The 5% Deposit Scheme in NSW: who qualifies and how it works

What the scheme is

Lenders usually charge lenders mortgage insurance when your deposit is less than 20%. On a large loan, that insurance can cost many thousands of dollars.

Under this scheme, the Australian Government guarantees part of your loan to the lender. The lender then does not charge lenders mortgage insurance.

The scheme was called the Home Guarantee Scheme. The First Home Guarantee was part of it.

The guarantee is to the lender, not to you. You still owe the whole loan.

Is the 5% Deposit Scheme still active?

Yes. As at 2 November 2026 the scheme is open.

Since 1 October 2025 there are no income limits and no limit on the number of places.

Who is eligible for a 5% deposit?

In general, on the date you sign your loan:

1. You are at least 18.
2. You are an Australian citizen or permanent resident.
3. You are a first home buyer, or you have held no interest in property in Australia in the last 10 years.
4. You are buying or building a home to live in, not an investment.
5. You have a deposit of at least 5% of the value, but less than 20%.

You can apply alone or with one other person. That person can be a partner, a friend or a family member. Both of you must meet the rules.

A single parent or legal guardian may be able to buy with a 2% deposit under the same scheme.

The NSW price limits

1. Sydney, and the regional centres listed for NSW, including Newcastle and Lake Macquarie, the Illawarra and the Central Coast: up to $1,500,000.
2. The rest of NSW: up to $800,000.

Both the price and the lender's valuation must be at or below the limit.

Your lender confirms which limit applies to the address you are buying.

What you can buy

1. An existing house, townhouse or apartment.
2. A house and land package.
3. Vacant land, with a separate contract to build a home.
4. An off the plan apartment or townhouse.

The property must be a residence, and you must be the registered owner at settlement.

How it works, step by step

1. You apply through a participating lender. You cannot apply to the government directly.
2. Once you are pre-approved, you have 90 days to find a home and sign a contract.
3. Send us the contract before you sign. We check it and tell you what to change.
4. After you sign, your lender completes the approval and we prepare for settlement.
5. For an existing home, you must move in within 6 months of settlement, and keep living there while the guarantee applies.

What is a 5% deposit on a $600,000 house?

5% of $600,000 is $30,000.

The deposit is not the only cost. You also need money for stamp duty, if you pay it, the government fees to register the transfer and the mortgage, and the legal costs of the purchase.

A first home buyer who qualifies pays no stamp duty on a home up to $800,000. Read first home buyer stamp duty in NSW.

Is the 5% Deposit Scheme a trap?

It is not a trap, but it has costs you must understand.

1. A smaller deposit means a larger loan, and more interest over the life of the loan.
2. If you stop living in the home, rent it out or sell it, the guarantee ends. If your loan is still above 80% of the value, the lender may then charge lenders mortgage insurance or other costs.
3. If prices fall, a small deposit gives you little buffer.

Whether it suits you is a decision for you and your lender. We explain the contract and your obligations before you sign.

The contract deposit is a different thing

The 5% under this scheme is the deposit your lender needs. The deposit you pay the seller on exchange is set by the contract, and is usually 10%.

A smaller contract deposit can be agreed with the seller. Read paying a 5% deposit instead of 10% in NSW.

Common questions