The 5% first home deposit scheme arrives early - what this means for you

If you’ve been saving for your first home, here’s some good news. From 1 October 2025, the Australian Government’s First Home Guarantee scheme will make it possible to buy with as little as a 5% home deposit - and you won’t need to pay costly Lenders’ Mortgage Insurance (LMI). This is a significant step towards improving housing affordability for first home buyers.

The expanded Home Guarantee Scheme was originally due to start in January 2026, but has been brought forward, meaning first home buyers can step into the market sooner.

What’s changing?

Here’s what you need to know in plain terms:

➢ Start date: The 5% deposit scheme is now live from 1 October 2025.

➢ Deposit: First home buyers can purchase with just 5% down.

➢ No income caps: Eligibility is open to all first home buyers, regardless of household income.

➢ Unlimited places: There’s no cap on the number of people who can apply.

➢ Higher property price caps:

• Sydney: up to $1.5 million
• Melbourne: up to $950,000
• Brisbane: up to $1 million
• Increased property price caps across other regions too.

In short, more people can access the expanded Home Guarantee Scheme, and more properties are eligible.

How much time and money could you save?

The difference between a 20% and a 5% home deposit is huge. Let’s look at the sums.

In Melbourne the median house price is ~$983,000. According to last year’s ANZ-CoreLogic Affordability Report, this could take you around 10 years to save the required 20% deposit of around $196,600. (This assumes a household can save 15% of their gross household income each year.) Under the scheme, a 5% home deposit means you only need to save around $49,150, potentially getting you into the market 7 years sooner.

As of July 2025, Sydney’s median house price sits at $1.564 million. A 20% deposit is about $312,800, while a 5% deposit is just $78,200. That’s a difference of more than $230,000 in upfront savings!

Meanwhile, in Brisbane, the median house price is $1.067 million. A 20% home deposit means saving roughly $213,400, while a 5% deposit lowers that hurdle to just $53,350. Based on average savings rates, the deposit gap that once took close to a decade to bridge can now be crossed in just a few years.

What about Lenders Mortgage Insurance (LMI)?

On top of this, skipping Lenders Mortgage Insurance (LMI) can save tens of thousands of dollars more - money you can put towards your home, not fees.

Most first home buyers have heard of LMI, but many don’t realise just how much it adds to the cost of buying. LMI is an insurance policy that protects the lender, not the borrower, if you can’t keep up with your repayments. Traditionally, if you didn’t have a 20% deposit, your bank required you to pay LMI on top of your home loan.

For first home buyers already stretched to save a deposit, this could mean tens of thousands of dollars extra upfront. For example, someone buying a $700,000 property with a 10% deposit could face LMI of up to $20,000–$25,000, depending on the lender. On a $1 million property, LMI could climb well above $40,000. While the cost was usually rolled into the mortgage, it still meant higher repayments and years of paying interest on the expense that isn’t tied to the value of your home.

By removing the need for LMI under the 5% home deposit scheme, first home buyers not only get into the market sooner but also avoid one of the biggest hidden costs of home ownership.

What it means for you

If you’re looking at buying land and building a new home - or purchasing a newly completed property - here’s how to take advantage of the Scheme:

1. Check your eligibility: Use the Housing Australia online tool from 1 October 2025.
2. Talk to lenders early: Many banks and customer-owned lenders will offer loans under the Home Guarantee Scheme.
3. Get your first home deposit ready: Aim for 5% of your target property price, plus land transfer (stamp) duty and other upfront costs. As a first home buyer, you may also be eligible for a stamp duty exemption or concession.
4. Stick to your budget: It’s easy to get carried away - plan for repayments that are comfortable long-term. Keep in mind the property price caps for your region.

Next steps

Buying your first home can feel complicated, but it doesn’t have to. The expanded Home Guarantee Scheme is designed to make housing more affordable for first home buyers - and we’ve created resources to make the journey even clearer.

Our First Home Buyer Guide brings together everything you need to know, from saving and finance to choosing the right home and community. It’s a practical companion for anyone ready to take the next step with confidence. Read the First Home Buyer Guide here and start planning your path to home ownership today.

Disclaimer: All opinions, estimates, forecasts, links to external websites, conclusions and recommendations and underlying assumptions contained within this webpage are made and expressed by Frasers in good faith, in the reasonable belief they are correct and not misleading as at the date of publication. Deposit and LMI saving estimates on this webpage and accessible links are provided as a general guide only and do not constitute advice. Actual figures or deposit or LMI savings may vary depending on the customer’s individual circumstances and eligibility for any government grants. Please visit the relevant state government website on first homeowners grants and check eligibility. This publication and its content do not represent financial or other professional advice and should not be regarded as such. Before acting on any information provided, you should fully consider the appropriateness of the information, having regard to your objectives, financial or taxation situation and needs and, if necessary, seek appropriate professional advice.