Written by Jordan Davis-Kimber, Manager - Conveyancing, Terracon Legal
From 1 October 2025 the Australian Government is introducing significant changes to the Home Guarantee Scheme (Scheme) to help more Australians enter the property market with as little as a 5% deposit, and no requirement for Lenders Mortgage Insurance (LMI).
Key Changes from 1 October 2025
No place limits: Previously, places in the Scheme were limited and allocated annually. Now there will not be any cap on the number of eligible first home buyers who can access the Scheme, and all eligible Australian first home buyers who have saved a 5% deposit can apply.
No income caps: The current income thresholds will be completely removed. This opens the Scheme to a broader range of buyers, including professionals and dual income households who may have been previously excluded.
Increased property price caps: To reflect rising property values, especially in high growth areas, the Scheme’s property price caps are being increased. This provides buyers with significantly more flexibility in choosing where and what to purchase. See below the property price caps from 1 October 2025 for ACT and NSW Property:
How the Scheme Works
Under the Scheme, eligible buyers will be able to purchase a property with as little as a 5% deposit, with the Federal Government ‘guaranteeing’ up to 15% of the property’s value. This means that buyers will not need to pay LMI when purchasing a property under this Scheme. It is important to note that the Scheme does not provide financial relief in the event of a default, and even though the Federal Government is ‘guaranteeing’ up to 15% of the property’s value to help the buyer avoid LMI, the buyer remains 100% responsible for repaying the full loan amount as per the terms and conditions of the loan.
Have You Already Signed a Contract?
If you have already signed a contract for a property purchase that has not yet settled, you can still apply for a place in the Scheme after 1 October 2025. The key date is the date that your lender reserves your place in the Scheme, and not the date that you sign the contract. There are of course risks in signing a contract before having your place in the Scheme formally assessed and approved, as this could delay settlement, so it is important that you discuss this with your lender and solicitor or conveyancer if you have already signed a contract.
Do Sellers Need to Accept a 5% Deposit?
No, sellers are not legally required to accept a 5% deposit. The Scheme enables buyers to secure financing with a smaller deposit, but the terms of the contract remain negotiable. Sellers may still request a higher deposit as part of the contract to reduce perceived risk, especially in competitive or high value markets.
Our Legal Insight: What to Consider
While these changes create exciting new opportunities to fast-track the process for you to own a home, it’s important to approach any property transaction with careful legal and financial due diligence. We would recommend:
1. Pre-Approval and Budgeting
Secure your pre-approval and understand your borrowing capacity (including how a 5% deposit may affect loan terms and repayments) before you sign any Contract.
2. Participating Lenders
Your lender will need to be one from the list of ‘Participating Lenders’ on the Housing Australia website, which can be found via this link: https://www.housingaustralia.gov.au/home-guarantee-scheme-participating-lenders If you are using a mortgage broker for finance, they will be able to discuss this with you further and advise you of your options.
3. Contract Review
Ensure that we review the Contract for any property that you find before you sign anything. This is important to ensure that you fully understand the property that you are buying.
4. Scheme Eligibility
Confirm your eligibility using the official Home Guarantee Scheme Eligibility Tool via this link: https://www.housingaustralia.gov.au/support-buy-home/eligibility-tool
5. Settlement
Delays in finance approvals under the Scheme may affect settlement dates. It is important that the settlement period is negotiated to ensure there is sufficient time for your finance to be approved and provided prior to settlement of the contract.
How Terracon Legal Can Help
Our team of experienced property lawyers and conveyancers act for buyers in both ACT and NSW, assisting clients throughout the entire conveyance process. Finding the right legal assistance is extremely important, especially with the Scheme opening new pathways to home ownership. If you are considering buying your first home and are interested in using our services, please feel free to reach out to our conveyancing team: conveyancing@terraconlegal.com.au
Note: this is not legal advice and should not be relied upon (as it is general in nature, and will differ depending on factual circumstances). Legal advice should only be relied upon if Terracon Legal have been engaged via a cost agreement to provide such advice, and it is given with specific facts and context provided.