The 5% First Home Buyer Scheme – What You Need to Know 🔎
Iain-Sight Series: Episode 3 (Part 2 of First Home Buyer’s Series)
One of the most common things I hear from first home buyers is:
“There’s no way I can save a 20% deposit.”
And the good news is — you often don’t have to.
In this episode of Iain-Sights, I break down the 5% First Home Buyer Scheme, how it actually works, and the things you really need to understand before relying on it.
What is the 5% First Home Buyer Scheme?
The scheme (officially known as the First Home Guarantee) allows eligible first home buyers to:
Purchase a home with as little as 5% deposit
Avoid paying Lenders Mortgage Insurance (LMI) (See this blog for a full breakdown of what LMI is)
The government guarantees the difference between your deposit and 20% — you still have a normal home loan and normal repayments, (however they may be higher than someone with a 20% deposit).
What the Scheme Helps With (and What It Doesn’t)
It helps with:
Lower upfront deposit
Avoiding LMI (which can save tens of thousands)
It doesn’t help with:
Borrowing more money
Lower repayments
Getting around serviceability checks (How much you can afford per month)
This is where a lot of people get caught out.
The Big Thing People Miss: Borrowing Capacity
The scheme only helps with the deposit, not whether the loan is affordable.
Lenders still assess:
Your income
Your living expenses
Existing debts (HECS, car loans, credit cards)
Interest rate buffers
You can have a 5% deposit ready to go and still not qualify — which is why checking numbers early is so important.
Property Price Caps Matter
The scheme has strict property price limits, which vary by location. (Reach out if you want to know for your area).
If the purchase price is even $1 over the cap, the scheme doesn’t apply — no exceptions.
This is especially important in regional areas where prices can vary street by street.
Is the 5% Scheme Right for You?
It can be a great option if:
You have solid income
You’re short on deposit, not serviceability
You want to avoid LMI and get in sooner
It’s not always the best move for everyone — sometimes waiting, saving more, or using a different strategy puts you in a stronger long-term position. Also note - It cannot be used for investment purposes, you must live in the property after purchase.
If you’re in Kilmore, Broadford, Wallan, or anywhere across regional Victoria and you’re thinking about buying your first home, I’m always happy to have a no-pressure chat and help you work out the right next step!
Thanks :)
Iain (& Dave)
Mortgage Muster