From 1 October 2025, the Federal Government introduced major changes to support first-home buyers including the renamed Australian Government 5% Deposit Scheme (formerly the Home Guarantee Scheme).

If you’re trying to enter the property market, these updates could mean buying a home much sooner and saving tens of thousands in Lenders Mortgage Insurance (LMI).

How the new 5% deposit scheme works

Normally, if you don’t have a 20% deposit, your lender makes you pay Lenders Mortgage Insurance (LMI) a fee that protects the bank, not you.

The new scheme helps eligible first-home buyers purchase a property with:

• as little as 5% deposit, and
• no LMI payable

This is possible because the government acts as a partial guarantor, covering up to 15% of the property’s value.

The scheme is available through more than 30 participating lenders across Australia, including both major banks and regional lenders.

What’s changed in 2025? (The big improvements)

As of October 2025, the scheme has further updated that:

The 2025 update makes the scheme far more accessible than ever before:

1. No more income caps

You no longer need to meet previous income limits (formerly $125k for singles / $200k for couples).

2. No yearly caps on places

There’s no limit on how many first-home buyers can access the scheme each year.

3. Higher property price caps

You can now buy a higher-value property and still qualify.

Here are the new thresholds:

State New Property Price Cap
NSW $1,500,000
VIC $950,000
QLD $1,000,000
WA $850,000
SA $900,000
TAS $700,000
ACT $1,000,000

Note: These caps only relate to eligibility for the 5% Deposit Scheme. They are different to the thresholds under the NSW First Home Buyers Assistance Scheme (stamp duty exemptions/concessions).

Common misunderstanding: “I only need to pay 5% deposit at exchange.”

This is the part that trips up a lot of buyers.

Even if you qualify for the 5% Deposit Scheme, the Contract for Sale usually requires a 10% deposit at exchange.

This is where legal guidance becomes crucial.

Can you negotiate a reduced deposit?

Yes – sometimes.

After your offer is accepted, VRT Lawyers can write to the vendor’s solicitor/conveyancer to request that the seller accepts a reduced 5% deposit.

However:

• The vendor must agree.
• If you’re competing with another buyer offering the full 10%, the vendor may choose them instead.

This is a strategic moment where proper advice can protect your position.

What this means for first-home buyers

With the new scheme, you may be able to:

• buy with far less savings
• avoid expensive LMI
• access higher-priced properties
• enter the market months (or years) earlier

But the contract, deposit negotiations, and bank arrangements still require careful handling.

Thinking about buying your first home?

If you’re planning to use the 5% Deposit Scheme or, wondering whether you’re eligible, we can guide you through the process and help you negotiate a reduced exchange deposit where possible.

Contact VRT Lawyers for tailored advice before you sign anything.