Thinking you need a 20% deposit to buy your first home? Not anymore. Thanks to several updated government initiatives, eligible first-home buyers in 2025 can get into the property market with just 5% — or even 2% — and avoid paying Lenders Mortgage Insurance (LMI) altogether.
Here’s how it works, who qualifies, and what’s changing in 2026 that you’ll want to plan for.
What Does a 5% Deposit Actually Look Like?
Let’s break it down with a real example. If you’re looking at a $700,000 property, a 20% deposit would normally require $140,000 upfront. And if you had less than that, you’d usually be up for LMI, which in this case could cost over $20,000 — an amount that doesn’t go toward your loan or equity.
With a 5% deposit, you’d only need $35,000 — and if you’re eligible under a government scheme, you can skip LMI entirely, saving thousands from day one.
Government Schemes That Make It Possible in 2025
There are three major initiatives helping first-home buyers reduce upfront costs:
1. First Home Guarantee
- 35,000 places available nationwide in 2025
- For singles earning up to $125,000, or couples up to $200,000 combined
- You must live in the home, and price caps apply depending on your location
- Lets you buy with a 5% deposit and no LMI
2. Family Home Guarantee
- For single parents or legal guardians
- Only 2% deposit required
- Income cap: $125,000
- You must live in the property and meet specific criteria
3. Regional First Home Buyer Guarantee
- Similar criteria as the First Home Guarantee
- Prioritises buyers in regional areas
- Same LMI waiver and deposit flexibility
Do You Qualify? Here’s What Lenders Want to See
Even with government support, lenders still assess your financial stability. Here’s what they typically look for:
- Consistent income
- Clean credit history
- Rental history (some lenders now count 6–12 months of rent as genuine savings)
- Overall responsible financial behaviour
Note: Not all lenders offer these schemes — they’re only available through a panel of approved lenders. This is where working with a mortgage broker can help ensure you’re applying through the right channels.
What Are the Benefits?
Here’s why this strategy is a game-changer for many renters:
- Save over $20,000 by avoiding LMI on a $700,000 purchase
- Get into the market sooner
- Retain more cash for moving costs, minor renovations, or a financial buffer
- Build equity faster, as more of your repayment goes toward your loan principal
- Could allow you to upgrade or invest sooner
Watch Out for These Common Pitfalls
While these schemes are generous, there are a few things to keep in mind:
- ❌ Don’t apply without checking eligibility — income, residency, and property price caps all apply
- ❌ Don’t forget stamp duty — you may be exempt, but it depends on your state and purchase price
- ❌ Factor in ongoing costs — like strata fees, council rates, insurance, and maintenance
Looking Ahead: A Major Change Coming in 2026
From 1 January 2026, the Australian Government will expand eligibility for the First Home Guarantee and similar schemes to allow any two applicants to apply together — not just married or de facto couples.
This means:
- Friends
- Siblings
- Parents and adult children
…can team up to buy a home under the same LMI-free structure. It’s a big shift that opens up co-ownership opportunities and could make home ownership more accessible for many Australians priced out on a single income.
If you’re planning a purchase in 2026 or beyond, start the conversation early — whether that’s with a family member or a close friend who might be a future co-owner.
View the Full Breakdown
Want to dive deeper into the numbers and scheme details? We’ve explained it all in the video breakdown here: