The 5% Deposit Scheme: What Perth First Home Buyers Need to Know in 2026

First home

For years, the advice was the same: save 20% or pay Lenders Mortgage Insurance. That advice is now out of date, and a lot of people saving hard toward a deposit they no longer need haven’t heard.

What changed

From 1 October 2025, the federal government’s First Home Guarantee — now generally referred to as the Australian Government 5% Deposit Scheme — was substantially expanded:

No place limits. Previously capped at around 35,000 spots a year, with people missing out. Now uncapped.

No income caps. The old limits ($125,000 single / $200,000 couple) are gone. Your income no longer excludes you.

Higher property price caps, lifted materially across the country.

The core mechanism is unchanged: you save a 5% deposit, Housing Australia guarantees the next 15% to your lender, the lender treats it as a 20% deposit, and you pay no Lenders Mortgage Insurance.

What that’s actually worth

LMI on a 95% loan is not a rounding error. Depending on the loan size it can run from roughly $15,000 to well over $30,000 — money you either pay upfront or capitalise onto the loan and pay interest on for decades.

Under the scheme, that cost is zero.

Just as importantly, it means you can stop saving three years earlier. In a rising market, that’s often the bigger prize: getting in sooner, at today’s price, rather than saving toward a target that keeps moving.

The catches nobody puts in the headline

It is a guarantee, not a grant. You get no cash. You still borrow 95% of the purchase price and you repay every cent of it.

You still have to qualify. The scheme removes the LMI requirement. It does not remove the serviceability assessment. If you can’t service a 95% loan at the assessment rate, the scheme doesn’t help you. Given borrowing power has fallen this year, this is where most people actually get stuck — not on the deposit.

Bigger loan, bigger repayments. A 5% deposit means a larger mortgage and higher monthly repayments than a 20% deposit would. Make sure the repayment is comfortable, not just possible.

You must live in it. It’s for owner-occupiers. Rent it out without telling Housing Australia and the guarantee can be revoked — which can trigger the LMI you avoided.

Pricing can differ. Some lenders price scheme loans slightly differently from their standard products. The scheme saves you LMI; it doesn’t automatically get you the best rate. Comparing across participating lenders is where a broker matters.

Property price caps still apply. These are set per region.

Basic eligibility

Australian citizen or permanent resident

You must not have owned property in Australia in the past 10 years (this applies to both applicants on a joint purchase)

You must move in and live in the property

The property must be within the price cap for your area

You must borrow through a participating lender

Stack it with the WA concessions

This is the bit that gets missed. The 5% Deposit Scheme is federal. Western Australia has separately just made first home buying significantly cheaper — the May 2026 state budget lifted the stamp duty exemption threshold to $600,000 and the First Home Owner Grant cap to $800,000.

Used together, a WA first home buyer can now potentially avoid LMI and avoid stamp duty and collect the grant. Read WA’s 2026 Stamp Duty Changes next — it may be worth more to you than the scheme itself.

Frequently asked questions

Do I still need savings beyond the 5%? Yes. You’ll need funds for legal fees, building and pest inspections, and any duty payable. Most lenders also want to see genuine savings history.

Can I use the First Home Super Saver Scheme for the deposit? Yes — you can make voluntary super contributions and later withdraw them (plus associated earnings) toward a first home deposit, within the ATO’s limits. It works alongside the 5% Deposit Scheme.

Is it better than Help to Buy? They’re different tools, and you can’t use both. The 5% Deposit Scheme leaves you owning 100% of your home. Help to Buy needs only a 2% deposit but the government takes an equity stake. See Help to Buy Explained.

Not sure which scheme fits you? There are now three federal pathways and a revamped set of WA concessions. Getting the combination right can be worth tens of thousands.

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