5% Deposit, No LMI: How the 5% Deposit Scheme Works for Geelong Buyers

By Andrew Paterson

If saving a 20% deposit feels out of reach, there is a government-backed way to buy with 5% and skip lenders mortgage insurance (LMI).

It is the Australian Government 5% Deposit Scheme, and its rules widened a lot on 1 October 2025. Here is how it works, who it suits and why the price cap matters so much around Geelong.

General information only. Not financial, tax, credit or legal advice. Have a chat with a licensed broker before you decide anything.

How the scheme works

The scheme used to be called the Home Guarantee Scheme, and many people still call it the First Home Guarantee. Housing Australia runs it on behalf of the federal government.

• You buy with a deposit of at least 5% of the home’s value.
• The government guarantees up to 15% of the property value to your lender.
• Because of that guarantee, the lender does not charge you LMI.

The guarantee protects the lender if a loan goes bad. It puts no money in your pocket, so treat it as a replacement for lenders mortgage insurance.

• You still borrow up to 95% of the property value.
• You are responsible for every repayment, plus stamp duty, legal fees and bank costs.
• You still need to pass the lender’s serviceability check, including the APRA interest rate buffer.
• The loan must be owner-occupied with principal and interest repayments, for up to 30 years.

Housing Australia charges no fee to use the scheme.

What changed on 1 October 2025

Plenty of older articles still quote the previous rules. These are the changes that matter.

1. No income caps. The old limits of $125,000 for singles and $200,000 for couples are gone.
2. Unlimited places. The annual place limits and waitlists have been removed for all guarantees.
3. Higher price caps. The Victorian cap for Melbourne and Geelong rose from $800,000 to $950,000.
4. One regional pathway fewer. The Regional First Home Buyer Guarantee closed to new applicants, so regional buyers now apply as first home buyers or single parents.

Housing Australia says the scheme has helped over 320,000 Australians since it began in 2020. For a Victorian view of the changes, see our guide to the October 2025 changes.

Price caps in Victoria and where Geelong fits

Both the purchase price and the lender’s valuation must sit at or below the cap for the home’s location. In Victoria there are two caps.

Area	Price cap
Melbourne and the Geelong regional centre	$950,000
Rest of Victoria	$650,000

Geelong is the only Victorian area the scheme lists as a regional centre. Other regional centres sit in New South Wales and Queensland, including Newcastle, Illawarra, the Gold Coast and the Sunshine Coast.

The Geelong area reaches well past the city itself. Housing Australia’s postcode tool currently shows the $950,000 cap for places like Lara, Ocean Grove, Torquay, Anglesea, Lorne, Bannockburn and Winchelsea.

Go a little further west and the cap drops to $650,000. Colac is on the lower cap, and even postcode 3241 is split, with Winchelsea at $950,000 and Ombersley at $650,000.

So check the exact suburb and postcode on the official price cap tool before you make an offer. The tool is a guide, and your lender confirms the cap for the specific home.

A worked example at $850,000

Say you are buying an $850,000 home inside the $950,000 cap area. This is how the upfront numbers compare.

Approach	Deposit	Loan	Estimated LMI
5% Deposit Scheme	$42,500	$807,500	$0
5% deposit with LMI	$42,500	$807,500	Around $35,000
20% deposit	$170,000	$680,000	$0

The LMI estimate uses one insurer’s published estimator rates, including Victoria’s 10% insurance duty. Actual premiums vary by lender and insurer.

Stamp duty sits on top of the deposit. At $850,000 a first home buyer is above the $750,000 concession limit, so general Victorian duty applies at about $46,070.

The trade-off for the smaller deposit is a bigger loan. At an assumed 6.5% over 30 years, repayments are about $5,104 a month on $807,500, against $4,298 on $680,000.

Lenders also test whether you could cope with a rate at least 3 percentage points higher. At 9.5%, the $807,500 loan works out to about $6,790 a month.

Two ways in: first home buyers and single parents

First home buyers

• Minimum 5% deposit.
• You must be a first home buyer, or not have owned a home or land in Australia in the last 10 years.
• You can apply alone or with one other person, such as a partner, friend or family member. Both must be eligible.

Single parents and legal guardians

• Minimum 2% deposit, with the government guaranteeing up to 18%.
• You must be single and the parent or legal guardian of at least one dependent child.
• You do not need to be a first home buyer, but you cannot hold any other property once the new home settles.
• Applications are individual only.

Both pathways now have no income caps and no limit on places.

Eligibility checklist

• Australian citizen or permanent resident, aged 18 or over.
• Buying a home to live in, with no investment properties allowed.
• Moving in within six months of settlement and living there while the guarantee applies.
• The 10-year rule covers property in Australia, so overseas property is treated differently.
• The home is priced at or below the cap for its suburb and postcode.
• You meet the lender’s borrowing assessment.

You apply through a participating lender, either directly or through a broker. Housing Australia does not take applications itself.

More than 30 lenders take part, and their credit policies differ. Once pre-approved, you have 90 days to find a home and sign a contract.

Guarantee, LMI or keep saving?

The right choice depends on your income stability, your spending and your plans. These are the main considerations.

• Using the guarantee can suit you if you can comfortably meet repayments on a 95% loan and want to buy sooner.
• Paying LMI may be worth a look if the home is over the cap, you want an investment loan or a non-participating lender fits you better.
• Saving longer means a smaller loan and less interest, while you keep paying rent and prices keep moving.

A small deposit also leaves little buffer if values dip in the first few years. That can make selling or refinancing harder, so factor it in.

Support you can combine with it

Victorian buyers can often use the scheme alongside other help.

• First Home Super Saver Scheme. Each eligible person can release up to $50,000 of voluntary super contributions, so a couple buying together can each use it.
• Victorian stamp duty relief. First home buyers pay no duty up to $600,000, with a sliding concession to $750,000. At $600,000 that saves $31,070.
• Victorian First Home Owner Grant. $10,000 for eligible new homes valued up to $750,000.

You cannot use the 5% Deposit Scheme together with the federal Help to Buy shared equity scheme. You would choose one or the other.

Mistakes worth avoiding

• Treating the guarantee as a grant. You still owe the full loan.
• Making an offer before checking the cap for that exact suburb and postcode.
• Assuming every lender offers the scheme.
• Moving out or renting the home while the guarantee applies, which can end it and bring LMI back into play.

Your next step

The quickest way to know if the scheme fits is an eligibility check and a lender match. We can confirm which pathway applies, check your target suburb against the cap and model repayments at the assessed rate.

Scheme rules and caps can change, so confirm current details at firsthomebuyers.gov.au and sro.vic.gov.au before relying on any figure here.

Frequently asked questions

Do I pay LMI under the scheme?

No, as long as the guarantee stays in place. If you stop living in the home or refinance to a non-participating lender, the guarantee can end and your lender may require LMI.

When does the guarantee end?

It ends once your scheduled repayments bring the loan down to 80% or less of the property value. At that point you would not normally need LMI anyway.

What if my home is over the price cap?

The scheme cannot be used for that purchase. You could look at a home under the cap, save a bigger deposit or buy with LMI instead.

Can I use it if I have owned a home before?

Yes, if at least 10 years have passed since you last owned a home or land in Australia. The period runs from the sale of your previous property to the date of your new loan. Single parents do not need to meet this test.

Is my deposit based on the price or the valuation?

It is based on the home’s value as assessed by your lender. If the valuation comes in below the price, the loan is sized on the lower figure, so you may need extra cash to cover the gap.