What is the First Home Buyer 5% Deposit Scheme?

The scheme allows eligible first home buyers to purchase a property with a 5% deposit and avoid paying Lenders Mortgage Insurance (LMI). This can save buyers between $40,000 and $60,000 depending on the property value.

When does the 5% Deposit Scheme start?}

The scheme will now begin in October 2025, three months earlier than originally planned. Buyers who are ready by October can benefit immediately, while others may face higher property prices due to increased demand.

‍

Government Brings Forward the 5% First Home Buyer Deposit Scheme

‍

Introduction

The Federal Government has made a major change that impacts anyone looking to buy property in the next 12 months. The First Home Buyer 5% Deposit Scheme was originally set to begin on 1 January 2026. It will now start in October 2025.

This means eligible buyers will only need a 5% deposit to purchase a home, and they will not need to pay Lenders Mortgage Insurance (LMI). For many Australians, this is the difference between waiting years to save and entering the market now.

If you are a first home buyer looking to take advantage of this scheme, Nexus Wealth Partners can help you prepare and secure the right loan.

‍

How the 5% Deposit Scheme Works

The scheme allows first home buyers to:

Purchase a property with a deposit as low as 5%
Avoid paying LMI, saving between $40,000 and $60,000 depending on the property value
Access higher property price caps than in earlier versions of the scheme

‍

Property Price Caps by City

Sydney: Up to $1.5 million
Melbourne: Up to $950,000
Brisbane: Up to $1 million

This opens opportunities in markets where prices were previously too high for first home buyer schemes.

‍

‍

Example of the Savings

If a buyer wanted to purchase a $1.5 million property in Sydney:

Standard 20% deposit: $300,000
With 5% scheme deposit: $75,000
LMI savings: $40,000 to $60,000

This difference allows buyers to access the market years earlier than if they waited to save a full deposit.

‍

Why the Timing Matters

The timing of this announcement has created both opportunities and challenges:

Buyers ready in October 2025 benefit immediately.
Those waiting until January 2026 could face higher property prices due to increased demand.
Investors and current buyers may try to purchase before October, anticipating price rises.

This change has shifted market expectations. Property demand will likely increase earlier than predicted.

‍

Impact of Interest Rate Cuts

Recent interest rate cuts have already lifted borrowing capacity. With further cuts expected by the end of 2025, borrowing limits will rise again. Combined with the 5% scheme, this will put more buyers into the market with greater purchasing power.

For first home buyers, this is good news if they are ready now. For others, the competition for properties could drive prices higher in the coming months.

‍

Who Benefits Most

The scheme is designed to support first home buyers, but the real winners are:

Buyers who are ready to purchase in October 2025
Those with savings already in place for a 5% deposit
Buyers who want to avoid LMI and use those savings towards their loan or property costs

Those still saving for their deposit might miss out, as price rises between October and January could make properties less affordable.

‍

Risks to Consider

While the scheme provides opportunities, there are risks:

Rising property prices could cancel out deposit savings.
Limited places in the scheme mean not all buyers will qualify.
Buyers entering with a 5% deposit will have higher loan-to-value ratios, increasing debt risk if interest rates rise again in the future.

It is important for first home buyers to weigh both the benefits and risks before committing.

‍

‍

Strategic Opportunities for Buyers

For those considering buying, here are strategies to prepare:

Have your deposit ready before October 2025.
Speak to your accountant or mortgage broker about borrowing capacity.
Secure pre-approval to move quickly once the scheme begins.
Consider the impact of future price rises when setting your budget.

Acting early could help buyers take advantage of the scheme while keeping control of costs. Nexus Wealth Partners can help you secure pre-approval and structure your loan before the scheme opens.

‍

The Market Outlook

With the scheme brought forward, expect:

Higher demand from October 2025 onwards
Price growth in major cities like Sydney, Melbourne, and Brisbane
Increased competition for properties under the scheme caps
Stronger investor activity anticipating buyer demand

The government's decision to bring the scheme forward has shifted property market dynamics for the rest of 2025.

‍

How Nexus Wealth Partners Supports First Home Buyers

Buying your first property is more than finding a home. It involves loan structuring, financial planning, and long-term budgeting. Nexus Wealth Partners helps you by:

Reviewing borrowing and savings strategies
Explaining how much deposit you need and how to manage repayments
Advising on cash flow and budgeting for mortgage costs
Structuring loans with lenders to achieve long-term savings
Providing financial guidance so you enter the property market with confidence

We help you prepare not just to buy your home, but to manage it sustainably in the years ahead.

For tax and structuring advice on your property purchase, our accounting division, Trinity Accounting Practice, can also assist with stamp duty planning, first home buyer concessions, and long-term tax strategies.

‍

Key Takeaways

The First Home Buyer 5% Deposit Scheme begins in October 2025, not January 2026.
Buyers only need a 5% deposit and pay no LMI.
Property caps are higher, making more homes eligible across Australia.
Buyers who are ready by October benefit most, while those still saving risk facing higher prices.
Nexus Wealth Partners provides financial advice and lending support to help first home buyers succeed.

Book a consultation with Nexus Wealth Partners today to get started.

Nexus Wealth Partners

Mortgage Broker in Beverly Hills, Sydney

Phone: 0478 666 333

Address: 159 Stoney Creek Road, Beverly Hills NSW 2209

Website: nexuswealth.au

Weekend and after-hours appointments available

Book online now

For accounting, tax, and business advisory services, visit Trinity Accounting Practice.

Our Virtual CFO division, VCFO Australia, provides strategic financial management, budgeting, forecasting, and compliance support for growing businesses and not-for-profits.

Learn more about what we offer

Discover the industries we specialise in

Disclaimer: Information provided on this website is intended as a general overview only and does not replace professional advice tailored to your personal circumstances.

‍