Government schemes now let eligible buyers purchase with as little as 2% or 5% down, and no income cap applies to the main guarantee program anymore.
That shift happened in October last year when Housing Australia dropped the income limits on what's now called the Australian Government 5% Deposit Scheme. It opened the door for buyers who'd previously earned a dollar over the threshold and missed out entirely. But there's still confusion about who qualifies, how the schemes combine with state concessions, and what happens when your lender says no.
Who Can Use the 5% Deposit Scheme
You need to be an Australian citizen or permanent resident, and you can't have owned property in the last 10 years. Housing Australia guarantees up to 15% of the purchase price to your lender, which means you reach a combined 20% without paying lenders mortgage insurance. Single parents or legal guardians can apply with just 2% down, and Housing Australia covers up to 18%.
Applications go through a panel of participating lenders, not directly to Housing Australia. The panel had 3 major banks and 28 non-major lenders when the scheme expanded in October, and more have joined since. Not every lender offers the same appetite for every property type or location, so if one declines, another on the panel might approve the same scenario.
Consider a buyer in Newcastle on a permanent visa who's been renting for six years and has saved $50,000. A unit priced at $650,000 would need a 5% deposit of $32,500 under the scheme, leaving funds to cover settlement costs. Without the guarantee, the same buyer would face an LMI premium of around $18,000 to $22,000, which would either need to be paid upfront or capitalised into the loan amount. The scheme removes that cost entirely and keeps the home loan application process moving without the delay of waiting for a larger deposit.
Price Caps and How They're Applied
Both the purchase price and the lender's valuation must sit at or below the cap for your area. In NSW, that's $1,500,000 in capital cities and regional centres including Newcastle, the Central Coast, Illawarra, and Richmond-Tweed. Outside those areas, the cap drops to $800,000. Victoria's caps are $950,000 and $650,000. Queensland sits at $1,000,000 and $700,000. Western Australia is $850,000 and $600,000, with Perth postcodes confirmed via the postcode search tool on the official site.
The valuation clause catches some buyers off guard. A property might be under contract at $945,000 in Melbourne, but if the bank's valuer comes back at $955,000, you're over the Victorian cap and the guarantee falls away. That doesn't kill the purchase, but it does mean LMI comes back into the picture unless you can increase your deposit to 20%.
How the Scheme Interacts with State Concessions
Most states let you stack a federal guarantee with their own first home owner grant or stamp duty relief, but the rules differ by jurisdiction and some programs exclude certain combinations. NSW offers stamp duty concessions for first home buyers purchasing under $800,000, and that can sit alongside the 5% Deposit Scheme. Victoria's first home owner grant of $10,000 applies to new homes in regional areas under $750,000 and can be used with either federal scheme, subject to eligibility.
Queensland, South Australia, Western Australia, Tasmania, the ACT, and the NT each run their own versions with different price thresholds and grant amounts. Some require you to occupy the property within a set period or hold it for a minimum term. If you're applying for both a federal scheme and state support, your broker or lender should confirm the interaction before contracts exchange, because losing one concession late in the process can shift your borrowing capacity or upfront costs enough to affect settlement.
What Happens When You Don't Fit the Standard Profile
If you're on a temporary visa, you're not eligible for the 5% Deposit Scheme, regardless of how long you've been in Australia or how much you've saved. The citizenship and permanent residency requirement is absolute. New Zealand citizens on a Special Category Visa (subclass 444) are treated as permanent residents for most property purposes under federal and state rules.
That leaves temporary visa holders needing a standard loan with a 20% deposit to avoid LMI, or paying the premium if borrowing above 80%. The same applies to expats and non-residents, who face their own set of lender policies and often higher interest rates or lower maximum LVRs. If your visa status is about to change—say you've applied for permanent residency and expect a decision within a few months—some lenders will consider a conditional approval now and hold the application until the visa is granted, but that's lender-specific and not a universal practice.
How Lenders Assess Applications Under the Schemes
Lenders still apply their usual serviceability tests even when Housing Australia is guaranteeing part of the loan. Your income, existing debts, living expenses, and employment stability all get reviewed the same way they would on any other owner occupied home loan. The guarantee covers the lender's risk if you default, but it doesn't change whether they'll lend to you in the first place.
Some lenders are more comfortable with casual or contract income, others want two years of tax returns if you're self-employed, and a few will accept a shorter employment history if you've just finished study in a high-demand field. The panel of participating lenders gives you options to shop around without needing a bigger deposit, which is where working with a broker makes a practical difference. One lender might decline based on a low credit score or a previous default, while another on the same panel might take a different view if the issue is explained and enough time has passed.
Choosing Between a Variable, Fixed, or Split Structure
You're not locked into a variable rate just because you're using a government scheme. Fixed, variable, and split loan structures are all available, and the choice depends on your tolerance for rate movement and whether you want the flexibility to make extra repayments without penalty.
A variable rate moves with the market, so your repayments can go up or down. Most variable loans let you pay extra whenever you like, and many come with an offset account that reduces the interest you're charged. A fixed rate holds your repayment steady for a set period, usually one to five years, but you'll face break costs if you pay off the loan or refinance early, and extra repayment limits are often capped at $10,000 to $30,000 per year.
A split loan gives you both. You might fix half your loan for three years and leave the other half variable with an offset account attached. That way you've got some protection if rates rise, but you're not completely locked in. Your broker can model different splits and show you how the repayments and features compare at current variable rates.
If your fixed rate is coming up for renewal and you originally used a government scheme, you can refinance or restructure without losing the benefit, as long as the property stays your primary residence and you meet any other ongoing conditions in the guarantee terms.
Call one of our team or book an appointment at a time that works for you. We'll check which scheme suits your situation, which lenders on the panel are open to your profile, and how to structure the loan so it works now and stays flexible as your circumstances change.
