I’ve had a lot of people ask me lately about the Government’s new Home Guarantee Scheme. You’ve probably heard the headlines: “Buy with just 5% deposit!” and “No Lenders Mortgage Insurance!”
I’ve had a lot of people ask me lately about the Government’s new Home Guarantee Scheme. You’ve probably heard the headlines: “Buy with just 5% deposit!” and “No Lenders Mortgage Insurance!”
Sounds amazing, right? But let’s dig into what it actually means for you as a buyer—or even as a seller.
How the Scheme Works (Plain English)
Normally, banks want you to put down at least 20% deposit. If you don’t, they slap you with Lenders Mortgage Insurance (LMI)—and that can be tens of thousands of dollars out of your pocket.
This scheme changes that.
Here’s the deal:
- You put in 5% deposit.
- The Government guarantees up to 15% of the property’s value to the bank.
- The bank now feels comfortable lending you the other 95%—without charging you LMI.
Important point: the guarantee protects the lender, not you. If you default and the property is sold for less than what’s owed, the Government covers the bank’s shortfall (up to that 15%). You still lose the property and remain responsible for any debt beyond the guarantee.
What’s Changing from 1 October 2025
From this date, things are opening up big time:
- Income caps? Gone. Doesn’t matter what you earn.
- Property caps lifted to match the real market:
- Sydney: up to $1.5m
- Melbourne: $950k
- Brisbane: $1m
- No limit on places. Previously, there was a quota. Now, if you qualify, you’re in.
Who Can Use It?To qualify you must:
Be an Australian citizen or permanent resident, over 18.
- Be a first-home buyer (or not owned for at least 10 years).
- Plan to live in the property (not an investment).
- Have at least a 5% genuine deposit saved.
The Big Question: Does It Make Borrowing Easier?
Here’s where I need to be blunt: No, it doesn’t.
This scheme only helps you with the deposit side of things. It doesn’t relax the bank’s affordability checks.
Banks still have to make sure you can afford the loan under strict rules. They test your repayments as if interest rates were 3% higher than today.
That means if today’s mortgage rate is 5.75%, they’ll assess you at almost 9%. It’s called the serviceability buffer. And it makes a big difference.
Let Me Give You a Real Example
Say you’re buying at $1.2m in Sydney.
- Deposit: $60k (5%)
- Loan: $1.14m
- On the bank’s calculator (with the buffer), repayments tested at: ~$9,000/month
- That means a household income of around $300k+ per year to pass the test.
So yes—you can buy with 5%… but only if your income stacks up.
What Does This Mean for the Market?
- Buyers: More people can now step in with smaller deposits. That’s good news, but expect competition. Stock around the $900k–$1.5m range will get hotter.
- Sellers: If your property sits in this price band, you’ve just got a bigger pool of qualified buyers. That usually translates to stronger sale prices.
My Take as an Agent
This scheme is a great tool. It removes one of the biggest barriers to entry—the deposit—and wipes out LMI, which is dead money for buyers.
But here’s the trap: don’t assume you can buy more house than you can afford. The banks are still the gatekeepers, and they’re not bending the rules.
Final Word
If you’re a buyer, talk to a broker early, know your numbers, and don’t stretch yourself to the absolute limit just because the scheme lets you in with 5%.
If you’re a seller, especially in Sydney’s $1.2m–$1.5m market, this is a tailwind you can take advantage of.
