When to Use the 5% Deposit Scheme or Help to Buy

Which Federal Low Deposit Program Should You Use?

The Australian Government 5% Deposit Scheme and Help to Buy both let you purchase with a small deposit, but only one removes the lenders mortgage insurance bill. The 5% Deposit Scheme guarantees the shortfall between your deposit and 20% of the property value so no LMI is charged. Help to Buy has the government take an equity stake in your home in exchange for reducing the amount you need to borrow. The scheme you choose depends on how much you earn, where you want to buy, and whether you want full ownership from day one.

Consider a buyer in Newcastle looking at a townhouse valued at $650,000. Under the 5% Deposit Scheme, they put down $32,500 and borrow $617,500 with no LMI. Under Help to Buy, they could contribute a 2% deposit of $13,000 and the government takes a 30% equity share worth $195,000, leaving a loan of $442,000. The second option reduces monthly repayments but requires the buyer to buy back the government's share later or share any capital gain when they sell. If that buyer earns $110,000, they are locked out of Help to Buy and the 5% Deposit Scheme becomes the only option.

Income Limits Decide Which Program You Can Access

Help to Buy caps household income at $100,000 for individuals and $160,000 for couples or single parents. The 5% Deposit Scheme has no income cap. If you earn above the Help to Buy threshold, the 5% Deposit Scheme is your only federal low deposit path. Both schemes are available through participating lenders, and you will need to meet standard lending criteria including serviceability and credit history. You can read more about eligibility requirements on the first home buyers guide.

In our experience, buyers who earn just over the Help to Buy cap often assume they have missed out on government support entirely, but the 5% Deposit Scheme is built for exactly that situation. You still avoid LMI and you retain full ownership, which matters when property values rise.

Property Price Caps Vary by Location and Scheme

The 5% Deposit Scheme sets price caps based on whether you are buying in a capital city, a regional centre, or another area. In New South Wales, the cap is $1,500,000 for Sydney and regional centres such as Newcastle and Wollongong, and $800,000 for other areas. In Victoria, the cap is $950,000 for Melbourne and regional centres, and $650,000 elsewhere. Queensland caps are $1,000,000 for Brisbane and regional centres, and $700,000 for other areas. Western Australia caps are $850,000 for Perth and $600,000 for the rest of the state. South Australia caps are $900,000 for Adelaide and regional centres, and $500,000 elsewhere. Tasmania caps are $700,000 for Hobart and regional centres, and $550,000 for other areas. The ACT cap is $1,000,000 across the territory. Northern Territory caps are $750,000 for Darwin and $600,000 for the rest of the Territory.

Help to Buy uses different price caps set by postcode, and they are generally lower than the 5% Deposit Scheme caps. If the property you want to buy exceeds the Help to Buy cap but sits under the 5% Deposit Scheme cap, the choice is made for you. Both the purchase price and the lender's valuation must fall within the applicable cap, so if a property is listed at $695,000 in regional Victoria but the bank values it at $660,000, you stay eligible under the $650,000 cap for that area.

How Equity Sharing Changes What You Owe Later

Help to Buy reduces your loan size by having the government take up to 30% equity in an established home or up to 40% in a new home. That equity share must be repaid when you sell, refinance, or reach the end of the scheme term. If the property increases in value, the government's share of that gain increases proportionally. If the property falls in value, the government's share falls too.

As an example, a buyer in Adelaide purchases an established home for $500,000 under Help to Buy with a 2% deposit of $10,000. The government takes a 30% equity share worth $150,000. The buyer borrows $340,000. Five years later, the property is worth $600,000. The government's 30% share is now worth $180,000. If the buyer wants to refinance and buy out the government, they need to pay $180,000 or sell the property and split the proceeds proportionally. The buyer's equity at sale would be $600,000 less the outstanding loan balance, less $180,000 to the government, less selling costs.

Under the 5% Deposit Scheme, the same buyer would borrow $475,000 with a $25,000 deposit and no LMI. They own the property outright from settlement. When the property reaches $600,000, the full $100,000 gain belongs to them. The trade-off is higher monthly repayments because the loan amount is larger. You can explore how deposit size affects your borrowing capacity using the borrowing capacity calculator.

New Homes Attract a Larger Government Stake Under Help to Buy

Help to Buy contributes up to 40% equity for a new home compared to 30% for an established home. That larger contribution reduces your deposit and loan size further, but it also means a larger share of future value goes back to the government. The 5% Deposit Scheme does not distinguish between new and established homes. Both are eligible as long as the property is residential and you intend to live in it.

Buyers targeting new apartments or townhouses in growth corridors sometimes combine Help to Buy with state government grants for new homes. In Queensland, a new home valued under $750,000 attracts a $30,000 first home owner grant. That grant can be used as part of the deposit under Help to Buy, reducing the cash you need to bring to settlement. The 5% Deposit Scheme also allows state grants to be used as part of your deposit.

Combining Federal and State Programs

The 5% Deposit Scheme can be used alongside state and territory stamp duty concessions and grants. Help to Buy can also be combined with most state incentives, but it cannot be used at the same time as the 5% Deposit Scheme. You pick one or the other.

In Victoria, a first home buyer purchasing an established home valued at $580,000 qualifies for full stamp duty exemption. Under the 5% Deposit Scheme, they put down $29,000 and borrow $551,000 with no LMI and no duty. Under Help to Buy, they could contribute a smaller deposit and have the government take equity, and still receive the same duty exemption. The stamp duty saving applies regardless of which federal program you use, as long as you meet the state eligibility rules. More detail on state concessions is covered in the first home buyers guide.

Tasmania no longer offers a stamp duty exemption for established homes from 1 July 2026, but the $20,000 grant for new homes remains available. Buyers using either federal scheme in Tasmania should confirm current state incentives before signing a contract.

When Holding Full Ownership Matters More Than Lower Repayments

If you expect the property to increase in value significantly, or if you want the flexibility to renovate, refinance, or sell without needing to account for a government equity partner, the 5% Deposit Scheme gives you full control from day one. Help to Buy works when lower repayments now are more important than retaining all future capital growth, or when your income sits comfortably under the cap and you are confident you can buy out the government's share later.

You should also consider loan features. The 5% Deposit Scheme is available through a wide panel of participating lenders, and depending on the lender you may have access to offset accounts, redraw facilities, fixed or variable rates, and split loan structures. Help to Buy is available through a smaller group of participating lenders, and loan features vary. If offset functionality or rate flexibility is important to you, confirm what is available under each program with your lender before proceeding. If you are currently on a fixed rate that is ending soon, the fixed rate expiry guide explains how to compare features when moving to a new loan.

Call one of our team or book an appointment at a time that works for you. We will confirm which schemes you are eligible for, what the caps are for the area you are buying in, and which combination of federal and state programs leaves you with the lowest upfront and ongoing cost.