Short answer: no. Under the Australian Government 5% Deposit Scheme, the Government does not hand you the other 15% of your deposit in cash. Instead, it provides a guarantee to a participating lender, which can allow an eligible buyer to borrow with a smaller deposit and avoid Lenders Mortgage Insurance (LMI).
You still contribute your own deposit. You still take out the home loan. And you remain responsible for every repayment under that loan.
That distinction matters. It affects how you assess affordability, what happens if your circumstances change and whether buying now with 5% is a sensible move for you.
What the Government guarantee actually does
The simplest way to understand the scheme is to separate your deposit, your loan and the guarantee.
With a conventional purchase, many buyers aim for a 20% deposit. If you borrow more than 80% of the property’s value, a lender may require LMI. LMI protects the lender, although the borrower generally pays the cost.
Under the 5% Deposit Scheme, an eligible first home buyer may contribute at least 5% of the property value. The Government then provides a guarantee to the lender for an agreed portion of the loan, which can help the lender offer a loan of up to 95% of the property value without charging LMI.
It is not extra money in your savings account. It is not a payment that reduces the purchase price. It does not reduce the amount you borrow from the lender.
- You provide the deposit you have saved.
- The lender provides the home loan and assesses whether you can afford it.
- The Government guarantee supports the lender’s exposure above the usual 80% loan-to-value threshold.
- You buy the property and make repayments on the full loan amount.
A simple 5% deposit example
Imagine you buy an eligible home valued at $800,000. A 5% deposit is $40,000. That leaves a $760,000 home loan before allowing for any purchase costs and subject to the lender’s assessment.
The missing $120,000 is not paid to you as a second deposit. Rather, the guarantee can support the lender in providing a 95% loan without LMI, provided you meet the scheme and lender requirements.
Does the Government own part of your home?
No. The 5% Deposit Scheme is not a shared-equity arrangement. The Government does not buy a percentage of your property, share in future gains or losses, or require you to buy out a Government ownership stake under this scheme.
This is a frequent point of confusion because Australia also has separate home-buying support arrangements that can involve a Government equity contribution. Those programs operate differently.
For the 5% Deposit Scheme, your ownership and your mortgage work in the usual way: you purchase the home, your lender holds security over the property for the loan, and you build equity as you reduce the loan and as the property value changes.
- No Government cash contribution towards your 15% gap.
- No Government equity share in your home under this scheme.
- No percentage of future sale proceeds payable to the Government simply because you used the scheme.
- A standard home loan remains in your name.
Will the Government pay your mortgage if you cannot?
No. The guarantee does not cover routine missed repayments or make your monthly home loan payments for you. If you are struggling, you still need to contact your lender early and discuss the options available under your loan.
The guarantee is designed to protect the lender in a particular default-and-sale scenario. If a borrower defaults, the property is sold and the sale proceeds do not clear the amount owing, the lender may be able to claim under the guarantee up to the agreed limit.
That does not mean you are automatically free of the debt. The guarantee does not stop the lender taking action after default, including selling the property, and it may not cover every amount still outstanding.
- It does not pay your normal monthly repayments.
- It does not stop interest from being charged under your loan.
- It does not prevent default action or repossession if the situation reaches that point.
- It does not guarantee that every remaining debt after a sale disappears.
Why the distinction matters
A 5% deposit can make an earlier purchase possible, but it is still a large loan. Your decision should be based on whether the repayments, ownership costs and a sensible cash buffer fit your situation—not simply on whether you can reach a 5% deposit.
If you are concerned about income changes, parental leave, variable earnings, upcoming childcare costs or a potential rate rise, factor those pressures into your budget before you make an offer.
Who may be eligible for the 5% Deposit Scheme?
Eligibility depends on your circumstances, the property and the proposed loan. The general pathway is aimed at eligible first home buyers, including people who have not owned a property in Australia for the previous 10 years. There is also a separate pathway for eligible single parents or legal guardians, who may be able to apply with a smaller minimum deposit.
Current scheme settings have broader access than earlier versions, but lender approval is still essential. Being eligible for the scheme does not mean a lender must approve your home loan.
- You must generally be at least 18 years old.
- You must meet citizenship or permanent-residency requirements.
- The home must be in Australia and be within the applicable location-based property price cap.
- You must intend to live in the property as an owner-occupier, rather than buy an investment property.
- The loan generally needs to be an eligible principal-and-interest owner-occupier home loan from a participating lender.
- You need to meet the lender’s credit, income, expenses and serviceability requirements.
Property type and price still matter
Eligible purchases can include different types of new and existing homes, subject to the scheme rules and lender policy. However, the purchase price and the lender’s assessed property value need to sit within the relevant cap.
This is important if you are buying in a market where values are moving quickly. A lender valuation that comes in below the contract price can change the deposit or loan amount you need.
What about income caps and limited places?
For the current expanded 5% Deposit Scheme, places are uncapped and income caps have been removed. Other requirements still apply, including the lender’s own ability-to-repay assessment, so the scheme should not be treated as automatic finance approval.
