Buying your first home is an exciting milestone. However, for many, home ownership can be a daunting experience to navigate, and purchasing your first home might be the biggest decision you make. To make the home ownership journey for first-home buyers that little bit easier, the Australian Government has introduced the 5% Deposit Scheme, which came into effect on the 1st October 2025. 

Introduced with the intention of helping Australians purchase their first home sooner, the scheme supports home buyers who have saved a minimum of 5% of the property value and meet eligibility. Additionally, the scheme means that home buyers can avoid paying Lenders’ Mortgage Insurance (LMI). 

We understand the scheme can feel overwhelming, especially once the jargon and acronyms start piling up. The good news? You don’t have to navigate it alone. Fortify Loans is here to guide you through the essentials in simple terms. We’ll break down the key terms you’re likely to encounter and walk you through the five main steps of the process.

How the Scheme Works

To help you get your head around the 5% scheme, we’ve broken it down it into 5 simple steps:

1. Meet eligibility: meet the scheme’s eligibility criteria 
2. Small deposit: home buyer needs to have saved a minimum 5% of the property value
3. Government guarantee: housing australia provides guarantee to the lender to allow the home buyer to borrow up to 95% of the property value
4. Home loan from lender: lender provides home loan
5. Home ownership: home buyer purchases their first home

Understanding Your Eligibility

To keep your Guarantee under the scheme, you need to continue meeting the eligibility rules. If you stop meeting these conditions, the Guarantee may be removed, and your lender might ask you to pay LMI or other costs. To be eligible for the 5% scheme, you must be:

• An Australian citizen or permanent resident who is 18 or above
• Have saved a minimum deposit of 5%
• A first home buyer
• Is buying a home in Australia priced at or within their postcodes price cap 
• Planning to live in the home as an owner-occupier 
• Applying for a home loan to live in the property, with Principal and Interest repayments, through a Participating Lender.
• Applying on your own or jointly (maximum 2 applicants)

Understanding Lenders’ Mortgage Insurance (LMI):

LMI is a one-off, non-refundable fee added to your home loan. It’s calculated based on the size of your deposit and the amount you borrow – typically when borrowing more than 80% of the property’s value. This insurance protects the lender if the borrower is unable to repay their loan.

With the introduction of the 5% scheme, buyers no longer need to pay LMI. Instead, the Australian Government provides a Guarantee to the lender, covering up to 15% of the property’s value. This is great news for both parties: lenders are protected, and buyers save big time. 

Impact on Existing Homeowners

If you’re an existing home owner looking to see how this scheme will impact your home’s value, it is important to note that it can take some time for sales data to start reflecting this. However, we can expect this scheme to cause a gradual influence on property values in affected areas. 

As a team, we’re dedicated to making the home-buying journey as stress-free as possible. If you’re thinking about buying your first home and want to learn more about the 5% deposit scheme, reach out to our home loan experts today. We’d love to support you in achieving this special milestone.