5% Deposit Scheme: No Income Cap, June 2026

One of the biggest changes to a first home buyer scheme in years happened in October 2025, and many buyers still do not know it happened. The Australian Government's 5% Deposit Scheme - formerly known as the Home Guarantee Scheme - was expanded to remove all income restrictions and open access to an unlimited number of places. If you previously ruled yourself out because you earned too much or missed an annual allocation, it is worth looking at this scheme again.

What the scheme actually does

The 5% Deposit Scheme lets eligible first home buyers purchase a property with a deposit as low as 5%, without paying Lenders Mortgage Insurance (LMI). Single parents and eligible legal guardians can buy with as little as 2%.

The federal government, through Housing Australia, acts as a guarantor for the portion of your loan between your deposit and the standard 20% threshold most lenders require. Your lender then treats the loan as though you have a full 20% deposit - so no LMI premium applies. You do not share equity with the government under this scheme, unlike the Help to Buy shared equity arrangement. You own 100% of your property from settlement.

LMI is not a trivial cost. Depending on your loan size and how much you have saved, it can add anywhere from around $8,000 to over $30,000 to the upfront cost of buying. Avoiding it removes one of the biggest barriers for buyers who have saved a genuine 5% deposit but cannot yet reach 20%.

Use the LMI Calculator to see exactly how much LMI you would pay without the scheme, based on your deposit amount and target purchase price.

What changed from October 2025

Before October 2025, the scheme operated with annual place limits and income caps. Singles earning above $125,000 and couples earning above $200,000 combined were excluded. Only a fixed number of guarantees were available each year, meaning buyers who applied late in a financial year often missed out.

From 1 October 2025, both restrictions were removed:

• No income caps: Any eligible first home buyer can now access the scheme regardless of how much they earn. A couple on a combined income of $250,000 who would previously have been excluded can now apply.
• Unlimited places: The annual cap on guarantees has been removed entirely. There is no longer a risk of missing out because an allocation has been exhausted.
• Higher property price caps: Eligible purchase prices were raised across the country. In NSW, the cap for capital cities and regional centres rose from $900,000 to $1,500,000. Caps vary by state and by whether you are buying in a capital city or regional area.

Who qualifies in June 2026

To be eligible for the scheme, you generally need to:

• Be an Australian citizen or permanent resident
• Be a genuine first home buyer - you must not have previously owned a residential property in Australia
• Plan to use the property as your principal place of residence
• Have a minimum 5% deposit saved (or 2% for single parents and eligible legal guardians)
• Purchase through a participating lender - CommBank and ANZ are among the major banks currently on the scheme panel, along with a range of non-major lenders
• Purchase a property within the price cap for your state and location

There are no income restrictions under the expanded rules. However, you still need to pass your lender's standard credit assessment and serviceability requirements. Lenders will still assess whether you can comfortably repay the loan, including applying the standard APRA serviceability buffer on top of the current interest rate.

What this means for first home buyers right now

The removal of income caps is the most significant change. Many households who were earning above the old limits - particularly in Sydney and Melbourne where a combined income above $200,000 is not unusual for professional couples - can now access the scheme. For a buyer purchasing at $900,000 with a 5% deposit of $45,000, the LMI saving alone could be worth approximately $25,000 to $35,000.

In June 2026, the scheme becomes particularly useful given the current market. Capital city home values have been softening, with Sydney and Melbourne recording modest price falls over recent months. If you have been saving toward a 20% deposit while prices were rising quickly, you may now find that a 5% deposit gets you into a property before values begin recovering. The Borrowing Power Calculator can show you what loan size you could realistically manage given current rates.

A few important points to factor in:

• Stamp duty still applies. The scheme removes LMI but does not waive stamp duty. Most states offer separate stamp duty concessions for first home buyers, but you need to check the rules in your state and factor this cost in.
• Your deposit must be genuine savings. The scheme does not contribute money toward your deposit. Lenders and Housing Australia require that you have genuinely accumulated the 5% yourself, which typically means it has been held in an account for a period of time.
• The lender panel is not universal. Not every bank or lender offers the scheme. You can only apply through a participating lender as part of a home loan application. It is worth comparing rates across participating lenders, as the scheme does not fix the interest rate you receive - that is still negotiable.
• You can stack this with other grants. Depending on your state, you may be able to access the First Home Owner Grant and state stamp duty concessions on top of the 5% Deposit Scheme. In Queensland, for example, buyers who sign contracts for a new home before June 30, 2026 may be eligible for a $30,000 FHOG alongside the scheme guarantee.

Run the numbers

Use these tools to work out whether the 5% Deposit Scheme fits your situation:

• LMI Calculator - estimate how much LMI you would pay without the scheme, based on your loan size and deposit
• Borrowing Power Calculator - check what loan size you can realistically service at current interest rates
• Scheme Comparison Tool - compare the 5% Deposit Scheme with Help to Buy and other government schemes side by side
• Stamp Duty Calculator - estimate the stamp duty costs that still apply and whether first home buyer concessions reduce them in your state