How to buy your first home with just a 5% deposit


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First home buyers will be able to get into a house with as little as 5% deposit through the First Home Loan Deposit Scheme - provided the value of the property falls under the property price caps announced this week by the Morrison government.

The caps are designed to correct for the varying cost of entry into Australia's property markets. All things being equal, buying a house in one of the big cities will set you back a lot more than it would in regional town.

In Sydney, eligible buyers will be able to access the scheme when purchasing a home worth up to $700,000, while loan guarantees in the rest of the state will be capped at $450,000.

first home buyers

In Melbourne and greater Victoria, home values will be capped at $600,000 and $375,000 respectively.

The scheme, which will guarantee loans for up to 15% of the purchase price, will be available to first home buyers with taxable incomes up to $125,000 per annum for singles and up to $200,000 per annum for couples, and apply to principle and interest loans only.

It will support up to 10,000 loans on a 'first in, best dressed' basis.

Speaking on Sky News, Finance Minister Mathias Cormann said "The price caps are calibrated to take into account median house prices and conditions in respective markets and indeed they are set with reference to the threshold for concessional arrangements for stamp duty in various states."

Meanwhile, the Australian Prudential Regulation Authority says it will adjust its capital requirements for loans made through the scheme "in a comparable manner to mortgages with a loan-to-valuation ratio of 80%. This would allow eligible FHLDS loans to be risk-weighted at 35% under APRA's current capital requirements."

The nation's housing market shows continued signs of recovery.

September saw home values in Sydney and Melbourne both lift by 1.7%, while the Nation saw a rise of 0.9%, according to data from Corelogic.

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David Thornton was a journalist at Money from September 2019 to November 2021. He previously worked at Your Money, covering market news as producer of Trading Day Live. Before that, he covered business and finance news at The Constant Investor. David holds a Masters of International Relations from the University of Melbourne.

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