5% First Home Deposit – Understand your options
From 1 October 2025, first-home buyers can use the Australian Government 5% Deposit Scheme to purchase a home with as little as a 5% deposit and pay no LMI, thanks to a government guarantee provided through Housing Australia. Places are now unlimited, income caps are removed, and price caps have been lifted.
What changed on 1 October 2025?
Unlimited places: no more race to secure a spot each financial year.
No income caps: higher-income earners are now eligible.
Higher property price caps: for NSW, the cap is $1.5m in Sydney and regional centres (Illawarra, Newcastle & Lake Macquarie) and $800k across other NSW areas.
Why this matters: A higher NSW cap unlocks more suburbs for first-home buyers, particularly in Greater Sydney, where listings in the $1.1m–$1.5m bracket are common.
How the 5% Deposit Scheme works
With a 5% deposit, your loan would normally be at 95% LVR and attract Lenders Mortgage Insurance (LMI). Under the Scheme, Housing Australia guarantees up to 15% of the property value, so your lender can treat your loan like an 80% LVR and waive LMI. (It’s a guarantee, not a cash grant—you’re still responsible for the loan.)
The Scheme is open to first-home buyers (or those who haven’t owned an Australian property in the last 10 years), and there’s a companion pathway for single parents/legal guardians with a 2% deposit. You must intend to live in the property; investment purchases are not eligible. Applications are made via participating lenders.
NSW stack: layer federal + state support
You can combine the 5% Deposit Scheme with NSW-specific assistance:
Stamp duty relief (FHBAS):
Full exemption on homes ≤ $800,000.
Concessional duty for homes >$800,000 and < $1,000,000.
For vacant land you plan to build on: exemption ≤ $350,000, concessional duty $350,000–$450,000.
First Home Owner (New Homes) Grant (FHOG):
$10,000 for eligible new or substantially renovated homes ≤ $600,000, or house-and-land where the combined value is ≤ $750,000.
Tip: Many buyers use the federal Scheme to minimise deposit/LMI, then apply NSW concessions to reduce up-front state taxes—especially powerful between $800k–$1m, where concessional duty applies.
What you can buy (NSW)
Property types: new or established homes (houses, townhouses, apartments) are eligible, provided they sit at or below the cap for your area.
Location caps:
Sydney + regional centres (Illawarra, Newcastle & Lake Macquarie): up to $1,500,000
Other NSW areas: up to $800,000
Example pathways (NSW)
Established apartment in Ashfield at $950,000
Federal: Eligible under the 5% Scheme (Sydney cap $1.5m).
State: Stamp duty concession (not exemption) because price is between $800k–$1m; FHOG not available (not new).
2. New townhouse in Newcastle at $780,000
Federal: Eligible under the 5% Scheme (cap $1.5m as a regional centre).
State: Full stamp duty exemption (≤ $800k) plus potential $10k FHOG (new build, under FHOG threshold).
3. House-and-land build near Goulburn at $730,000 (land + build)
Federal: Eligible under the 5% Scheme (other-NSW cap $800k).
State: FHOG may apply (combined value ≤ $750k); stamp duty depends on the land contract value (exemption ≤ $350k for land, concessional $350k–$450k).
FAQs we’re hearing
Is the 5% Scheme a grant?
No. It’s a government guarantee to your lender (typically up to 15% of property value) so you avoid LMI. You still borrow and repay the full loan.
Can I buy with a friend or sibling?
Yes—joint applications with one other person are allowed (you’ll both need to meet eligibility and live in the property).
Can I use it on land + build?
Yes, but the Scheme has build-time requirements; your lender will outline the milestones.
How Skybridge Capital can help
The 5% Deposit Scheme is live now and materially changes what’s possible for NSW first-home buyers—especially when combined with state concessions. But it’s not “free money”: higher LVRs demand careful planning. If you’re considering a purchase this spring, get advice early, line up your documents, and shop with a clear budget.
This article is general information only and does not take your personal circumstances into account. Contact us to explore your options with expert advice tailored to your specific financial goals. We are a team of MFAA-approved finance brokers with the knowledge and experience to help you make the right choice for your lifestyle.
MFAA Accredited Finance Brokers are loan specialists.