Can I Buy a House with a 5% Deposit in Australia in 2026

Can I Buy a House with a 5% Deposit in Australia in 2026? Your Complete Guide

Yes, you can buy a house with a 5% deposit in Australia right now. The Australian Government 5% Deposit Scheme makes it possible for eligible first home buyers to enter the property market with far less saved upfront. Launched as part of the Home Guarantee Scheme and expanded in October 2025, this program removes income caps, eliminates waitlists, and lets you skip Lenders Mortgage Insurance (LMI) entirely.

If you have been wondering “can I buy a house with 5 percent deposit Australia,” the short answer is yes — provided you meet the criteria and choose a property within the scheme’s price caps. This guide explains everything in plain English so you can decide if a low-deposit home loan suits your situation.

What Is the Australian Government 5% Deposit Scheme?

The scheme lets first home buyers purchase a home with only 5% of the property value as a deposit. Single parents or legal guardians need just 2%. The government provides a guarantee to the lender for the remaining 15% (or 18% for single parents), which means banks treat your loan like a standard one and waive LMI.

Without the scheme, a 5% deposit on an $800,000 home would normally trigger LMI costs of around $32,000–$41,000. The scheme saves you that money upfront and gives you access to competitive interest rates usually reserved for 20% deposit loans.

The program covers existing homes, new builds, and house-and-land packages — as long as you live in the property as your main home. Over 248,000 Australians have already used similar guarantees since 2020.

Who Can Apply? Eligibility Made Simple

You qualify if you:

• Are an Australian citizen or permanent resident and at least 18 years old.
• Are a first home buyer or have not owned residential property (even partly) in Australia in the past 10 years.
• Have saved a genuine 5% deposit (or 2% if you are a single parent or legal guardian). Lenders usually want to see this money come from your own savings, not a recent gift.
• Plan to live in the home you buy.

Joint applications require both people to meet the ownership history rule. There are no income limits anymore, and places are unlimited.

Property Price Caps – Where You Can Buy

The scheme applies only up to certain price limits that vary by state and region. These caps rose in October 2025 to match more realistic market values:

• New South Wales: $1,500,000 in Sydney, Newcastle, Illawarra and Lake Macquarie; $800,000 elsewhere.
• Victoria: $950,000 in Melbourne and Geelong; $650,000 elsewhere.
• Queensland: $1,000,000 in Brisbane, Gold Coast and Sunshine Coast; $700,000 elsewhere.
• Western Australia: $850,000 in Perth; $600,000 elsewhere.
• South Australia: $900,000 in Adelaide; $500,000 elsewhere.
• Tasmania: $700,000 in Hobart; $550,000 elsewhere.
• Northern Territory: From 1 July 2026, $750,000 in Darwin and $600,000 elsewhere.

Use the official postcode tool on the First Home Buyers website or ask your lender to confirm the exact cap for any property you like.

Benefits of Buying with a 5% Deposit

You reach your goal years faster. Many buyers save the extra 15% needed for a 20% deposit in three to five years — time during which house prices often rise.

You avoid LMI completely under the scheme, which can equal tens of thousands of dollars.

You start building equity immediately. If property values increase, your 5% stake grows in line with the full home value.

You lock in today’s interest rates instead of waiting and risking higher rates later.

Potential Drawbacks You Must Know

A smaller deposit means a larger loan and higher monthly repayments. Lenders still assess whether you can afford the mortgage comfortably.

You carry more risk if property prices fall. You could end up in negative equity — owing more than the home is worth — though this rarely forces a sale if you keep making repayments.

The guarantee stays in place only while you live in the home as your main residence. If you rent it out or move, the lender may require LMI later.

Some lenders still apply stricter credit or income rules even under the scheme.

Extra Help: State First Home Buyer Grants and Concessions

Pair the 5% Deposit Scheme with your state’s incentives to stretch your budget further. Most grants apply to new homes only:

• Queensland: Up to $30,000 (contracts until 30 June 2026).
• New South Wales: $10,000 for new or substantially renovated homes.
• Victoria: $10,000 for new homes up to $750,000.
• South Australia: $15,000 with no value cap for new homes.
• Western Australia: Up to $10,000 depending on location.
• Tasmania: Up to $30,000 for new homes until mid-2026.

Many states also offer stamp-duty concessions or exemptions for first home buyers. Check your state revenue office for the latest rules.

Other Costs to Budget For

Even with a low deposit you still pay:

• Stamp duty (often reduced or waived for first home buyers).
• Conveyancing and legal fees ($1,500–$3,000).
• Building and pest inspections ($500–$1,000).
• Removalist and connection costs.
• Ongoing rates, insurance and maintenance.

Add a buffer of at least 2–3% of the purchase price for these extras.

Step-by-Step: How to Buy with a 5% Deposit

• Check your eligibility – Use the free online tool at firsthomebuyers.gov.au.
• Speak to a participating lender – Major banks and many smaller lenders take part. They assess your full loan application.
• Get pre-approval – Once approved, you have 90 days to find a home.
• Search within the price cap – Use realestate.com.au or domain.com.au filters.
• Sign the contract and settle – Your lender handles the final paperwork and government guarantee.
• Move in – You must live in the property as your main home.

The whole process usually takes 4–12 weeks once you find the right home.

Smart Tips to Make It Work

Build your 5% deposit in a high-interest savings account or offset account linked to an existing loan.

Get a mortgage pre-approval before you shop so you know exactly what you can afford.

Compare at least three lenders — rates and fees still vary.

Consider a family guarantee if your parents can help without lending cash.

Budget for interest-rate rises — stress-test your repayments at 3% above the current rate.

Talk to a mortgage broker who specialises in government schemes. They know the shortcuts and can speed up approval.

Is a 5% Deposit Right for You?

The Australian Government 5% Deposit Scheme opens the door to home ownership for thousands of Australians who once thought a 20% deposit was impossible. It cuts waiting time dramatically and removes the sting of LMI.

At the same time, you must feel confident about larger repayments and the long-term commitment of a bigger loan.

If you meet the eligibility rules and find a suitable home within the price caps, act soon. Property markets move fast, and the scheme gives you a genuine head start.

Start today by checking your eligibility online or booking a no-obligation chat with a participating lender. Your first home could be closer than you think.

 Frequently Asked Questions

1. Can I really avoid LMI with a 5% deposit?

Yes. Under the Australian Government 5% Deposit Scheme the government guarantee replaces LMI, so you pay nothing extra for insurance.

2. Do I need to be a first home buyer?

You must not have owned property in Australia in the past 10 years. Couples must both satisfy this rule.

3. What if I am a single parent?

You need only a 2% deposit and the government guarantee covers a larger share. A separate information guide explains the details.

4. How much can I borrow with a 5% deposit?

Lenders assess your income, expenses and credit the same way as any other loan. The scheme simply removes the deposit barrier and LMI cost.

5. Can I use the scheme to buy an investment property?

No. You must buy the home to live in as your main residence. Renting it out later may cancel the guarantee and trigger LMI.