First Home Buyer 5% Deposit Options in Australia (2026)
Buying a home with a 5% deposit is possible in Australia through several pathways. The most popular is the federal government’s First Home Guarantee (FHBG) — which allows eligible buyers to purchase with 5% deposit and no Lenders Mortgage Insurance (LMI). Without the scheme, buying with 5% requires paying LMI, which can add $10,000–$40,000+ to the cost of borrowing.
Your 5% Deposit Options at a Glance
| Option | LMI Payable? | Income Cap | Property Price Cap | Who It Suits |
|---|---|---|---|---|
| First Home Guarantee (FHBG) | No | $125k single / $200k joint | State-specific (e.g., $900k NSW, $800k VIC) | Most eligible first home buyers |
| Regional First Home Buyer Guarantee | No | $125k single / $200k joint | Lower state-specific regional caps | Regional buyers |
| Family Home Guarantee (2% deposit) | No | $125k | State-specific | Single parents; 2% not 5% |
| Lenders Mortgage Insurance (LMI) | Yes — you pay it | No cap | No price cap | Buyers above FHBG income/price caps |
| Keystart (WA only) | No | WA-specific income cap | WA-specific | WA residents; 2% deposit available |
| Guarantor loan | No LMI | No income cap | No price cap | Buyers with supporting family equity |
Option 1 — First Home Guarantee (FHBG)
The FHBG is administered by Housing Australia and allows eligible first home buyers to purchase with 5% deposit without paying LMI.
How it works: The government guarantees up to 15% of the property value to the lender. This effectively means the lender has an 80% LVR assurance (your 5% + 15% government guarantee) — eliminating the need for LMI.
Key criteria:
- Australian citizen or permanent resident
- First home buyer (never previously owned residential property in Australia)
- Income: ≤$125,000 (single) or ≤$200,000 (couple/joint)
- Property price: within state cap (see table below)
- Must intend to occupy as principal place of residence
Property price caps (2026):
| State | Capital City / Non-Regional | Regional |
|---|---|---|
| NSW | $900,000 | $750,000 |
| VIC | $800,000 | $650,000 |
| QLD | $700,000 | $550,000 |
| WA | $600,000 | $450,000 |
| SA | $600,000 | $450,000 |
| TAS | $600,000 | $450,000 |
| ACT | $750,000 | N/A |
| NT | $600,000 | $550,000 |
LMI saving estimate by purchase price:
| Purchase Price | LMI at 95% LVR (without scheme) | Saving via FHBG |
|---|---|---|
| $500,000 | ~$11,000–$15,000 | ~$11,000–$15,000 |
| $650,000 | ~$16,000–$22,000 | ~$16,000–$22,000 |
| $800,000 | ~$23,000–$32,000 | ~$23,000–$32,000 |
| $900,000 | ~$30,000–$40,000 | ~$30,000–$40,000 |
Option 2 — Paying LMI (Without the FHBG)
If you don’t meet the FHBG criteria — because your income exceeds the cap, the property exceeds the price cap, or all places are taken — you can still buy with 5% deposit by paying LMI.
LMI is a one-off premium that protects the lender (not you) in case of default. It can be:
- Paid upfront as a cash lump sum
- Capitalised onto your loan balance (most common) — increasing the total loan amount
LMI is not all bad: Despite being a significant cost, LMI allows buyers to enter the market sooner — capturing capital growth they might otherwise miss waiting to save a 20% deposit. In markets where annual price growth exceeds the LMI cost, paying LMI to enter earlier can make mathematical sense.
Option 3 — Keystart (WA Only)
Western Australia’s Keystart loan program allows eligible WA residents to purchase with as little as 2% deposit and no LMI. Keystart is a direct lender (not broker-distributed) and has its own income and purchase price caps.
For WA first home buyers who don’t have 5%, Keystart’s 2% minimum deposit is accessible in a way the FHBG is not.
Option 4 — Guarantor Loan
A parent or family member with equity in their own property can act as guarantor — effectively providing additional security to the lender. This allows the buyer to purchase with minimal or no cash deposit without paying LMI.
Key risks to guarantors: The guarantor’s property is at risk if the borrower defaults. This is a substantial commitment. See going guarantor risks for full detail before proceeding.
Is 5% Enough? What You Also Need Beyond the Deposit
A 5% deposit is the minimum for the FHBG — but you still need funds for upfront costs:
| Cost | Amount |
|---|---|
| Stamp duty | $0 (if under exemption threshold) to $40,000+ |
| Conveyancing/legal | $1,500–$3,500 |
| Building and pest inspection | $400–$900 |
| Loan establishment fee | $0–$600 |
| Moving costs | $800–$2,500 |
| Recommended buffer | 3–5% of purchase price |
Practical minimum savings target for a $600,000 purchase (with FHBG and stamp duty exemption):
- 5% deposit: $30,000
- Costs and buffer: ~$10,000–$15,000
- Total: ~$40,000–$45,000
Is a 5% Deposit Strategy Right for You?
Consider a 5% deposit if:
- You are eligible for the FHBG (income and price caps met)
- Property prices in your target area are growing and waiting to save more could cost you more in capital growth
- Your monthly repayments at the higher loan amount are comfortably within budget (including 3% buffer for rate rises)
Consider waiting for a larger deposit if:
- You don’t qualify for the FHBG and LMI would add $20,000–$40,000 to your loan
- Your monthly repayments at 95% LVR are at the absolute limit of serviceability
- You expect rates to rise further and want maximum buffer
Frequently Asked Questions
Can I buy a house with a 5% deposit in Australia? Yes — through the First Home Guarantee (if eligible), via a guarantor arrangement, or by paying Lenders Mortgage Insurance on a standard 95% LVR loan.
How much is LMI on a 5% deposit? LMI at 95% LVR depends on the loan size. On a $600,000 property, LMI is approximately $16,000–$22,000. The First Home Guarantee eliminates this cost for eligible buyers.
What is the maximum purchase price for the 5% deposit First Home Guarantee? Varies by state — from $600,000 (WA, SA, TAS, NT) to $900,000 (NSW). See the property price cap table above.
Can I combine a 5% deposit with the FHOG? Yes — if you are buying a new build that qualifies for the FHOG, the $10,000–$30,000 grant can reduce your effective cash outlay alongside the FHBG.
Related Guides
- First Home Guarantee Explained
- How Much Deposit Do I Need?
- Going Guarantor on a Home Loan
- Saving for a Deposit
- First Home Buyer Hub
This article provides general information only. Scheme eligibility, LMI costs and property price caps are subject to change. For advice tailored to your situation, speak with a licensed mortgage broker or financial adviser. Find one through MoneySmart.
Disclosure: This article compares government schemes and lenders generally. Peakifi does not receive commissions from any lender, insurer or government scheme administrator.