The 5% Deposit Scheme (First Home Guarantee) in NSW [2026 Guide]

How the First Home Guarantee works

Lenders usually charge LMI when you borrow more than 80% of a property’s value. Under the scheme, Housing Australia gives your lender a guarantee instead: if you default and the sale of the home doesn’t cover the debt, it pays the lender the shortfall, up to 15% of the property’s value. That lets you borrow up to 95% without LMI.

The guarantee protects the lender, not you. It isn’t cash, it doesn’t cover missed repayments, and you still repay the whole loan. There’s no fee to use the scheme, but you pay the usual buying costs such as stamp duty and legal fees.

Minimum deposit

5% of the property value (2% for eligible single parents)

Lenders mortgage insurance

None while the guarantee applies

Income cap

None since 1 October 2025

Places

Unlimited, no waiting list

NSW price cap

$1.5 million in Sydney and regional centres, $800,000 elsewhere

Loan type

Owner-occupier, principal and interest, up to 30 years

What changed on 1 October 2025

The Home Guarantee Scheme was rebranded as the Australian Government 5% Deposit Scheme, and several limits went at the same time:

• Income caps were removed for all applicants.
• Property price caps were increased; Sydney’s is now $1,500,000.
• The cap on the number of places was removed, so there’s no waiting for a new allocation.
• The Regional First Home Buyer Guarantee closed to new applicants. Regional buyers now apply as first home buyers, or as single parents or legal guardians.

Single parents and legal guardians (the former Family Home Guarantee) can buy with a 2% deposit and don’t need to be first home buyers. This guide focuses on the first home buyer side.

Who is eligible for the 5% Deposit Scheme

For a first home buyer application, you (and the other applicant, if you apply jointly) must meet all of these:

• Aged 18 or over on the date you sign your home loan.
• An Australian citizen or permanent resident on that date. If one of you is and the other isn’t, you don’t qualify.
• A first home buyer, or you haven’t owned property in Australia in the last 10 years.
• A deposit of at least 5% of the property value, but less than 20%.
• Buying a home to live in: investment properties aren’t eligible.
• Applying alone or with one other person, such as a partner, friend or family member.
• Taking an owner-occupier principal and interest loan of up to 30 years from a participating lender.
• Meeting the lender’s own credit and approval criteria.

If you’ve applied for permanent residency but haven’t received your visa, you don’t yet meet the residency test. The lender confirms your status as part of the application.

First Home Guarantee price caps in NSW

Both the purchase price and the property value (as assessed by your lender) must be at or below the cap for the location. When you buy land and build, the land price plus the build cost must fit under the cap.

Eligible homes include new and existing houses, townhouses and apartments, house and land packages, off-the-plan purchases, and vacant land with a separate building contract. Some suburbs share more than one postcode, so check the exact address with the Housing Australia postcode search tool (opens in a new tab) and confirm with the lender.

What the scheme could mean for your upfront costs

The catch is the bigger loan. Borrowing 95% means higher repayments and more interest over the life of the loan, and a small fall in prices could leave you owing more than the home is worth for a while. Run the numbers with our home loan repayments calculator before you decide.

Is buying with 5% the right move?

It can be, if your income is steady and the budget still works when rates move. Buying sooner means your repayments go towards a home you own, but coming out ahead isn’t guaranteed: it depends on prices, rates and how long you stay. Weigh it up honestly:

• Could you still manage the repayments if rates rose? Moneysmart suggests testing a rate 2% higher.
• The scheme expects you to put as much of your savings as you reasonably can into the deposit, so plan how you’d cover an unexpected bill in the first year.
• Do you plan to stay? Selling within a few years means paying buying and selling costs on a thin slice of equity.
• Might you need to rent the home out soon? Renting ends the guarantee, so the scheme may not suit.

How to apply for the First Home Guarantee

You can’t apply to Housing Australia directly. The application goes through a participating lender as part of your home loan.

1. 1

   Check your eligibility

   Use Housing Australia’s eligibility tool, then talk to us about the lenders on the scheme panel.

2. 2

   Apply through a participating lender

   The lender assesses you, reserves a place (held for 14 days while you complete the application) and submits it. You’ll need ID, your Medicare number, proof of citizenship or residency and a signed Home Buyer Declaration, which is a Commonwealth statutory declaration.

