How the Australian Government’s 5% Deposit Scheme Helps First Home Buyers and Single Parents

There are thousands of First Home Buyers and Single Parents who face a common barrier to home ownership: while they have the income to service a home loan, saving the large upfront deposit traditionally required can be a significant challenge.

The Australian Government’s 5% Deposit Scheme has become a key initiative in helping eligible First Home Buyers and Single Parents overcome this hurdle and make home ownership more achievable.

1. Introduction: What is the Australian Government 5% Deposit Scheme?

From 1 October 2025, the Australian Government expanded support to first home buyers and single parents to make home ownership more accessible with as little as 5% deposit for first home buyers, or 2% deposit for single parents or legal guardians, by;

• removing the income caps for eligibility
• increasing the property price caps
• offering unlimited spots and no waiting lists

If you are a first home buyer or single parent looking to take advantage of the scheme to purchase your home, this guide will walk you through everything you need to know.

The team at Fastrack Conveyancing are only a call or a click away to help answer any further queries you may have on the home buying process.

2. How does the 5% Deposit Scheme work?

For eligible buyers who obtain a home loan through a participating lender, the government act as a guarantor for the home loan. This enables obtaining a home loan more achievable and removes the requirement for Lenders Mortgage Insurance (LMI) which reduces the upfront costs of a home loan by thousands of dollars.

To avoid LMI buyers would traditionally have to have saved a 20% deposit. This scheme changes the required deposit to 5% (or 2% for single parents), which significantly reduces the time for saving the 20% and allowing buyers to get into the market sooner.

There are over 30 participating lenders, including 3 out of the 4 major banks, being CommBank, NAB and Westpac. The loan must be a home loan for an owner-occupier with principal and interest payments, up to 30 years (plus up to three years to build a new home if purchasing land).

3. Eligibility Criteria for the 5% Deposit Scheme

There is a useful tool to check eligibility at https://firsthomebuyers.gov.au

3.1 Eligibility for First Home Buyers (5% Deposit);

• You must have saved a minimum deposit of 5%
• You must be an Australian citizen or a permanent resident
• You must be 18 years old or above
• You must be a first home buyer (or have not owned a property in Australia in the last 10 years).
• You must be buying a home;
  • That is priced at or below the location price caps (which for Victoria, capital city and regional centre is $950,000 and other is $650,000); and
  • That you are buying as an owner-occupier (not an investment property to be leased out)
• You can apply on your own or jointly with one other person
• You must also meet the Participating Lenders’ credit policy and loan approval criteria, as you need to be able to obtain a home loan and meet the lenders’ requirements to be eligible for the scheme.

3.2 Eligibility for Single Parents/Guardians (2% Deposit);

• You must have saved a minimum deposit of 2%
• You must be a single parent or single legal guardian of one or more dependent children, (note, single means no spouse or de facto, and if previously married you must be divorced not just separated)
• You do not need to be a first home buyer. However, you must not have any other property interest once the new home settles
• You must be applying on your own (no joint applications)

4. Benefit and Risk – What to consider?

4.1 Key Advantages of the scheme

The key advantages of taking up the 5% deposit scheme or the 2% single parent deposit scheme are;

• No need to pay LMI (saving of thousands of dollars).
• Get into the market sooner, and stop paying rent sooner by owning your own home.
• Access to quality lenders and government-backed support.
• Opportunity to start building equity.

4.2 The Trade-Offs: Higher Loan, Higher Risk

While the scheme provides that there are no limits as to how many applicants may apply, this scheme will likely put further pressure on demand in the market with more buyers taking advantage of the scheme. It is recommended to do your market research and work out the benefits for your own circumstances.

It is important to consider the market too, as the opportunity to start building equity will depend on the market value.

Lastly, keep in mind that the lower deposit means the higher your borrowing is, and higher interest and repayments. Before taking out a home loan, you should ensure you can service the repayments and maintain a lifestyle. Speak to an expert finance broker to assist you in understanding your financial ability.

As well as having an expert finance broker on your team, you should also have a trusted conveyancer on your team to help guide you through the process and ensure your interests are protected.

5. Step-by-Step: How to Apply for the 5% Deposit Scheme

• Step 1: Ensure you have done your property market research. There are several real estate websites that can assist with data on recent sales and median prices, such as https://www.realestate.com.au/ and https://www.domain.com.au/. Also, speaking with local agents and attending auctions in the area, can also help get further insight on the local market.
• Step 2: Check eligibility, as outlined above. There is also a useful tool here. This will include ensuring you have genuinely saved your 5% deposit (or 2% for single parents/guardians).
• Step 3: Choose a participating lender and obtain a conditional pre-approval, either directly with the lender or using a trusted mortgage broker. The participating lender will submit the application on your behalf. The conditional pre-approval is usually valid for 90 days to find a property and sign a Contract.
• Step 4: Find a suitable property (within price caps mention above) but also within your pre-approval as guided by the participating lender.
• Step 5: Engage a conveyancer to review the contract and handle the legal side. This is where you can ‘contact us’. We strongly recommend that you do not sign any Contract before having us review this for you. We pride ourselves on being an efficient conveyancer who can provide you with a thorough written review quickly, to help you move forward with your offer and signing the contract.
• Step 6: Once you have signed the Contract, your lender can finalise the loan application, to enable you to sign loan documents. Your lender will also finalise the application for the scheme.
• Step 7: Your conveyancer and your lender will work together with you towards settlement of your home.
• Step 8:Settle, move in and enjoy your new home.

6. Taking advantage of the Australian Government’s 5% Deposit Scheme

If you are a first home buyer or single parent looking to take advantage of the Australian Government’s 5% Deposit Scheme get in touch with us today to talk through the steps and how we can help you with your property purchase.

You may also like to check out “Buying a Property” for further information on our services.

Fastrack Conveyancing can assist with all types of conveyancing, Victoria wide.