Buying your first home sooner: how the Australian Government’s 5% Deposit Scheme and other government support can help

Buying your first home can feel like a big step - especially when saving for a deposit and covering upfront costs, such as stamp duty and legal fees, seem out of reach.  

The good news is there are government supports designed to help first home buyers get into the market sooner, with less money upfront. 

Here’s how key supports work, and how they can potentially be used together when buying a first home. 

The Australian Government’s 5% Deposit Scheme: buying with a smaller deposit 

One of the biggest hurdles for first home buyers is the deposit. Traditionally, lenders require a deposit of 20% of the purchase price, or if your deposit is less, you may be required to purchase Lenders Mortgage Insurance (LMI) on top of your loan. 

The Australian Government 5% Deposit Scheme, previously referred to as the First Home Guarantee or the Home Guarantee Scheme, helps eligible home buyers purchase a home with as little as a 5% deposit for first home buyers, or single parents with a minimum of 2% deposit plus associated costs (eg stamp duty) without paying LMI. 

How it works 

Instead of providing a full 20% deposit, the government financially backs up to 15% or 18%, for eligible single parents, of the property value to the lender. This means: 

  • First home buyers only need to save a 5% deposit 
  • Single parents only need to save a 2% deposit 
  • The lender treats your loan as though you’ve contributed 20% 
  • You avoid the cost of LMI. 

Importantly, this is not a cash payment. The government doesn’t give you money - the guarantee simply reduces the amount of deposit the bank requires. 

Example 

Amelia and Carlos are looking to buy their first home and are considering their options from the table below: 

 

*Please note that rules vary by state and can change at any time. The best place to confirm your exact eligibility is the relevant state revenue office website (refer to the bottom of page for state links). 

The takeaway 

The government schemes mentioned such as the Australian Government’s 5% Deposit Scheme, First Home Owners Grant (FHOG), and State Revenue Office’s (SRO) stamp duty concessions, which vary by state, can make a big difference to how soon you’re able to buy. 

The Australian Government’s 5% Deposit Scheme helps you buy with a smaller deposit 

Stamp duty savings or concessions can reduce upfront costs 

And the FHOG  gives extra funds (for example $10,000 in Victoria) if you’re buying a brand-new property or building a new property. 

With the right guidance, these supports or schemes can move home ownership from “someday” to sooner than you might think. 

Below is a list of state revenue office links for different states that might be helpful: 

At BankVic we’re happy to help you understand how the above ‘by State’ supports or schemes interact with federal schemes like the Australian Government’s 5% Deposit Scheme. 

Ready to take the next step?  

Reach out to our BankVic Home Loan Mentors to help you find out what type of home loan is right for you.  

We’re here to help  

If you have any questions about buying your first home, visit https://www.bankvic.com.au/home-buying/the-australian-government-5percent-deposit-scheme/ or call 13 63 73 or Book appointment to make an appointment with a BankVic Home Loan Mentor. 

The information in this article was current as at the time of publication only. The information in this article is general in nature, produced by BankVic for educational purposes only and does not constitute advice. All loan applications are subject to lending criteria and approval. Terms, conditions, fees and charges apply which are available upon request. Police Financial Services Limited ABN 33 087 651 661 - trading as BankVic | AFSL and Australian Credit License 240293.