3. 3

   Find a home within 90 days

   Once pre-approved, you have 90 days to find a home under the price cap and sign a contract.

4. 4

   Final approval and settlement

   The lender manages final approval and the guarantee. Your conveyancer handles settlement.

5. 5

   Move in within six months

   For an existing home or off-the-plan purchase, move in within six months of the loan settling.

Building? The lender will require you to sign a fixed-price contract with a licensed builder within six months of the loan settling, start within 12 months, finish within 36 months and move in within six months of the occupancy certificate. Owner-builder contracts aren’t eligible, and if you already own the land before you get a place, the build loan won’t qualify. See our building your own home page.

Rules while your loan is guaranteed

The guarantee stays in place as long as you keep meeting the rules. It ends when any of these happens:

• Your scheduled repayments bring the loan down to 80% or less of the property value (extra repayments you can redraw don’t count).
• You stop living in the home without an approved exemption, or you rent it out.
• You borrow more against the property, refinance to a lender that isn’t on the panel, sell or repay the loan.

Using the scheme with other NSW first home buyer help

The 5% Deposit Scheme sits alongside most other first home buyer help:

• Transfer duty: the NSW exemption up to $800,000 and concession below $1 million apply as normal. See our first home buyer stamp duty guide.
• First Home Owner Grant: the $10,000 grant for new homes up to $600,000 can go towards your deposit and costs. See our First Home Owner Grant guide.
• First Home Super Saver Scheme: super savings can make up part of the deposit.
• Help to Buy: not with this scheme. Help to Buy buyers can’t use another government guarantee on the same purchase.

A family guarantee, where a parent uses equity in their home as extra security, is another way to avoid LMI, and the scheme’s price caps don’t apply to it. Our blog on family financing options compares it, and our LMI explainer shows what the scheme saves you from. For every program in one place, read our guide to first home buyer assistance.

Frequently asked questions

Is the First Home Guarantee the same as the 5% Deposit Scheme?

Yes. The scheme began in 2020 as the First Home Loan Deposit Scheme, was later renamed the First Home Guarantee under the Home Guarantee Scheme, and from 1 October 2025 has been called the Australian Government 5% Deposit Scheme. The idea is the same: the government guarantees part of your loan so you can buy with a smaller deposit and avoid lenders mortgage insurance. Housing Australia runs it.

Is there an income limit for the First Home Guarantee?

Not any more. From 1 October 2025 the income caps were removed, along with the limit on the number of places. You still need to meet your lender’s normal credit assessment, so your income, debts and expenses still decide how much you can borrow. Help to Buy, a separate federal scheme, does have income limits.

Can I use the 5% Deposit Scheme if I have more than a 5% deposit?

Yes, as long as your deposit is less than 20% of the property value. Housing Australia expects you to use as much of your savings as you reasonably can, in line with your lender’s policy. If you have 20% or more left after paying buying costs such as stamp duty and legal fees, your loan won’t be eligible for the scheme.

Can I rent out my home if it was bought with the 5% Deposit Scheme?

Not while the guarantee applies. The scheme is for owner-occupiers: you must move in within six months of settlement and keep living there. Renting the property out ends the guarantee, and if your loan is still above 80% of the property value, your lender may require you to pay lenders mortgage insurance or other costs. Talk to your lender before your plans change.

Can I refinance a loan that has the government guarantee?

You may be able to refinance to another participating lender and keep the guarantee, as long as you don’t increase the loan amount, extend the term or make other changes that affect eligibility. If you refinance to a lender that isn’t a participating lender, the guarantee ends, and you may face lenders mortgage insurance if your loan is still above 80% of the property value.

Sources

1. Housing Australia: Australian Government 5% Deposit Scheme for first home buyers (opens in a new tab)
2. Housing Australia: 5% Deposit Scheme property price caps (opens in a new tab)
3. Housing Australia: 5% Deposit Scheme frequently asked questions (opens in a new tab)
4. Housing Australia: 5% Deposit Scheme Information Guide (PDF) (opens in a new tab)
5. Housing Australia: Help to Buy frequently asked questions (opens in a new tab)
6. Revenue NSW: First Home Buyers Assistance Scheme (opens in a new tab)