Buying your first home in Victoria has become increasingly difficult – but with the expanded Australian Government 5% first home buyer deposit scheme, more buyers can now enter the market sooner and with far less upfront cost. The first home buyer deposit scheme is a significant federal initiative designed to support eligible home buyers in achieving home ownership sooner.
Formerly known as the Home Guarantee Scheme, the program facilitates the purchase of a home with a significantly reduced deposit, helping to bridge the gap for those who might otherwise be unable to enter the housing market.
Whether you’re looking at a townhouse, a city apartment, or building on vacant land, the first home buyer deposit scheme is designed to help you secure a home that fits your lifestyle and budget. But with demand surging across the country, new challenges have emerged – particularly long mortgage processing times that can jeopardise contracts for unsuspecting buyers.
Since its inception in 2020, the first home buyer deposit scheme has supported over 240,000 Australians into home ownership, serving as a transitional support mechanism. From 1 October 2025, the Federal Government made sweeping changes:
- No income caps
- No loan mortgage insurance (LMI)
- Higher price caps
- Available to all eligible first home buyers and single parents/legal guardians.
Whether you’re looking at a townhouse, a city apartment, or building on vacant land, the first home buyer deposit scheme is designed to help you secure a home that fits your lifestyle and budget. But with demand surging across the country, new challenges have emerged – particularly long mortgage processing times that can jeopardise contracts for unsuspecting buyers.
How does the first home buyer deposit scheme work?
Traditionally, home buyers need a deposit of 20% of the Property Value to obtain a home loan without requiring Lenders Mortgage Insurance (LMI). LMI is insurance that protects the lender if a borrower defaults, and the borrower pays the cost, which helps the lender recover losses. Under the Australian Government 5% first home buyer deposit scheme, eligible buyers only need a minimum deposit of 5% of the property value.
- You must meet eligibility criteria (first home buyer; or single parent/legal guardian)
- You save the minimum deposit – 5% or 2%
- The government guarantees up to 15% of the property value
- A participating lender approves a home loan for up to 95-98% of the property value
- You buy and move into your home.
Housing Australia provides a guarantee to the participating lender. This guarantee enables the home buyer to borrow up to 95% of the property value without the requirement of paying LMI. This effectively helps home buyers purchase a home sooner and with lower upfront costs.
It is vital for applicants to understand the nature of the guarantee: it is a legal arrangement between Housing Australia and the participating lender, and it protects the lender, not the borrower. The guarantee is not a cash payment to the buyer or a deposit for the home. In the event the borrower defaults and selling the property does not cover the outstanding mortgage, Housing Australia guarantees to pay the lender a shortfall, up to a pre-agreed limit of 15% of the property value.
Crucially, the guarantee does not assist with missed loan payments, prevent default, or stop the lender from taking action against the borrower, including repossessing and selling the property.
The first home buyer deposit scheme: expansion and key changes as at 1 October 2025
The expanded first home buyer deposit scheme now supports two streams:
1. The general stream: This stream supports eligible first home buyers, and those who have not owned a property in Australia in the last 10 years, to buy a home with a deposit as low as 5%.
2. The single parent stream: This supports eligible single parents or legal guardians with at least one dependent. Participants in this stream can buy a home with a deposit as low as 2% and are not required to be first home buyers.
The first home buyer deposit scheme underwent a substantial expansion and relaunch on 1 October 2025, aimed at making it easier for more Australians to buy a home. Key changes introduced under the expanded first home buyer deposit scheme include the removal of income caps for eligible applicants, offering an unlimited number of places, and increasing the property price caps across jurisdictions to reflect market growth.
