The 5% Deposit Scheme and your borrowing power
Last updated September 2026 · Back to the calculator
The First Home Guarantee (now branded the Australian Government 5% Deposit Scheme) lets eligible first home buyers buy with as little as a 5% deposit and no Lenders Mortgage Insurance (LMI). It makes the deposit smaller. It does not make the lender's serviceability test any easier. Most people who hit a wall hit it here. (New to how lenders work it out? Start with how much a first home buyer can borrow.)
What the scheme actually does
The government guarantees part of your loan to the lender (up to 15% of the property value), so the lender can lend up to 95% without charging LMI. There are no income caps and no cap on the number of places, but there are property price caps that vary by city and region. Check the current caps for your area on firsthomebuyers.gov.au.
If your income is the limit: Help to Buy
The 5% Deposit Scheme shrinks the deposit, not the loan. If your income cannot support a 95% loan, the other government scheme, Help to Buy, works differently: the government buys up to 30% of the home (40% for a new build), so your loan is smaller. It has income limits, limited places, and the government shares in any gain when you sell. See the side-by-side comparison.
Why a small deposit can shrink your borrowing power
- Bigger loan, same income. Borrowing 95% instead of 80% means a larger repayment on the same property, and lenders test that repayment against your income and expenses.
- The buffer. Lenders assess you at a rate well above the actual rate (APRA expects at least a 3 percentage point buffer), so the test repayment is much higher than what you would really pay.
- Living expenses. Lenders use the higher of your declared expenses or a benchmark, so understating them does not help.
- Debts and limits. Credit card limits, HECS/HELP, car loans and buy-now-pay-later all reduce capacity, even when the balance is zero.
Why one lender can offer tens of thousands more than another
Each lender uses its own assessment rate, expense benchmark, treatment of bonus and overtime income, and HECS rules. Two lenders can look at the same applicant and reach quite different numbers. That is the gap a comparison tool exists to show.
Lender panels are limited
Not every lender takes part in the scheme, and participating lenders set their own policies and eligibility rules. Your best borrowing-power result may not be with a participating lender, so it pays to compare rather than assume.
Before you make an offer
- Get an indicative estimate across several lenders (our calculator does this in about 60 seconds).
- Confirm the property is under the price cap for its location.
- Check state grants and stamp duty concessions, which can stack with the scheme.
- Talk to a mortgage broker about a formal pre-approval before you bid.
How a broker helps, at no cost to you
- Finds the right lender. Compares lenders across their panel to find which will lend you the most, including those taking part in the 5% Deposit Scheme and Help to Buy.
- Handles the scheme. Checks your eligibility and the price cap, and applies for your scheme place through the lender.
- Gets you ready to bid. Sorts the paperwork and a pre-approval before you make an offer.
Who pays? Most mortgage brokers charge you nothing. The lender you choose pays the broker a commission when your loan settles. By law a broker must act in your best interests, not the lender's. We may receive a referral fee from the broker; it does not change what you pay.
This page is general information only, not credit advice or a recommendation. Scheme rules change; confirm current rules and eligibility with Housing Australia or a licensed broker.