Saving a 20% deposit in Perth’s current market can take a long time. With median house prices well above $700,000 across much of the metro area, many first home buyers are looking for a practical way to reduce the upfront cash barrier without taking unnecessary risks.
The Australian Government 5% Deposit Scheme, formerly known as the First Home Guarantee, may help eligible buyers purchase with a minimum 5% deposit and no Lenders Mortgage Insurance (LMI). LMI is the insurance premium that often applies when a borrower has less than a 20% deposit.
Following the 1 October 2025 expansion, the Scheme is more accessible than the version many Perth buyers may remember. Income caps were removed, places became unlimited, and the Perth property price cap increased to $850,000. For eligible buyers, the Scheme may reduce the upfront deposit and LMI barrier, but lender approval, serviceability, property eligibility and Scheme rules still apply.
How the 5% Deposit Scheme Works
With a standard home loan, a deposit under 20% often means the lender may require Lenders Mortgage Insurance. LMI protects the lender, not the borrower, if the loan defaults. On a $600,000 purchase with a 5% deposit, LMI can add a significant upfront cost, depending on the lender, loan structure and borrower profile.
Under the 5% Deposit Scheme, Housing Australia provides a guarantee to a participating lender for up to 15% of the property’s value. In the lender’s assessment, that can help bridge the gap between a 5% deposit and the usual 20% threshold for avoiding LMI.
You still borrow up to 95% of the purchase price. The guarantee is not a cash payment to you, and it does not reduce your loan amount or repayment obligations. The Scheme is administered by Housing Australia and accessed through participating lenders.
Eligibility: Who Qualifies?
As at June 2026, the core eligibility settings for first home buyers include:
- Age and residency: you must be at least 18 and an Australian citizen or permanent resident.
- Prior ownership: you must be a first home buyer or a previous homeowner who has not owned property in Australia in the past 10 years.
- Owner-occupier use: the property must be your home, not an investment property.
- Minimum deposit: first home buyers generally need a minimum 5% deposit. Participating lenders may also assess the source of funds and genuine savings under their own credit policies.
- Property price cap: the property must sit within the relevant location cap.
- Lender approval: you still need to satisfy the participating lender’s borrowing capacity and credit assessment.
Where more than one buyer applies, each applicant needs to satisfy the relevant Scheme and lender requirements. Single parents and single legal guardians may be eligible under a separate pathway with a minimum 2% deposit, depending on their circumstances.
Perth Price Caps: What Does the Scheme Cover?
The government sets property price caps by location. The current caps for Western Australia are:
- Perth and eligible regional centres: $850,000
- Other areas of Western Australia: $600,000
In practical terms, the Perth cap covers many house-and-land packages and established homes across outer and middle-ring suburbs, including parts of Alkimos, Baldivis, Byford and Ellenbrook. The cap is less likely to cover premium coastal and inner-suburb purchases such as Cottesloe, central Subiaco or the more expensive parts of Mount Lawley.
Caps can change, and the exact cap may depend on the suburb or postcode. Use the official property price cap tool as a guide and confirm the cap with your participating lender before committing to a purchase price.
The Pros: Why Buyers Use It
- Lower deposit hurdle: eligible buyers may be able to enter the market with a minimum 5% deposit rather than waiting until they have 20% saved.
- No LMI under the Scheme: avoiding LMI can reduce upfront costs, although lender fees, government charges and other purchase costs still need to be budgeted for.
- No Scheme-specific penalty rate: the Scheme itself does not set a separate interest rate. Pricing is assessed by the participating lender based on its policies and your financial profile.
- No income caps: the 1 October 2025 expansion removed the previous income tests.
- Unlimited places: eligible applicants are not competing for a capped annual allocation.
- May work with other WA support: the Scheme may be used alongside the WA First Home Owner Grant and transfer duty concessions where you qualify.
The Cons: What to Weigh Up
- You still service the full loan: the guarantee supports the deposit side, not your borrowing capacity.
- Higher LVR risk: buying with a 95% loan-to-value ratio leaves less equity buffer if property values fall.
- Participating lenders only: not every lender offers Scheme loans, and lender policies can differ.
- The price cap is a hard limit: if the purchase price sits above the cap, the Scheme will not apply.
- Ongoing obligations apply: you need to meet Scheme requirements, including living in the property as an owner-occupier. Changes after settlement may affect the guarantee.
How to Apply
The process runs through a participating lender, not Housing Australia directly. In general, the steps are:
- Check the current eligibility rules and property price cap.
- Review your borrowing capacity and deposit position.
- Apply for pre-approval with a participating lender.
- Find a property within the relevant cap.
- The lender processes the Scheme guarantee as part of the loan approval and settlement process.
Our Perth home loan brokers work with first home buyers on Scheme applications. We can help you check eligibility, compare participating lenders, understand borrowing capacity and structure your application properly.
Check Your Eligibility with Us
The 5% Deposit Scheme may be useful for eligible Perth buyers, particularly after the 1 October 2025 expansion. It works best when you understand both sides of the equation: the upfront deposit and LMI benefit, and the ongoing loan, serviceability and owner-occupier obligations.
Speak with the team at Strategic Mortgages to find out whether you may qualify, which participating lenders may suit your circumstances, and what your options look like. The initial conversation is free and obligation-free.
Frequently Asked Questions
Can I use the 5% Deposit Scheme alongside the WA First Home Owner Grant?
Potentially, yes. The two schemes operate separately. If you are building or buying a new home that meets the WA First Home Owner Grant criteria, you may be eligible for the $10,000 grant at the same time as using the 5% Deposit Scheme. First home buyer transfer duty concessions may also apply. Confirm eligibility with the relevant government body, your lender and your broker before relying on any grant or concession.
Are there income caps?
No. Income caps were removed from 1 October 2025. Previously, singles and couples were subject to income thresholds, but those tests no longer apply under the expanded Scheme.
Are permanent residents eligible?
Yes. Australian citizens and permanent residents aged 18 or over may be eligible, provided they meet the other Scheme and lender requirements.
Are the places limited?
No. The Scheme now has unlimited places for eligible applicants, with no annual cap or waitlist.
How does the government guarantee actually work?
The guarantee is issued by Housing Australia to the participating lender, not to you directly. It can cover the difference between your deposit and the 20% threshold, up to 15% of the property value. It does not reduce your loan amount, change your repayments or remove the need for lender approval.
Do I still need loan approval?
Yes. The Scheme does not override lender credit assessment. You still need to show that you can afford the loan, meet the lender’s policy requirements and satisfy any conditions attached to the approval.
Disclaimer: The information provided in this article is general in nature and does not constitute financial, tax, or legal advice. Individual circumstances vary. We recommend consulting with qualified professionals before making financial decisions.
