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The 5 percent deposit scheme Sydney buyers ask about is the Australian Government 5% Deposit Scheme, renamed from the Home Guarantee Scheme. Under it an eligible first home buyer can purchase with a five per cent deposit and pay no lenders mortgage insurance.
Two things changed that many published guides have not caught up with. The income caps were removed, and the limit on places was removed with them. Buyers who were told they earned too much, or that places had run out, should look again.
The government guarantees the portion of your loan that would normally require lenders mortgage insurance. The lender is protected, so the premium is not charged to you.
The 5 percent deposit scheme Sydney buyers ask about gives you no money and creates no second loan. The guarantee sits behind your loan and falls away as you repay. Your repayments are the same as any other borrower’s on the same loan size.
A separate Single Parent or Legal Guardian Stream allows entry from a two per cent deposit, and its criteria are genuinely different.
You do not have to be a first home buyer, you must have a dependent child meeting that stream’s own test, and you must apply as an individual rather than jointly.
Read that stream’s criteria in full before assuming either way, because the dependent child test is narrower than most people expect. The scheme covers houses, townhouses and units, new build or existing.
The eligibility test for the 5 percent deposit scheme Sydney buyers use is narrower than it looks, and the parts that catch people out are rarely the parts they worry about.
| Requirement | What it means in practice |
|---|---|
| First home buyer, or a ten year gap | You must be a first home buyer, or not have owned a home or land in Australia in the last ten years, measured from the date your previous property was sold. The Single Parent Stream does not require first home buyer status at all |
| Income | No income caps apply. This was removed and is the single biggest change |
| Places | Unlimited, with no waiting list. The old scramble at the start of each financial year is gone |
| Deposit | At least five per cent, or two per cent under the Single Parent or Legal Guardian Stream |
| owner-occupier | You must live in the property. Investment purchases are outside the scheme |
| Price cap | The property must sit at or under the cap for its location. This is now the main constraint |
| Participating lender | Only lenders in the scheme can write it, which narrows your panel the moment you choose this route |
Note the last row. Choosing the scheme decides your lender shortlist, so eligibility has to be settled before lender selection rather than after.
With income caps gone, the price cap is what decides whether the 5 percent deposit scheme Sydney buyers want actually works for you. Caps are set by location and are revised, so the figure matters more than any general advice about the scheme.
We deliberately do not publish a cap figure here. Caps change and Sydney has more than one applicable area. A stale number in a blog post is how buyers end up bidding on a property that was never eligible.
Check the cap for your specific suburb on the official tool before you shortlist anything. Your broker can confirm it against the participating lender at the same time.
Where the property you want sits above the cap, a family guarantee is usually the next route to look at. See family guarantee lending.
The scheme itself is straightforward. The way people approach it is where purchases come apart, and the same five errors account for most of them.
Searching before pre-approval. The scheme runs through a participating lender, and without an approval in hand you do not know your price ceiling or whether you qualify at all.
Assuming one cap covers the whole city. Caps are set by location, and the 5 percent deposit scheme Sydney applicants rely on can treat two suburbs half an hour apart differently.
Choosing a lender first. Pick the lender before the scheme and you may exclude the scheme without realising it, because only participating lenders can write it.
Budgeting only for the deposit. The guarantee removes the insurance premium, not the legal fees, inspections, transfer duty where it applies or the moving costs.
Treating the guarantee as money. It is neither a grant nor a second loan. Your repayments on the 5 percent deposit scheme Sydney buyers use are the same as any other borrower’s on the same loan size, which is the point most often misunderstood.
A place in the 5 percent deposit scheme Sydney buyers chase is not automatically the better outcome. It removes the premium, which is real money, but it restricts you to participating lenders and to properties under the cap.
If the lender with the sharpest rate for your situation is outside the scheme, the rate difference across several years can exceed the premium you avoided. That comparison is arithmetic, not principle.
Run both. See what a premium actually costs and the other routes to avoiding it.
You cannot apply to the government directly for the 5 percent deposit scheme Sydney buyers use. The application goes through a participating lender, and your broker arranges it as part of the loan.
First, confirm eligibility and the cap for the area you are buying in. Second, choose a participating lender whose policy also suits your income type, because the two tests are separate.
Third, obtain pre-approval. There is no place to reserve and no scheme deadline, but your lender’s pre-approval carries its own validity period, so ask what it is before you start inspecting.
Fourth, exchange and settle as normal. See our first home buyer page or call +61 447 959 546.
No. Income caps were removed, which is the most significant change to the scheme and the one many published guides have not updated.
Buyers who were previously told they earned too much to qualify should check again, because the test that excluded them no longer exists. Confirm the current position on the official site before you rely on it.
No. The scheme now has unlimited places and no waiting list. The annual scramble that used to happen at the start of each financial year, where places were exhausted within weeks, no longer applies. That removes the main reason buyers used to miss out on the scheme entirely.
Broadly, an owner-occupier buying to live in, with at least a five per cent deposit, at or under the price cap for the location, through a participating lender. You must be a first home buyer or not have owned a home or land in Australia in the last ten years.
The Single Parent or Legal Guardian Stream runs on separate criteria, including a dependent child test and individual application only. Investment purchases are excluded, and the official eligibility material is the only reliable confirmation for your own case.
Caps are set by location and are revised over time, so we do not publish a figure that could be out of date by the time you read it.
Use the official price cap tool for your specific suburb, and have your broker confirm it against the participating lender at the same time. A property above the cap is simply ineligible, however well you qualify otherwise.
Yes. They are separate programs run by different governments and qualifying for one says nothing about the other.
The NSW First Home Buyers Assistance Scheme removes transfer duty up to its own threshold, and the federal deposit scheme removes the insurance premium. Many first home buyers in Sydney qualify for both at once.
Yes, and this is the trade-off people underestimate. Only participating lenders can write a scheme loan, so your panel narrows the moment you commit to this route. That is why eligibility should be settled before lender selection. Occasionally a non-participating lender’s pricing makes paying the premium the better overall outcome.
Current eligibility, caps and the participating lender list are published on the Australian Government scheme site. Confirm them before you commit to a purchase.
Paritosh Wadhwani | Director and Principal Broker, APW Finance
Member of the Finance Brokers Association of Australia (FBAA). Arranging residential, commercial and specialist lending for Sydney clients across a panel of more than 50 lenders.
APW Finance Pty Ltd, 304/20a Lexington Drive, Bella Vista NSW 2153. Email: info@apwfinance.com. Phone: +61 447 959 546.
ACN 620 646 479 | ABN 79 620 646 479
This guide is general information only. It does not take into account your objectives, financial situation or needs, and it is not financial or credit advice. Lending criteria, interest rates, duty thresholds and government schemes change, and every application is subject to lender approval.
Consider whether this information suits your circumstances and seek independent advice before acting. Figures quoted are current at the date below and should be confirmed before you rely on them. Last reviewed: October 2026.
APW Finance Pty Ltd delivers expert lending solutions with personalised service, empowering clients across residential, commercial, and business sectors.