FAQs regarding the 5% Deposit Scheme (Federal Home Guarantee Scheme)

Feb 5
3 min read

Buying your first home is a major milestone. Government initiatives such as the 5% Deposit Scheme, aim to ease this pressure.

What is the ‘5% Deposit Scheme’ and how does it Work?

Under the 5% Deposit Scheme, Housing Australia enables eligible buyers to purchase a home with as little as a 5% deposit. Housing Australia then guarantees up to 15% of the property’s value, which removes the need for the buyer to pay Lenders Mortgage Insurance. A participating lender issues the home loan on standard principal‑and‑interest terms of up to 30 years (with an additional three years permitted for new builds).

What about Single Parents and Guardians?

The scheme extends support to eligible single parents and legal guardians through the Family Home Guarantee. This enables them to purchase a home with as little as a 2% deposit while still benefiting from the government‑backed guarantee.

What are the key features and benefits?

They include:

Low deposit options;
No income caps;
No Lenders Mortgage Insurance (save on upfront fees);
Wide choice of home types;
Government backing; and
Unlimited spots with no waiting list.

Am I eligible?

General requirements include that you are:

An Australian citizen or permanent resident, aged 18 or over;
Intending to live in the property as an owner‑occupier; and
Applying for an owner‑occupier home loan with Principal and Interest repayments from a Participating Lender, with a loan term of up to 30 years (plus up to three years for construction of a new home).

Additional eligibility specific for the 5% Deposit:

Must have saved a minimum 5% deposit;
Must be a first home buyer, or not have owned property or land in Australia in the past 10 years; and
May apply individually or jointly with one other person (such as a partner, friend, or family member).

Additional eligibility specific for the 2% Deposit:

Must have saved a minimum 2% deposit;
Must be a single parent or single legal guardian of one or more dependent children;
Must not hold any other property interest once the new home settles; and
Must apply on your own.

What would disqualify my eligibility?

Any individual seeking to purchase the house as an investment property
Are not an Australian citizen or permanent resident, or are under 18 years old.
Have a deposit of 20% or more of the property's value, as the scheme is designed for those with a minimum of 5% (or 2% for single parents) but less than 20%.
Already own property in Australia, or have owned property in the last 10 years (this rule is generally waived for the single parent scheme).
Do not plan to live in the home as an owner-occupier; the scheme does not cover investment properties.
Purchase a property that exceeds the price cap for its specific location (e.g., over $1.5 million in Sydney or $1 million in Brisbane).
Have more than two applicants on the home loan; applications are limited to individuals or joint applicants (two people maximum).
Enter into an 'owner-builder' contract for new constructions, as all building contracts must be with a licensed builder on an arm's-length basis.

How do I apply?

It is best to get in contact with a participating lender or mortgage broker, as they are gateways for the scheme. The lender may then assess your finances and submit the application for the Guarantee allocation to secure a spot.

This process can be very difficult and confusing. It is very important to get adequate advice.

Get in contact with us today:

by phone on (02) 9651 1380
by email at office@meritlegal.com.au
by completing our enquiry form: https://www.meritlegal.com.au/contact

***Disclaimer:

Information on this website or post does not constitute legal advice and that electronic dialogue with readers of this website does not constitute any form of client engagement unless specifically agreed. The information is provided on a general basis only. We strongly recommend that you to seek your own independent advice from a lawyer about your situation.