Introduction
Saving for a first home deposit is hard, so getting in with a low deposit scheme could be game-changing. Two key options are the federal government’s 5% Deposit Scheme and the new 2% Help to Buy scheme. In essence, the 5% Deposit Scheme allows eligible first home buyers to purchase with a 5% deposit while avoiding lenders mortgage insurance because the government guarantees part of the loan, whereas Help to Buy is a shared equity scheme where the government co-purchases part of your property, letting you buy with as little as a 2% deposit. Knowing the differences can help you choose the fastest path into your own place. For official policy details, see the Australian Government home ownership support page.
How the 5% Deposit Scheme Works
Under the 5% Deposit Scheme, now part of the Home Guarantee Scheme, you need a minimum 5% deposit. Housing Australia then guarantees up to 15% of the purchase price so you avoid lenders mortgage insurance. From 1 October 2025 there unlimited places were announced, also no income caps and higher property price caps in most states. You must be an Australian citizen or permanent resident aged 18+, and buy a home you will live in and take out a principal and interest loan with a participating lender. The scheme covers existing homes, off the plan apartments, house and land packages and land with a build contract within 12 months. It’s designed to get first home buyers into the market sooner without saving a 20% deposit.
How the 2% Help to Buy Scheme Works
Help to Buy is a federal shared equity program which started on 5 December 2025. If your deposit is at least 2% of the purchase price, the Commonwealth can contribute up to 40% of the price for a new build or 30% for an existing home. You then own the balance and pay the mortgage on your share. You pay nothing on the government’s share but must live in the home and eventually buy back the equity or repay it on sale. To be eligible, you must be an Australian citizen earning under $100 000 as a single person or $160 000 as joint applicants, not own other property and buy under state based price caps. The scheme will have 10 000 places annually and is limited to certain states initially. More information is available in the Help to Buy scheme overview.
Key Differences That Matter
- Deposit size: the 5% Deposit Scheme requires a 5% deposit, while Help to Buy allows a minimum 2% deposit.
- Government role: with the 5% scheme the government acts as guarantor, whereas with Help to Buy the government becomes a co-owner, holding up to 40% equity.
- Income caps: the 5% scheme has no income caps from October 2025, while Help to Buy has strict income thresholds.
- Price caps: both have property price caps but they differ; Help to Buy caps are generally higher in capital cities.
- Repayment: under the 5% scheme you pay the full loan yourself but avoid lenders mortgage insurance; with Help to Buy you share capital gains and must repay the government’s share when your circumstances change or you sell.
Which Option Fits Different Buyers
If you have a moderate income but can’t save a 5% deposit quickly, the Help to Buy scheme could get you into a home sooner because the government shares the cost. It may suit singles, low to middle income couples or single parents who meet the income and property caps and want a lower deposit hurdle. However, you’ll need to budget for the future buyback of the government’s share.
Buyers with stable employment who can save a 5% deposit may prefer the 5% Deposit Scheme. You retain full ownership from day one, avoid ongoing equity sharing and there are no income caps. This scheme works well if you want to maximise control over your property and avoid lenders mortgage insurance. Use the Home Loans or First Home Buyers pages to check your eligibility and the loan calculators to work out repayments.
Conclusion
Both schemes aim to make home ownership more attainable, but they suit different circumstances. Help to Buy offers a lower deposit hurdle but involves sharing ownership, whereas the 5% Deposit Scheme lets you buy sooner without lenders mortgage insurance but requires a larger deposit. Speak with a Zippy broker to discuss which option fits your goals and always consider your long term plans before choosing which scheme. This article is general information only and does not constitute personal financial advice.