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Eligibility requirements for home buyers
To qualify for the first home buyer deposit scheme and be considered an eligible home buyer, applicants must meet several criteria relating to their personal circumstances:
- Deposit: Applicants must have saved a minimum deposit of 5% of the property value, but less than 20%. If an applicant has 20% or more saved after covering other purchase costs (e.g., stamp duty), the home loan will not be eligible
- Prior property ownership: General stream applicants must be first home buyers or must not have held an interest in any property in Australia—whether residential or commercial, for investment or owner-occupied purposes—in the 10 years prior to the home loan date
- Citizenship and residency: Applicants (or both in a joint application) must be an Australian citizen or permanent resident at the home loan application date
- Minimum age: Applicants must be at least 18 years old
- Owner-occupier: The applicant must buy or build a home to live in, as investment properties are not eligible.
The first home buyer deposit scheme is available to individuals or joint applicants of two people (such as partners, friends, or family members), but home loans with three or more borrowers do not qualify.
Why Victorian buyers benefit most from the first home buyer deposit scheme?
Victoria’s rising property values have made saving a 20% deposit nearly impossible for many first home buyers.
Key advantages for Victorian buyers include:
- Only a 5% deposit needed: A $950,000 Melbourne home now only requires a deposit of $47,500
- No Lenders Mortgage Insurance (LMI)
- No income limit: High-earning first home buyers can now access the first home buyer deposit scheme
- Unlimited places: Everyone who qualifies can apply and proceed immediately
- Expert Tip
Never sign a Contract of Sale or S32 before getting it reviewed.
With banks taking longer to approve loans, buyers must negotiate:
- A longer finance period
- A reduced deposit
- Building/pest inspection clauses
- Flexible settlement terms
These terms must be added before signing – you cannot change them later.
Eligible properties and price caps
The property must be a residential property, and both the purchase price and the property value (as assessed by the participating lender) must be at or below the location’s price cap. Eligible properties include existing homes, house and land packages, vacant land with a separate contract to build a home, or ‘off-the-plan’ properties. For new builds involving vacant land and a separate contract, the combined land purchase price and build cost must stay under the cap.
Property price caps vary significantly. For instance, in New South Wales, the cap is $1,500,000 for the capital city and regional centres, while in Victoria the cap is $950,000 for the capital city and Geelong. Although these caps have been raised significantly, they still fall below the median house values in every capital city, though median unit values generally remain below the new limits.
Bank delays: the hidden risk for first home buyers
Since the first home buyer deposit scheme expansion, Australia’s major lenders have been overwhelmed.
- Commonwealth Bank (CBA) approval times have blown out from 4 days to 16 days, with extra delays if documents need rework
- National Australia Bank (NAB), Westpac (WBC) and ANZ are also experiencing significant delays
- Some second-tier lenders offering good rates are taking even longer
These delays can jeopardise a buyer’s ability to:
- Meeting finance deadlines
- Make competitive offers
- Secure the property they want.
A extended approval time leaves little room for errors or delays. The participating lender assesses eligibility based on the first home buyer deposit scheme’s criteria and their own credit policies.
As part of the application, home buyers must provide a completed and signed Home Buyer Declaration, which is a statutory declaration affirming they meet all criteria. Providing false or misleading information in this declaration is a serious offence, potentially leading to criminal penalties and civil actions, including a maximum penalty of four years imprisonment.
Ongoing eligibility requires the property to remain owner-occupied. If an owner converts the property into a rental or stops living in it without an exemption, the guarantee may cease to apply, potentially requiring the borrower to pay LMI or other significant costs relating to their loan.
The expansion of the first home buyer deposit scheme on 1 October 2025 led to a massive influx of applications, creating significant processing bottlenecks across the lending sector. Mortgage brokers reported that the rush of first home buyers taking up the federal government’s scheme has blown out borrowing processing times, particularly at major lenders like the Commonwealth Bank, National Australia Bank, Westpac, and ANZ.
For some, the time required for a file to be picked up at CBA surged from four business days to 16 business days. These delays, compounded by the usual seasonal rush, risk putting in jeopardy people’s ability to make timely offers on homes.
Looking to Buy in Melbourne?
Understanding the eligibility criteria for the first home buyer deposit scheme and other government grants can make your journey to homeownership much easier.
If you need assistance with your property purchase, our property lawyers and conveyancers are here to support you throughout the process.
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