The benefits—and trade-offs—of buying with a 5% deposit
For the right buyer, the scheme can shorten the time between deciding to buy and being ready to purchase. Avoiding LMI may also preserve cash for legitimate buying costs, moving expenses and an appropriate emergency buffer.
But a 5% deposit means a bigger starting loan than a 10% or 20% deposit on the same property. More borrowing can mean higher repayments and more interest over the life of the loan. You also begin with a smaller equity cushion if property values fall.
- Potentially buy sooner instead of waiting to save a 20% deposit.
- Avoid LMI on an eligible scheme loan.
- Keep more savings available for upfront purchase costs and a suitable buffer.
- Borrow more than you would with a larger deposit.
- Have less initial equity and more exposure to a fall in property values.
- Pay more interest over time if the higher balance remains in place.
Do not forget the costs outside the deposit
Your deposit is only one part of the cash needed to buy. Depending on your state or territory and the type of purchase, you may also need to plan for transfer duty, conveyancing, building and pest inspections, loan fees, moving costs and insurance.
For a new build, leave room for potential timing changes, variations and costs that sit outside the original building contract. A smaller deposit should not mean settling with no financial breathing room.
Stress-test the repayments before you commit
Before choosing a purchase price, consider how repayments would feel if interest rates rose, your household expenses increased or one income reduced temporarily. Also include council rates, strata levies where relevant, utilities, maintenance and insurance in your ownership budget.
A lower deposit helps with entry, but it should not push you into a loan that leaves no room for ordinary life changes.
What happens after settlement?
After settlement, you need to continue meeting the applicable loan and scheme conditions. In practical terms, that means living in the home as required and keeping the loan in good standing.
Some changes can affect the guarantee. Selling the property, renting it out, increasing the loan amount or refinancing outside the participating-lender framework may end scheme support. If that happens while your loan-to-value ratio is still above 80%, your lender may apply LMI or other costs under its policy.
If you are thinking about renovations, changing lenders or turning the property into an investment later, ask about the implications before making a decision.
- Keep the home as your owner-occupied residence where required.
- Ask before increasing your loan amount.
- Check whether a proposed refinance can retain scheme support.
- Understand the impact before renting out or selling the property.
How to decide whether the scheme suits you
The right question is not simply, “Can I buy with 5%?” It is, “Can I buy this home, on these loan terms, while keeping the repayments and ownership costs manageable?”
A good decision weighs the benefit of entering the market earlier against the cost of borrowing more. It also compares lenders, rates, fees, features and policy differences—not just the headline ability to avoid LMI.
- Know your maximum comfortable repayment, not only your maximum approval amount.
- Keep an emergency buffer after deposit and buying costs where possible.
- Check the applicable price cap before you focus on a property.
- Understand whether the lender valuation could require additional funds.
- Compare loan rates, fees, offset features and repayment flexibility.
- Get clear on how a future refinance, renovation loan or change in occupancy could affect the guarantee.
A sensible next step
If you are considering buying with a 5% deposit, Find A Better Rate can help you assess whether the scheme may fit your plans, compare suitable lender options and understand the repayments and costs before you commit to a property.
Start with a conversation about your deposit, target location, income, commitments and preferred buying timeline. That gives you a clearer price range and a more practical basis for seeking pre-approval.
Frequently asked questions
Does the Government give you the other 15% of the deposit?
No. The Government does not give you a cash deposit under the 5% Deposit Scheme. It provides a guarantee to an eligible lender, which may allow the lender to offer a higher loan-to-value loan without LMI.
Do I own 100% of the home with the 5% Deposit Scheme?
The 5% Deposit Scheme is not a shared-equity arrangement. The Government does not take an ownership percentage in your home simply because you use this scheme.
Do I still owe a 95% home loan?
Yes. If you contribute a 5% deposit, you would generally be borrowing the remaining 95% of the property value, subject to the lender’s valuation, fees, eligibility and approval criteria.
Does the guarantee mean I will be approved for a loan?
No. You must still meet the participating lender’s lending criteria. The lender will assess factors such as income, expenses, existing debts, credit history, deposit and the property itself.
Can I use the scheme for an investment property?
No. The scheme is designed for eligible owner-occupiers. You need to buy or build a home that you will live in, subject to the applicable rules.
Can I refinance later?
Potentially, but conditions apply. A refinance with another participating lender may be possible in some circumstances. Refinancing outside that framework, increasing the loan or extending the term can affect whether the guarantee continues. Check the position before you refinance.
Frequently asked questions
Conclusion
The 5% Deposit Scheme can be valuable because it helps eligible buyers purchase with a smaller deposit and avoid LMI. But it does not give you a free 15%, turn the Government into a co-owner or remove your obligation to repay your mortgage.
If you are weighing up a 5% deposit purchase, focus on the complete picture: your genuine borrowing capacity, the purchase costs, the property cap, the loan terms and the financial buffer you will have after settlement.
Considering a 5% deposit home loan?
Speak with Find A Better Rate to explore whether the scheme may suit your situation, compare lender options and understand the repayments and costs before you start making offers.
Discuss Your Home Loan OptionsThis article provides general information only and does not constitute personal financial advice. Lending criteria, fees and eligibility requirements vary. Consider seeking advice appropriate to your circumstances.
