Saving a 20% deposit in Perth’s current market is a long road. With median house prices well above $700,000 across much of the metro area, getting that traditional deposit together can take years — and the market doesn’t always wait.
The Australian Government 5% Deposit Scheme (formerly the First Home Guarantee) is the federal government’s answer to that problem. It lets eligible first home buyers purchase with as little as a 5% deposit without paying Lenders Mortgage Insurance — the premium that normally applies when you borrow more than 80% of a property’s value.
Following an October 2025 expansion, the Scheme is now substantially more accessible than the version many Perth buyers will remember. Income caps were removed, place numbers became unlimited, and the Perth property price cap was lifted to $850,000. For Perth buyers working towards their first property, it can mean the difference between buying now and buying in three or four years.
How the 5% Deposit Scheme Works
With a standard home loan, any deposit under 20% triggers Lenders Mortgage Insurance (LMI). LMI protects the lender, not you, if you default on the loan. On a $600,000 purchase with a 5% deposit, LMI could add anywhere from $15,000 to $25,000 to your upfront costs.
Under the 5% Deposit Scheme, the federal government guarantees up to 15% of the property’s value. In the lender’s eyes, that takes your effective deposit to 20%, so the LMI requirement is waived entirely.
You still borrow up to 95% of the purchase price. The government isn’t handing over cash — it’s providing the guarantee that lets lenders approve a high-LVR loan without the insurance premium attached.
The Scheme is administered by Housing Australia and offered through a list of participating lenders.
Eligibility: Who Qualifies?
To access a 5% deposit home loan in Perth through the Scheme, you’ll need to meet all of the following:
- Australian citizen or permanent resident: the Scheme is open to both, provided you’re 18 or over at the time you apply
- First home buyer: you must not have previously owned property in Australia, including any interest in one
- Owner-occupier: the property must be your principal place of residence, not an investment
- Genuine savings: your 5% deposit must come from your own savings, not a gift or windfall
- Property price within the local cap: see below
If you’re buying with a partner, both of you must meet the first home buyer criteria.
Single parents may be eligible for a separate strand of the Scheme that requires only a 2% deposit. Speak with your broker about whether that pathway applies to you.
Perth Price Caps: What Does the Scheme Cover?
The government sets property price caps by location. The current caps for Western Australia are:
- Perth (capital city): $850,000
- Rest of Western Australia: $600,000
In practical terms, the Perth cap covers a lot of ground. New estates in Alkimos, Baldivis, Byford, and Ellenbrook regularly have house-and-land packages and established homes within range. The same applies across many of Perth’s southern, eastern, and northern suburbs, and a meaningful share of the inner ring once you move beyond the most premium pockets.
Where the cap can pinch is the most expensive coastal and inner suburbs. If your target is somewhere like Cottesloe, central Subiaco, or the more sought-after parts of Mount Lawley, you’d likely be looking at prices above the threshold and would need to explore other options.
Caps are reviewed periodically, so confirm the current limit before you commit to a price point. Your broker can check this for you.
The Pros: Why Buyers Use It
Get in sooner. This is the main draw. Instead of spending another two or three years saving while prices continue to move, you can buy when you have your 5% ready.
Avoid LMI. On a 95% loan, LMI savings can be substantial — often $15,000 to $25,000 or more depending on the purchase price. That money stays in your pocket.
Same rates as standard borrowers. The Scheme doesn’t come with a penalty rate. You access the same loan products as any other borrower through the participating lender.
No income caps. Following the October 2025 expansion, the Scheme no longer applies income tests. Higher-earning households that were previously excluded under the old $125,000 / $200,000 caps can now use it.
Unlimited places. The Scheme is no longer rationed to a fixed number of places per year. There’s no waiting list and no need to time your application around an annual reset.
Stackable with other WA grants. The Scheme can work alongside the WA First Home Owner Grant ($10,000 for eligible new builds) and first home buyer transfer duty concessions where you qualify. That combination can meaningfully reduce the cash required to get into a first home.
The Cons: What to Weigh Up
You still need to service the full loan. The guarantee covers your deposit shortfall, not your borrowing capacity. You still need to demonstrate you can comfortably repay a 95% loan at current interest rates.
Negative equity risk. Buying at 95% LVR means a relatively small drop in property values could put you in a position where you owe more than the home is worth. This applies to any high-LVR loan, not just this Scheme, but it’s a real consideration, particularly in a market that has moved quickly.
Participating lenders only. Not every bank or lender is on the panel. Working with a Perth mortgage broker who knows which lenders are most competitive on Scheme loans can save you a lot of time.
The price cap is a hard ceiling. If your target property sits above $850,000 in Perth, the Scheme won’t apply, even if you’d otherwise qualify on every other measure.
How to Apply
The process runs through a participating lender, not Housing Australia directly. In general:
- Confirm you meet the eligibility criteria
- Get a clear picture of your borrowing capacity
- Apply for pre-approval with a participating lender
- Find a property within the price cap
- The lender issues the guarantee as part of the settlement process
Our Perth home loan brokers work with first home buyers on the Scheme regularly. We can check your eligibility, identify the most competitive lenders for your situation, and help you structure your application properly.
Check Your Eligibility with Us
The 5% Deposit Scheme offers a meaningful pathway into the market for many first home buyers, and the recent expansion has made it accessible to a much broader group of Perth buyers. It works best when you go in with a clear understanding of what it covers — and what it doesn’t.
Speak with the team at Strategic Mortgages to find out if you qualify, which lenders are most competitive for 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?
Yes. The two schemes operate independently. If you’re building a new home that meets the FHOG criteria, you may be eligible for the $10,000 WA First Home Owner Grant at the same time as using the 5% Deposit Scheme. First home buyer transfer duty concessions may also apply. Your broker can confirm what you’re eligible for based on your specific purchase.
Are there income caps?
No. Income caps were removed under the October 2025 expansion of the Scheme. Previously, singles were limited to $125,000 a year and couples to $200,000 combined; those tests no longer apply.
Are permanent residents eligible?
Yes. Both Australian citizens and permanent residents aged 18 or over can use the Scheme. Permanent resident eligibility has been part of the Scheme since 2023.
Are the places limited?
No. The previous cap of 35,000 places per financial year was removed in October 2025. The Scheme is now uncapped, with no waiting list.
How does the government guarantee actually work?
The guarantee is issued by Housing Australia to the lender, not to you directly. It covers the difference between your 5% deposit and the 20% threshold — essentially up to 15% of the property value. If you were to default, the government’s guarantee covers that portion of the lender’s loss. It doesn’t reduce your loan amount or change your repayment obligations.
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.
