Can I Buy a House in Australia With a 5% Deposit?
A 5% deposit can buy a home in Australia via LMI, the Home Guarantee Scheme or Help to Buy — how each path works, the caps, and the trade-offs.
Can you buy a house in Australia with a 5% deposit?
Yes. A 5% deposit is enough to buy a home in Australia today, through one of two main routes: paying lenders mortgage insurance (LMI) on top of an ordinary loan, or using a government-backed guarantee that removes the need for LMI altogether. A third federal option, Help to Buy, goes further and works from a 2% deposit — a separate scheme with its own rules. Which route suits you, and whether the smaller-deposit options are open to you at all, depends on your eligibility, the property’s price, and what you’re prepared to trade off.
A 5% deposit means borrowing the other 95% of the purchase price. Lenders don’t refuse that outright — they price the risk instead, usually through LMI, unless a scheme stands behind the loan.
What does a 5% deposit mean for your loan?
Loan-to-value ratio (LVR) is the size of your loan as a percentage of the property’s lender-assessed value. It’s the number lenders use to price risk, and it is what a “5% deposit” is really describing.
LVR = loan amount ÷ lender-assessed property value × 100
A 5% deposit puts you at a 95% LVR — the loan covers the rest. That is well past the point where lenders usually require LMI, which sits at 80% LVR: above that threshold, LMI is the norm, not the exception. LMI protects the lender if you default, not you or any guarantor.
What are your options for buying with a 5% deposit?
Three federal-level paths are worth comparing side by side. None is universally “better” — each trades cost, eligibility and price limits differently.
| Path | Deposit | LMI | Who it suits |
|---|---|---|---|
| Ordinary loan, no scheme | ~5% | One-off premium applies | Anyone meeting the lender’s own criteria |
| Home Guarantee Scheme (5% Deposit Scheme) | 5% (2% for eligible single parents/guardians) | Avoided — a government guarantee stands in | First home buyers or single parents, under cap |
| Help to Buy | 2% | Avoided — Commonwealth equity share stands in | Citizens under the income cap, sharing gains/losses |
An ordinary loan with a 5% deposit and LMI
This route has no government eligibility test and no price cap — it’s open to anyone who meets an ordinary lender’s income and serviceability criteria. The cost is LMI: a one-off premium, priced on your LVR, loan size and insurer. No authoritative source publishes a standard premium range, so treat any figure you see elsewhere as illustrative rather than a quote for your situation; LMI provider Helia offers an LMI fee estimator that models a premium for a given loan size and LVR.
The Home Guarantee Scheme (5% Deposit Scheme)
Rebranded the “Australian Government 5% Deposit Scheme” from 1 October 2025, this federal scheme has Housing Australia guarantee part of your loan to a participating lender, which removes the LMI requirement. As at July 2026 it has two applicant cohorts, not three: first home buyers (minimum 5% deposit), and single parents or single legal guardians of a dependent child (minimum 2% deposit, applying alone rather than jointly). Until 1 October 2025 the scheme ran as three separate guarantees, including a dedicated Regional First Home Buyer Guarantee and a “Family Home Guarantee” for single parents — that structure has since closed, the regional guarantee is closed to new applicants, and the Family Home Guarantee name is retired. Since the scheme’s expansion on 1 October 2025, there are no income caps and no limit on the number of places, whichever cohort you apply under.
Beyond the deposit minimum, eligibility conditions (as at July 2026) include: being an Australian citizen or permanent resident aged 18 or over; being a first home buyer, or not having owned property in Australia in the past 10 years; buying as an owner-occupier through a participating lender; and the property price sitting at or below the cap for its state and region. Caps vary widely — as at July 2026:
- NSW — $1,500,000 in the capital city and regional centres; $800,000 elsewhere in the state
- VIC — $950,000 in the capital city and regional centres; $650,000 elsewhere
- QLD — $1,000,000 in the capital city and regional centres; $700,000 elsewhere
Every state and territory cap is listed on the scheme’s property price caps page.
Help to Buy — a separate 2% deposit path
Help to Buy is a distinct federal shared-equity scheme, not a variant of the Home Guarantee Scheme, and its terms are its own. Applications have been open since 5 December 2025, and as at July 2026 it works from a minimum 2% deposit, with the Commonwealth contributing up to 40% of the purchase price for a newly built home or up to 30% for an existing home — removing the need for LMI. Two things set it apart from the 5% Deposit Scheme: income caps do apply (for FY2026-27, $103,000 for a single applicant or $165,000 for joint applicants or a single parent), and eligibility is limited to Australian citizens — permanent residents cannot apply.
Help to Buy’s price caps are set separately from the Home Guarantee Scheme’s and are not interchangeable. In NSW, for example, the Help to Buy cap is $1,300,000 for a capital city or regional-centre property, as at July 2026 — lower than the $1,500,000 cap that applies under the 5% Deposit Scheme for the same area. Always check which scheme a cap belongs to before comparing them. Because the Commonwealth’s contribution is an equity share, not a loan, it shares in gains and losses when the property is later sold or the share bought out — the arrangement is a second mortgage over the home, and Help to Buy’s own guidance recommends seeking independent legal and financial advice before applying.
Does a guarantee make your loan cheaper?
No — and it’s worth being clear about this. A Home Guarantee Scheme guarantee, or Help to Buy’s equity contribution, removes the need to pay LMI. It does not shrink the amount you borrow, and it does not reduce your ongoing repayments below what a 95% (or 98%) LVR loan already costs. Either way, you’re borrowing the same share of the purchase price. What you save is the LMI premium itself — and, if you would otherwise have added that premium to your loan balance, the extra interest you’d have paid on it for the life of the loan.
What else do you need beyond the deposit?
The deposit isn’t the only cash you’ll need at settlement. Depending on the state, you may also face transfer (stamp) duty — though first home buyer exemptions and concessions can reduce or remove it — plus conveyancing, building and pest inspections, and lender or government registration fees. Our guide to how much deposit you really need walks through these costs in detail, state by state.
What should you weigh before choosing a path?
None of these paths is the automatic choice. A few factors are worth weighing against each other:
- Cost versus eligibility — an ordinary loan with LMI has no price cap or income test, but you carry the premium yourself; the Home Guarantee Scheme and Help to Buy remove that cost but only if you qualify and the property is under the relevant cap.
- Speed to a smaller deposit — Help to Buy’s 2% minimum gets you into a home sooner than saving 5%, but its income cap and citizens-only rule may rule it out, and sharing capital gains (and losses) with the Commonwealth is a different trade-off to a straight loan.
- Certainty of place — the Home Guarantee Scheme currently has no cap on the number of places; Help to Buy is limited to 10,000 places per financial year.
Which path is right for you?
There’s no single right answer here — it depends on your citizenship or residency status, income, the property’s price against each scheme’s cap, and how you weigh an upfront LMI cost against sharing future gains with the Commonwealth. A licensed mortgage broker can check your eligibility against current scheme rules and model the cost of each path against your own numbers; firsthomebuyers.gov.au is the current source for Home Guarantee Scheme and Help to Buy eligibility and application details.
