Help to Buy or 5% Deposit Scheme: Compare Your Options

The short answer: which option is likely to fit?

For many buyers, the 5% Deposit Scheme is the cleaner option if you have a genuine 5% deposit, can meet repayments on the larger loan and want all future equity and capital growth to remain yours. It is a low-deposit lending pathway, not a contribution towards the purchase price.

Help to Buy can be the stronger option if the difference between a 95% loan and a smaller loan is what makes a suitable home affordable. In exchange for that assistance, the government has an equity interest in the property, so you do not keep 100% of the value movement on that share.

The best decision is usually the one that lets you buy a suitable home without leaving your budget too tight after settlement.

• Favour Help to Buy if you have between 2% and 5% saved, need a lower mortgage to pass servicing, meet the scheme rules and accept shared equity.
• Favour the 5% Deposit Scheme if you have at least 5% saved, can manage the larger debt and prefer full ownership from the outset.
• Pause and strengthen your position if buying would use every dollar you have or repayments would leave little room for rate rises, repairs, strata costs, insurance or life changes.

How Help to Buy works

Help to Buy is a shared-equity pathway. You contribute a minimum 2% deposit and take out a home loan through a participating lender. The Australian Government can contribute up to 30% for an existing home or up to 40% for a new home, reducing the amount you need to borrow.

You live in and own the home, but the government has a proportional equity share. If the property rises or falls in value, that share moves with the value of the property. When you sell or buy back equity, the amount is based on the home’s value at that time.

This structure can lower the mortgage and potentially improve day-to-day cash flow. However, it creates a longer-term obligation that needs to fit your plans, not just your first year of repayments.

• Minimum buyer contribution: minimum 2% deposit.
• Government contribution: up to 30% for an existing home or up to 40% for a new home.
• Mortgage effect: you borrow less than you would without the government contribution.
• Ownership effect: you share a proportion of the property’s future value movement until the government equity is bought out or the home is sold.
• Ongoing commitments: owner-occupier requirements, insurance, property upkeep and reviews of relevant circumstances may apply.

How the 5% Deposit Scheme works

The 5% Deposit Scheme helps eligible buyers obtain a home loan with a smaller deposit. Rather than contributing to the purchase price or taking a stake in the property, the government provides a guarantee to the lender.

For an eligible first home buyer, the standard minimum deposit is 5%. Eligible single parents or legal guardians may have a different minimum-deposit pathway. You still borrow the balance from the lender, make all loan repayments and meet the lender’s normal approval requirements.

The major attraction is simple: you own 100% of the property from settlement. You do not have a government equity share to buy back later. The trade-off is that your starting mortgage is likely to be much larger than under Help to Buy for the same property.

• Minimum deposit for eligible first home buyers: 5%.
• Ownership: 100% of the property from settlement, subject to your mortgage.
• Government role: a guarantee that supports eligible low-deposit lending; it is not a cash contribution to your purchase price.
• Loan responsibility: you are responsible for repayments, interest, fees and other loan costs.
• LMI: eligible borrowers can avoid Lenders Mortgage Insurance through the scheme, but lender and scheme conditions still apply.

Help to Buy vs 5% Deposit Scheme: the practical differences

The schemes tackle different barriers. Help to Buy reduces the amount you borrow. The 5% Deposit Scheme reduces the deposit hurdle for an eligible buyer but leaves the buyer funding the full purchase price through their deposit and home loan.

That distinction affects your repayments today and your equity position later.

• Deposit: Help to Buy starts from a minimum 2% deposit; the 5% Deposit Scheme generally requires a minimum 5% deposit for eligible first home buyers.
• Loan size: Help to Buy can produce a smaller mortgage because of the government contribution; the 5% Deposit Scheme generally leaves you with a larger loan for the same purchase price.
• Ownership: Help to Buy involves shared equity; the 5% Deposit Scheme gives you full ownership from settlement.
• Future value: under Help to Buy, gains and losses are shared proportionally on the government’s equity share; under the 5% Deposit Scheme, the property’s value movement belongs to you, after accounting for your loan and selling costs.
• Eligibility: Help to Buy has tighter eligibility and financial-capacity rules, including income limits that are indexed over time. The 5% Deposit Scheme has its own eligibility and property requirements but does not use the same income-cap structure.
• Flexibility: full ownership may feel simpler if you expect to move, renovate, refinance or build equity rapidly. Shared equity may be worthwhile where the smaller mortgage is more important than retaining every dollar of future growth.

The question that matters most: can you comfortably carry the loan?

A scheme may help you buy sooner, but it cannot remove the need for a resilient budget. Before choosing either path, test the repayments against your actual spending, not just the maximum amount you may be allowed to borrow.

Look beyond the advertised deposit. You may also need funds for conveyancing, inspections, moving, insurance, government charges, lender fees and any applicable duties. Apartment buyers should include strata levies; house buyers should allow for maintenance and repairs.

A buffer matters. Using every dollar for the deposit can make the first unexpected bill more stressful than it needs to be.

• Model repayments at a higher interest rate, not only today’s rate.
• Include childcare, transport, education, credit cards, personal loans and regular subscriptions.
• Keep a realistic emergency buffer after settlement where possible.
• Check whether the property’s ongoing costs fit your household, including rates, insurance and strata levies.
• Ask how loan features such as an offset account, redraw and additional repayments work under the available lender options.

How your future plans can change the better option

Think of this choice as a three-to-ten-year decision, not only a settlement-day decision. Your next few years may include a pay rise, reduced work hours, children, a new partner, relocation, an upgrade or a decision to sell.

The more likely your plans are to change quickly, the more important it becomes to understand exit options, equity buy-backs and loan flexibility before you commit.

Can you use Help to Buy and the 5% Deposit Scheme together?

No. You cannot use Help to Buy and the 5% Deposit Scheme for the same purchase. They solve different parts of the affordability problem and need to be assessed as alternatives.

Other assistance may still be relevant, depending on your circumstances and the rules that apply at the time. For example, a first-home buyer grant, stamp duty concession or the First Home Super Saver Scheme may be worth checking separately.

Do not assume every support measure can be combined. Confirm the current rules before you sign a contract or rely on funds in your purchase plan.

A practical way to compare your options

Before you apply, put both pathways beside the same target property price. The aim is to see the complete picture, not just the smallest deposit.

A home loan specialist can help you test the likely loan size, repayments, eligible lenders, property caps, purchase costs and loan features under each option. This is particularly useful if your employment, income, family position or deposit source is more complex than a straightforward application.

• Confirm your usable deposit after allowing for purchase costs.
• Check whether the property price is within the applicable cap.
• Compare estimated repayments under each structure using the same property price.
• Assess whether you meet the relevant eligibility conditions now and how foreseeable changes could affect you.
• Review how you would build an emergency buffer after settlement.
• Obtain legal advice before signing a contract, including whether a ‘subject to finance’ clause is appropriate.

Conclusion

Help to Buy versus the 5% Deposit Scheme is ultimately a choice between reducing your debt now and retaining full ownership from day one.

If your deposit is small, start with the numbers that matter most: your total cash after costs, a comfortable repayment level, the property price you can realistically target and how your circumstances may change. A clear comparison before you apply can make the path to your first home feel far more manageable.