Queensland’s 5% Deposit Scheme: A Clear Guide For First Home Buyers

Purchasing a first home is a significant milestone, yet saving for a deposit often represents the most substantial barrier for many Australians. Traditionally, lenders require a deposit of at least 20% of the property's purchase price to avoid paying Lenders Mortgage Insurance (LMI). For many first home buyers, accumulating this amount may take years. 

To address this challenge, the Australian Government will introduce a 5% deposit scheme through the First Home Guarantee, starting 1 October 2025. This scheme allows eligible first home buyers to enter the property market sooner with a significant lower upfront deposit. 

What Is The 5% Deposit Scheme? 

The 5% deposit scheme allows first home buyers to purchase a property with only 5% of the purchase price as a deposit, rather than the conventional 20%. The scheme is government- backed, which reduces the lender's risk and eliminates the need for LMI. 

Example:

For a property priced at $500,000:

• Standard 20% deposit: $100,000
• 5% deposit under the scheme: $25,000

By lowering the initial financial barrier, the scheme makes home ownership more accessible for first- time buyers. Applications for the scheme will open on 1 October 2025, and more details are outlined in the official announcement from the Prime Minister's Office. 

How The Scheme Works

1. Saving The Deposit Prospective buyers must have at least 5% of the property's purchase price saved.  
2. Application Through A Participating LenderBuyers apply for a home loan with a participating lender, who conducts standard assessments including income verification and credit checks. 
3. Government GuaranteeThe Australian Government guarantees a portion of the loan, reducing the lender's risk and eliminating the need for LMI. 
4. Purchasing The PropertyOnce approved, buyers can proceed with the property purchase with the reduced deposit.
5. Repayment Of The LoanBuyers make regular mortgage repayments as per the loan agreement. 

 It is important to note that the scheme does not reduce the total loan amount — it only lowers the initial deposit requirement.

Eligibility Criteria 

To participate in the scheme, buyers must meet several criteria: 

• First Home Buyer Status: Must not have previously owned residential property in Autsralia. 
• Citizenship Or Residency: Must be an Australian citizen or permanent resident.
• Income Thresholds: Income caps apply, which may vary for individuals or couples. 
• Property Price Limits: The property must fall below a specified price threshold. 
• Owner- Occupied Requirements: The property must be the applicant's primary residence (investment properties are not eligible). 
• Additional Conditions: Lenders may impose further requirements. 

Benefits Of The Scheme

• Lower Upfront Deposit: Enter the market with a smaller deposit. 
• No Lenders Mortgage Insurance: Avoid additional costs that can run into thousands of dollars. 
• Government Support: The guarantee reduces lender risk, making approval easier. 
• Encourages Home Ownership: Helps buyers enter the market sooner in competitive conditions. 

Example: 

John and Sarah want to purchase a $450,000 home. Normally, they would need $90,000 as a 20% deposit plus $5,000-$7,000 in LMI. With the 5% deposit scheme, they only need $22,500 upfront and avoid LMI entirely. 

Conditions Before Applying 

• Loan Responsibility: You are still responsible for the full mortgage, even with a smaller deposit.

• Additional Costs: Stamp duty, legal fees, and inspection costs still apply. Some first home buyers may qualify for concessions.

• Property Selection: Ensure the property meets price and eligibility requirements.

• Repayment Capacity: Lenders assess your ability to make regular mortgage payments. Budgeting remains essential.

Steps To Begin

1. Verify Eligibility & Loan Options: Check the scheme details on Albanese's announcement and the Housing Australia First Home Guarantee page.
2. Save The Deposit: Accumulate at least 5% of the property purchase price.
3. Identify A Participating Lender: Ensure the lender offers loans under the scheme. 
4. Obtain Pre- Approval: Understand your borrowing capacity and speed up the pruchasing process. 
5. Search For A Property: With pre- approval and deposit secured, start property selection. 

Conclusion

The 5% deposit scheme, launching 1 October 2025, is a valuable opportunity for first home buyers to enter the property market with reduced upfront costs and no LMI. By leveraging this scheme, buyers can achieve home ownership sooner while staying financially prepared.

Prospective buyers are encouraged to explore the scheme, verify eligibility, and consult a qualified lender. With careful planning, purchasing your first home in Queensland can become a more attainable goal.