The Australian Government is set to fire the starting pistol on its newest program to help low and middle income earners buy their first home this week, as the Help to Buy Scheme opens for applications on Friday (5 December).
The shared equity scheme joins the 5% Deposit Scheme (formerly the First Home Guarantee) among the initiatives in place to lend a helping hand in getting more Aussies on the property ladder.
There’s a big difference between the two, though, so it’s important for first-time buyers to understand how they both work and what the implications for their home ownership will be moving forward.
5% Deposit Scheme vs Help to Buy Scheme: snapshot
| 5% DS | HTBS | |
|---|---|---|
| How it works | Guarantee the difference between 20% of the purchase and borrower’s deposit | Contribute to the purchase price of the property, up to 30% for existing homes or 40% for new builds |
| Minimum deposit | 5% for first-time buyers, 2% for single parents or legal guardians | 2% |
| Ownership of the property | 100% owned by the borrower | Shared between the borrower and the Government |
| Available places | Unlimited applications | 10,000 per year |
| LMI payable? | No | No |
| Maximum income | No maximum income | Up to $100,000 for singles or $160,000 for single parents or joint applicants |
| Other eligibility criteria | Must be an Australian citizen or permanent resident, never have owned property before and live in your home as owner-occupier |
|
What is the 5% Deposit Scheme?
The 5% Deposit Scheme (5% DS) allows first-time buyers to purchase a home with a deposit under 20% without needing to pay lenders mortgage insurance (LMI). LMI is a cost charged on home loans with deposits below 20% (above 80% loan to value ratio or LVR) to compensate for the increased risk associated with them.
If your deposit is only worth 5% of the property you want to buy, for example, the 5% DS means the Australian Government can guarantee an additional 15%, therefore allowing your lender to approve your 95% LVR loan without charging you for LMI. This serves the same function as applying for a home loan with a guarantor, but the 5% DS means you won’t need to enlist the help of your parent or grandparent to dodge steep costs.
What is the Help to Buy Scheme?
The Australian Government’s new Help to Buy Scheme (HTBS) is a shared equity program designed to help Aussies with deposits as small as 2% buy their first home. Under this scheme, ownership of your property will be split between you and the Government. You can either pay them back gradually in voluntary instalments, as a lump sum or when you sell your home.
5% Deposit Scheme vs Help to Buy Scheme: cost difference
While both programs will let you get into your first home sooner, the cost of each one differs. Let's say you’re buying a new home for $800,000 in Sydney with your partner. Here’s what your 30-year home loan would look like:
| 5% DS | HTBS | |
|---|---|---|
| Deposit | $40,000 (5%) | $16,000 (2%) |
| Government contribution | N/A | $320,000 (40%) |
| Loan amount | $760,000 (95%) | $464,000 (58%) |
| Minimum combined income | $146,000 | $92,500 |
| LMI payable | $0 | $0 |
| Stamp duty payable | $0 | $0 |
| Fortnightly repayment | $1,991 | $1,215 |
| Lifetime interest | $791,561 | $483,269 |
| Calculations based on an interest rate of 5.50% p.a. and combined monthly expenses of $1,000. Calculations are for illustrative purposes only and not necessarily reflective of your borrowing power. | ||
As you can see, reducing your loan size by that amount means you’ll save massively on interest and create heaps of space in your monthly budget. However, there’s a give and take with the HTBS, so it’s important to see what it looks like when you sell your property.
What happens when you sell the property?
Continuing with the same example, you can see in the table below how much you’ll receive from your property sale if you decide to move houses after ten years:
| 5% DS | HTBS | |
|---|---|---|
| Property value | $1,487,669 | $1,487,669 |
| Ten-year mortgage balance | $627,432 | $383,064 |
| Interest paid | $419,051 | $255,841 |
| Proceeds from sale | $1,487,669 (100%) | $892,601 (60%) |
| Portion paid to Govt | $0 | $595,068 (40%) |
| Profit after paying off mortgage | $860,236 | $509,537 |
| Overall profit | $441,186 | $253,696 |
| Calculations based on an interest rate of 5.50% p.a. Property value based on an average increase of 6.4% per year, which is the average over the past 30 years. Proceed and profit calculations do not include applicable taxes or other home-selling costs. | ||
As you can see, even with a much larger loan and interest bill, you’ll be much better off when the time comes to sell your home. When you sell your home and clear your remaining debt with your lender, you’d be more than $350,000 ahead if you’re using the 5% DS compared to the HTBS. Even when you factor in all the interest you’ve paid over the ten years, you’ll still have almost $187,500 more in your pocket.
5% Deposit Scheme vs Help to Buy Scheme: maximum price
The property price caps for the 5% DS were increased as of 1 October 2025. You can see what the updated caps are for this scheme here:
| State | Price caps: capital cities and regional centres* | Price caps: all other areas |
|---|---|---|
| New South Wales | $1,500,000 | $800,000 |
| Victoria | $950,000 | $650,000 |
| Queensland | $1,000,000 | $700,000 |
| Western Australia | $850,000 | $600,000 |
| South Australia | $900,000 | $500,000 |
| Tasmania | $700,000 | $550,000 |
| Australian Capital Territory | $1,000,000 | $1,000,000 |
| Northern Territory | $600,000 | $600,000 |
| *Included regional centres are Illawarra, Lake Macquarie and Newcastle (NSW), Geelong (VIC) and Gold Coast and Sunshine Coast (QLD). | ||
The HTBS is also subject to price caps depending on where you live, which are identical to the 5% DS caps aside from in NSW, which had its Sydney and regional centre cap lowered by $200,000. These are as follows:
| State | Price caps: capital cities and regional centres* | Price caps: all other areas |
|---|---|---|
| New South Wales | $1,300,000 | $800,000 |
| Victoria | $950,000 | $650,000 |
| Queensland | $1,000,000 | $700,000 |
| Western Australia | $850,000 | $600,000 |
| South Australia | $900,000 | $500,000 |
| Tasmania | $700,000 | $550,000 |
| Australian Capital Territory | $1,000,000 | $1,000,000 |
| Northern Territory | $600,000 | $600,000 |
| *Included regional centres are Illawarra, Lake Macquarie and Newcastle, Central Coast, Mid-North Coast, Coffs Harbour-Grafton and Richmond-Tweed (NSW), Geelong (VIC) and Gold Coast and Sunshine Coast (QLD). | ||
"Many people focus on getting the lowest interest rate, but that's only half the story. A loan with fewer fees, flexible repayment options or no early exit penalties can often save you more in the long run. Don't just ask 'what's the rate?'; find out what the total cost of the car loan will be over its life."
How a broker can help a first home buyer apply for their mortgage
Which scheme is best for me?
The answer to this question depends on your individual circumstances, as the best for you might not be the best for someone else. Here are a few scenarios where one option might be better than the other:
- You want to minimise the size of your home loan: this might be the case if you aren’t a high income earner or simply want to save more room in your monthly budget. The HTBS is more suitable for achieving this.
- You only have a small deposit: if the deposit is the only issue, retaining full ownership of your home is preferable to giving part of it away. The 5% DS will help you buy your home in this situation, provided you have at least 5% saved up. You’ll have to go with the HTBS for deposits lower than that, unless you’re a single parent or guardian.
- You want to avoid giving away and buying back your home’s equity: if housing prices continue to rise as they have been in recent years, the amount you repay the Government for your home’s equity could be much more than what they paid. The 5% DS sidesteps this issue, too.
- You’re a high income earner: if you’re earning above $100,000 per year as a single or $160,000 as a couple, you won’t be eligible for the HTBS. The 5% DS is the only available option here, given the lack of earnings cap.
