What does the 5 percent deposit scheme mean for first home buyers?

McGrath Aspley
10/11/2025 | 3 MIN READ

With rising property prices across Queensland, getting onto the property ladder has started to feel out of reach for many Australians. But with the Federal Government’s 5 percent deposit for first home buyers scheme now in effect, there are more options available.

So what exactly does this scheme mean for first home buyers? And what should you still consider before diving into the property market?

What Is the 5 Percent Deposit Scheme?

Traditionally, lenders would require a 20% deposit when purchasing a property. For a $750,000 home, that would mean a $150,000 deposit – an amount that’s often out of reach for many first-time buyers.

The 5 percent deposit for first home buyers scheme allows eligible purchasers to buy a home with as little as 5% of the property’s value saved as a deposit, which would equate to $37,500 for a $750,000 home.

The Government then guarantees the remaining 15%, allowing you to avoid Lenders Mortgage Insurance (LMI). This is something that usually applies when you have a deposit of less than 20% and which could otherwise cost you up to 5% of the total amount borrowed.

Who is eligible for the 5 percent deposit scheme?

To qualify for the scheme, you’ll need to meet certain criteria:

  • You must be an Australian citizen and at least 18 years old
  • You must be a first home buyer
  • You must live in the home you purchase (investment properties are excluded)
  • The value of the property must not exceed the specified caps for each state and region. In Queensland, this cap is $1,000,000 for Brisbane and regional centres and $700,000 for all other areas

Other considerations: it’s not just about the deposit

While the 5 deposit first home buyer scheme lowers the entry barrier, it’s still important to consider the bigger financial picture. Here are some of the other costs and considerations to take into account.

1. Borrowing Power

Your borrowing capacity is influenced by your income, existing debts, and credit history. Just because you qualify for the scheme doesn’t mean the bank will approve the loan amount you’re hoping for.

2. Home Loan Repayments

A smaller deposit means a larger loan. For example, if you only put down 5%, your monthly repayments will be higher than if you had a 20% deposit. It’s essential to budget carefully and factor in interest rate fluctuations.

3. Upfront and Ongoing Costs

Your first home buyer deposit is just the beginning. You may also need to budget for:

  • Stamp duty (although exemptions and concessions may apply)
  • Legal and conveyancing fees
  • Building and pest inspections
  • Moving costs and initial repairs

Tips for first home buyers

While the introduction of the scheme will be welcome news for many, it’s important to play it smart. Before making a decision, you should consider:

  • Speaking with a mortgage broker to assess your eligibility and secure pre-approval
  • Setting a realistic budget that includes all hidden costs
  • Seeking support from a team who understands the local landscape

Final thoughts

The 5 percent deposit for first home buyers scheme is a game-changer for many aspiring homeowners. But like any major decision, it’s incredibly important to look at the full picture.

If you’re looking at buying your first home, the experienced team at McGrath Aspley can support your property journey. Contact us today to chat with one of our local property experts.

Disclaimer
All information is general and not intended as a substitute for professional advice.