The Australian Government 5% Deposit Scheme — still widely called the First Home Guarantee — lets eligible first home buyers purchase with a deposit as small as 5% without paying Lenders Mortgage Insurance. Since the scheme was widened in October 2025, it reaches a much larger share of Sydney buyers than it used to.
For buyers on the North Shore and Northern Beaches, the more useful question is not whether the scheme applies, but what it leaves untouched. It runs on very different thresholds from NSW stamp duty relief, and the gap between the two is where most of the cash in a purchase is actually needed.
Figures in this article were current at publication on 6 October 2026. Scheme settings are reviewed regularly — confirm the current criteria with Housing Australia and Revenue NSW before relying on them.
What the guarantee actually does
A lender normally charges Lenders Mortgage Insurance when the deposit is below 20% of the property's value. Under the scheme, the government guarantees part of the loan — up to 15% of the property's value — to a participating lender. The lender then treats the loan much as it would one with a 20% deposit, and LMI is not charged.
Two things follow from that, and both are easy to miss:
- It is not a grant. No money is paid to you. The loan is the full 95% of the price, and every dollar of it is repaid with interest.
- The guarantee protects the lender, not you. It replaces the insurance the lender would otherwise have required. Your obligations under the loan are the same as on any other home loan.
What it does do is remove a cost that can run to tens of thousands of dollars at Sydney prices, and let you buy years sooner than saving to 20% would allow. Our first home buyer guide explains how LMI is priced and why it rises so steeply as the deposit shrinks.
What changed in October 2025
The scheme was substantially expanded from 1 October 2025:
- Income caps were removed. Previously, applicants above set income limits were excluded.
- The annual cap on places was removed, so eligible buyers no longer compete for a limited allocation each year.
- Property price caps were raised. For Sydney the cap is $1,500,000. Lower caps apply in parts of regional NSW.
The price cap is the number that matters most on the North Shore and Northern Beaches, because it now sits well above the stamp duty thresholds covered below.
Who it is designed for
Broadly, the scheme is for Australian citizens and permanent residents aged 18 or over who are buying a home to live in. It is aimed at first home buyers, and in some cases at people who have not owned property in Australia for a set period. Applications can be made individually or jointly.
A few conditions shape how it works in practice:
- It is for owner-occupiers. The property must be the home you live in. Investment purchases are not covered.
- It runs through participating lenders only. Not every lender takes part, and the guarantee is arranged through the lender as part of the application rather than applied for separately.
- A 5% deposit is the minimum, not the target. Lenders still apply their own policies, including how much of the deposit needs to be genuine savings.
Eligibility detail changes over time, so the official criteria are the place to confirm where you stand.
The NSW wrinkle: two schemes, two thresholds
Stamp duty is a state tax, and the federal guarantee does nothing to reduce it. In NSW, first home buyer relief comes from the separate First Home Buyers Assistance Scheme, administered by Revenue NSW. For contracts exchanged from 1 July 2023:
- Homes valued up to $800,000 are exempt from transfer duty.
- Homes above $800,000 and below $1,000,000 pay duty at a concessional rate, which phases up towards full duty as the price rises.
- At $1,000,000 and above, full transfer duty applies.
- Vacant land has its own thresholds: exempt up to $350,000, concessional above that and below $450,000.
Set that beside the $1,500,000 Sydney price cap and the gap is obvious. Between $1,000,000 and $1,500,000, a first home buyer can use a 5% deposit with no LMI and still pay full stamp duty — from their own funds, on top of the deposit.
As an illustration only: on a $1,200,000 established home, a 5% deposit is $60,000. Transfer duty on the 2026-27 NSW scale is $48,187, with no first home buyer concession at that price. The cash needed before legal fees, inspections and moving costs is therefore around $108,000 — not $60,000. The duty alone is close to the size of the deposit.
That is the figure worth planning around. Our purchase costs calculator works it through for any price and applies the first home buyer concession where it is available.
The trade-offs worth weighing
The scheme is a genuinely useful tool. It is still a decision with costs, and they are clearest when written down:
- A larger loan costs more over time. Borrowing 95% rather than 80% means more interest across the life of the loan. Avoiding LMI is a real saving; it is not the same as borrowing less.
- Less equity means less room to move. With a 5% buffer, a soft patch in values can leave the loan close to — or above — the property's value for a period. That matters if circumstances change and selling becomes necessary sooner than planned.
- Refinancing early needs care. The guarantee sits with a participating lender. Moving the loan before reaching 20% equity can bring LMI back into the picture, so it is worth checking the effect before switching.
- The borrowing test does not change. The scheme lowers the deposit hurdle, not the serviceability assessment. Lenders still test income, expenses and existing debts against a buffer above the actual rate.
- Lender choice narrows. Only participating lenders can offer it, and the best fit for a self-employed applicant or an unusual property may not be on the list.
For many Sydney buyers, the binding constraint turns out to be borrowing capacity rather than the deposit. Our borrowing power calculator gives an indicative figure, and our guide to borrowing capacity covers what lenders actually assess.
Other pathways worth knowing about
- Family Home Guarantee. A related federal guarantee for eligible single parents and single legal guardians, with a deposit as low as 2%.
- Help to Buy. A separate federal shared equity scheme, where the government takes a share of the property's equity. It has its own income limits, price caps and conditions.
- A family guarantee. A private arrangement in which a parent uses equity in their own property as additional security. It can also remove LMI, and it is not limited by a scheme price cap.
- First Home Owner (New Homes) Grant. In NSW, a $10,000 grant for eligible buyers of newly built homes priced up to $600,000, or land and build packages up to $750,000. It does not apply to established homes.
These can interact. Which combination suits depends on the property, the price and the household — and it changes which lenders are worth approaching.
A sensible order of operations
- Confirm eligibility against the current Housing Australia criteria.
- Get borrowing capacity assessed properly, because it is usually the tighter limit.
- Work out the full cash requirement at your target price: deposit, stamp duty, legal fees, inspections and a buffer.
- Choose a participating lender that also suits your income type and the property you are likely to buy.
- Put an assessed pre-approval in place before bidding — our pre-approval guide explains why the assessed kind is the one that counts at auction.
Done in that order, the scheme becomes a planned part of the purchase rather than a late discovery about stamp duty.
If you are weighing the 5% Deposit Scheme for a purchase on the North Shore or Northern Beaches, talk to a Sabea broker or read more about how we approach first home loans.
General information only. It does not take your objectives, financial situation or needs into account, and it is not credit or financial advice. Lender policy, rates and eligibility change regularly and vary between lenders — talk to us about your own circumstances before acting on anything here.