Buying your first home is exciting and a huge step, but saving a deposit of 20% seems out of reach. The good thing is though, the 5% deposit scheme (also known as the First Home Guarantee) was approved by the Albanese Goverment and is designed to make things easier by helping more people get into the market sooner.
This guide breaks down how the 5% scheme works when buying your first house, who can apply and what to watch out for. We’ll also tell you why a building inspection is important, even if the government is helping you get your foot in the door.
What is the 5% deposit scheme in Australia?
The First Home Guarantee is a Federal scheme to assist eligible buyers to buy their first home using as little as 5% deposit and without the need for Lenders Mortgage Insurance (LMI). Typically, if your deposit is less than 20% the bank will require LMI on your loan amount, which can cost thousands.
But under this scheme, the Australian Government becomes the guarantor for the deposit amount that is left over. This reduces your upfront costs, making home ownership more achievable.
So, let’s say you want to buy a house that costs $600,000 in Hobart, Tasmania. That means you’d have to save $120,000 if you had to put together a 20% deposit. However, under the 5% deposit scheme to buy the same $600,000 house, you’d have to make an upfront payment of only $30,000.
It’s important to highlight that this scheme is not a cash payment. You still need to borrow and repay the money through your lender.
From 1 October 2025, the 5% deposit scheme will be expanded to provide unlimited places with higher property price caps, allowing greater access across Australia.
Who can apply for the 5% deposit home loan?
You can apply if you:
- Be an Australian citizen or permanent resident over 18 years old
- Buying a home for the first time or not having owned property in the last 10 years if you’re not a single parent or a single legal guardian with a dependent child
- Intend to live in the property as your main residence
- Have at least 5% deposit made up of genuine savings
- Apply through a participating lender
- The property you want to buy costs less than or is equal to the maximum price limit set for your area (see caps on maximum property prices below)
You can check your eligibility here.
After 1 October 2025, the scheme will no longer have income caps or a limit on how many people can access it. These updates mean more buyers will qualify.
Property price caps based on states and territories
The property price caps information below was extracted from the Australian Government website.
| State | Capital city and regional centres | Other areas |
| New South Wales | $1,500,000 | $800,000 |
| Victoria | $950,000 | $650,000 |
| Queensland | $1,000,000 | $700,000 |
| Western Australia | $850,000 | $600,000 |
| South Australia | $900,000 | $500,000 |
| Tasmania | $700,000 | $550,000 |
| Territory | All areas |
| Australian Capital Territory | $1,000,000 |
| Northern Territory | $600,000 |
| Jervis Bay Territory & Norfolk Island | $550,000 |
| Christmas Island & Cocos (Keeling) Islands | $400,000 |
When does the 5% deposit scheme start?
The scheme has been in place since 2020, but the new updates come into effect from 1 October 2025. These updates include:
- No income eligibility requirements, so more people are eligible
- Increased property thresholds (for example, to $700,000 for Hobart and $550,000 for regional Tasmania)
- Unlimited locations, so you never have to race and get a spot
The benefits of the 5% deposit scheme
There are a few big benefits if you are trying to get into the market:
- You only need 5% deposit
- You do not have to pay LMI, which can save thousands
- It helps you buy sooner, rather than spending years saving
- You can choose from a wider range of homes thanks to increased price caps
The risks first home buyers should watch out for
Buying a home with a smaller deposit can be risky too. Make sure you know what you’re signing up for:
- Smaller deposits mean larger loan amounts, so your monthly repayments could be higher
- Interest rates may vary across different lenders offering the scheme
- You still need to meet all the regular checks for a home loan
You might end up with negative equity if house prices fall or you have to sell before the mortgage is paid off.
Why are building inspections crucial under the 5% scheme?
Even though a smaller deposit can help you get in faster, this doesn’t mean you should forego proper checks. A building inspection is nevertheless necessary. At Fearless Building Inspections, we have seen many hidden problems in homes that appear to be fine on the surface. These include leaks, damaged wiring, roof damage and more. These problems can be expensive to repair later and can be dangerous if not caught in time.
That’s why we recommend a pre-purchase building inspection before you buy a house or an apartment. The report not only gives you peace of mind but also helps to negotiate the property’s price and avoid expensive surprises.
Our inspections cover:
- Structural soundness
- Signs of moisture or damage
- Roofing and foundation inspections
- Recommendations for repairs or points of negotiation
Tips for first home buyers in Hobart and Southern Tasmania
If you’re planning to buy in Hobart or nearby areas, here are some helpful tips:
- Explore suburbs just outside the CBD for better value
- Use local brokers who know how the scheme works in Tasmania
- Keep an eye on the new price thresholds from October onwards
- Line up your building inspection early, especially if buying at auction
- Ask questions about the property’s history, including renovations and repairs
Next steps if you’re buying with a 5% deposit
Here’s a basic plan to help you get moving:
- Visit the Home Guarantee Scheme website
- Contact someone who sells the scheme, such as a lender or broker
- Determine your budget, including payments and extras
- Schedule a building inspection so you won’t be exposed to unforeseen repair costs
- Choose the place you live on practical grounds, and not simply on enthusiasm
Final thoughts for first home buyers
The 5% deposit scheme can open the door to home ownership sooner, but it’s still a big commitment. Take your time, get advice, and do all the proper checks. At Fearless Building Inspections, we have over 30+ years of experience and our team can support first home buyers with honest, thorough reports that help you feel confident about your purchase. A home might look perfect on the surface, but it’s what’s underneath that matters.