What Is the 5% Deposit Scheme?

The Home Guarantee Scheme allows eligible buyers to purchase a property with just a 5% deposit, while avoiding lender’s mortgage insurance (LMI) — which can save you anywhere from $10,000 to $30,000, depending on the property.

Unlike some government schemes, the government doesn’t take a share of your property. They just act as the guarantor on the remaining 15% of your deposit.

It’s essentially the bank of mum and dad – but it’s the government instead.

The Key Changes (as of 1 October 2025)

The scheme has been around for a few years, but from 1 October, a few big changes have taken effect:

• ✅ Income caps removed – You no longer need to be under a certain income to qualify.
• ✅ Property price cap increased – In Melbourne, the cap’s gone from $800,000 to $950,000.
• ✅ No more “limited spots” – Previously capped at 35,000 places per financial year. Now, it’s effectively unlimited.
• ✅ Regional Guarantee rolled in – You no longer need to live in a specific postcode to qualify for a regional home.

That’s a lot of barriers suddenly removed. And naturally, it’s got people excited — and a little bit panicked.

Who Can Use It Now?

Here’s where it gets interesting.
You don’t have to be a first-time buyer. You just need to have not owned property in the last 10 years.

So, that includes:

• First-time buyers
• Renters trying to escape the cycle
• People who sold years ago and are getting back in

It’s a much bigger pool than before — and that’s where the market speculation starts to creep in.

The Catch Most People Don’t Know About

You don’t need to rush and buy before 1 October to access the new scheme.
What actually matters is the loan application date – not your purchase date.

So yes, you can buy a property today, but if your loan is submitted after 1 October, you’ll still be eligible for the new scheme rules (no income cap, higher price limit, no LMI).

And if you’re applying with a bank that requires finance approval sooner, you can even apply with LMI in place now, and then roll it over to the scheme later — once the new rules kick in.

That flexibility is important. Don’t feel pressured into overpaying or rushing into a deal you’re unsure of. Speaking with experienced buyers agents in Melbourne can help make sure you’re not missing anything before you commit.

Will It Create a Market Spike?

Short-term? Probably, yes.
We’re already seeing more interest, more buyer activity, and more meetings booked in — all by people trying to get ahead of the 1 October changes.

But here’s the thing:

• Some buyers will overpay just to “get in before the rush”.
• Others will sit back, thinking the market’s about to go wild.

In reality, it’ll probably be a short spike, followed by a return to balance. The media buzz has created urgency, but the fundamentals haven’t changed.
Supply is still tight. Melbourne’s market has been flat for a few years. We were due for a bounce regardless.

Should You Buy With Just 5%?

This is the tough one.
Personally, I’m not a huge fan of buyers taking on a 95% loan. It’s a big amount to borrow, and the risk is higher — especially if interest rates change or prices dip in the short term.
But I also get it.
If you’re renting, and struggling to save the full 20% (plus stamp duty), then the scheme can give you a much-needed leg up. If you buy well, and hold long-term, it can absolutely be worth it.

Just remember:

• 5% deposit means you need to be really clear on what you’re buying.
• You can’t afford to “test the market” with a dud.
• And ideally, the property needs to grow, so you can build equity fast.

If you’re not sure where to start, getting help from a Melbourne buyers advocate can make sure you’re buying smart and not overextending.

Common Mistakes Buyers Are Making

Here are some of the big ones we’re seeing right now:

• ❌ Rushing to buy before 1 October – thinking they’ll miss out.
• ❌ Not understanding their contract clause – or whether their finance date aligns with scheme eligibility.
• ❌ Assuming stamp duty is fixed at $0 under $600K – when in reality, it’s a sliding scale.
• ❌ Focusing too much on incentives – and not enough on whether the property is actually a smart long-term buy.
• ❌ Not speaking to a broker early.

As David put it, “You don’t know what you don’t know.” It’s free to have a chat and understand your options. But too many people leave it too late, or worse – try to wing it. That’s where speaking with a private negotiation expert or auction bidding specialist in Melbourne can make all the difference.

Final Thoughts

The 5% deposit scheme has the potential to open the door for more buyers – and that’s a good thing. But like any tool, it needs to be used properly.
If you’re in a good position financially and emotionally to buy a home, it could help you avoid the LMI sting and get in sooner.
Just don’t fall into the trap of thinking you have to buy right now. Take your time, buy the right property, and don’t force it because of a deadline.
The wrong property at the right time is still the wrong property.

Thinking of using the scheme and not sure where to start?

I’m happy to help you run through your options — and make sure you’re not just eligible, but also set up to make a smart buy.
You can get in touch with our team of experienced buyers agents in Melbourne to discuss your situation, or explore our auction bidding and private negotiation services for a smoother buying process.