres, $950,000 for Victoria capital cities and regional centres, and $1,000,000 for Queensland capital cities and regional centres. Property price caps vary by postcode and suburb, so buyers should always verify the applicable cap before signing a contract.
Pass: Your target property’s price sits below the relevant state and regional cap. | Watch: Check the exact cap for your suburb, not just the city. Regional and outer-metro caps can differ from the capital city figure.
Read More: Buying Your First Home in NSW 2026: Government Schemes Still Available
✓ CHECK: Whether your deposit is genuinely ‘genuine savings’
The scheme requires a minimum 5% deposit, but participating lenders may assess deposit source, savings history and loan approval criteria differently. First-home owner grants generally qualify. Whether borrowed funds can be used depends on the participating lender’s policy and the scheme requirements. Buyers should confirm this before applying.
Pass: Savings held for 3+ months, FHOG, or gifted funds at a lender that accepts them. | Watch: If your deposit is primarily from a recent gift, confirm the lender’s gifted-deposit policy before committing to a purchase.
✓ CHECK: Whether you can service a low-deposit loan comfortably
The scheme can reduce upfront LMI pressure, but it does not reduce the loan itself. A first home buyer mortgage broker can help check whether the repayment position still works after rates, fees, living expenses and lender assessment are considered.
Pass: Your income comfortably services the 95% loan at the stressed assessment rate with room to spare. | Watch: Buying at the maximum property price the scheme allows rather than the maximum your finances can comfortably service is a common and avoidable mistake.
✓ CHECK: Whether the property is eligible under the scheme’s property type rules
The scheme covers existing homes, new homes, house-and-land packages, off-the-plan purchases and vacant land where a building contract is included, provided the property is at or below the applicable price cap. If you move out and rent it while the guarantee is still active, you may breach the scheme’s conditions.
Pass: Owner-occupied purchase of an eligible dwelling type within the price cap. | Watch: The scheme cannot be used for investment properties or as part of a rentvesting strategy; owner-occupancy is a mandatory, ongoing condition.
The scheme saves LMI — not the deposit itself. The scheme can help eligible buyers avoid lenders’ mortgage insurance, which can be a meaningful upfront saving. But buyers still take on a higher loan balance than they would with a 20% deposit, so repayments and long-term affordability still need to be checked carefully.
Where OM Financials Fits In
Shyam Maggo and the OM Financials team help eligible first-home buyers understand the first home buyer scheme Australia process before applying. That includes checking property price caps, deposit position, lender policy, repayment comfort and whether the purchase fits the scheme’s owner-occupier rules.
As a mortgage broker Australia service, OM Financials works across more than 50 lenders to compare 5 percent deposit home loans Australia options and identify which participating lender may suit the buyer’s income, deposit source and financial position.
For anyone searching for a Mortgage broker first home buyer support team, or comparing for buyers looking for guidance through the application process, OM Financials helps first-home buyers move from eligibility to a lender-ready application.
Book a free consultation at omfinancials.com.au. Follow OM Financials on Instagram, Facebook and LinkedIn.
Frequently Asked Questions
Q: Is there still an income cap on the 5% deposit scheme in 2026?
Answer: No. Income caps were removed entirely from 1 October 2025. Income caps have been removed, but approval still depends on meeting the lender’s assessment criteria and the scheme eligibility requirements.
Q: Can I use the Australian Government 5% Deposit Scheme to buy an investment property?
Answer: No. Owner-occupancy is a mandatory condition. You must intend to live in the property, and the scheme cannot be used for an investment property or as part of a rentvesting strategy.
Q: What is the property price cap in Sydney and Melbourne under the 2026 scheme?
Answer: Sydney, Newcastle, Illawarra and Lake Macquarie: $1,500,000. Melbourne and Geelong: $950,000. Caps vary by region, so confirm the exact limit for your suburb before committing to a purchase price.