Your dream of buying your first home has never been more achievable!

YOUR DREAM OF BUYING YOUR FIRST HOME HAS NEVER BEEN MORE ACHIEVABLE

For many Australians buying your first home has seemed like a distant dream.  With increased property prices, stagnant salaries, saving a 10% deposit and meeting the bank’s loan requirements including Lenders Mortgage Insurance, has made it difficult to achieve.  But with the recent Australian Government announcement of changes to the First Home Buyers Scheme, more Australians have a realistic prospect of positioning themselves in the current housing market.

Unpacking the recent legislation changes

On 1 October 2025, the Government launched the 5% Deposit Scheme, under the blanket of their First Home Buyers Scheme.  This has been intended to shift the heavy financial impact of first home buyers to making the property market more accessible.  If eligible for the Scheme, the Government will guarantee the purchase which will waive the requirement for Lenders Mortgage Insurance, usually required for loans over 80% of the purchase price.  The legislative amendments have created realistic opportunities for first home buyers to achieve their goal of buying their first property.

Key features

The significant changes to the Scheme[1] are:

• Low deposit requirement:
  • 5% deposit for an individual or couples, or
  • 2% deposit for single parents and legal guardians.
• Unlimited places and no wait times – the annual cap for applicants has been removed and immediate access upon approval.
• No income cap, means you are no longer assessed on how much you earn.
• Property price cap has been increased for applicants to have more exposure to the current property market[2].
• Wider range of property types available ie. house, unit, vacant land, off the plan, house and land package.
• Owner occupied – the property must be your first home and you intend to live in the property for at least 12 months.

Understanding the fine print

Applicants must satisfy an eligibility criteria[3] when submitting their application to the Australian Taxation Office (ATO).  Specific evidence must be supplied with the application i.e. identification and residency status.

Criteria:	Details
Age	Over 18 years old.
Individual/ Couple	Can own individually or jointly with one other person, being partner, friend or family member.
Residence	Must be an Australian Citizen or Permanent Resident.  If a couple, then one person must be an Australian Citizen or Permanent Resident.
Property ownership	Not owned property in Australia for the past 10 years.  If a couple, neither can have owned a property for past 10 years.
Owner occupied	Plan to live in the property, and must reside in the property for at least 12 months.  If a couple, then one person must live in the property for 12 months.
Deposit	Have saved 5% deposit.
Price Cap	Must be at or below the location price cap.
Loan requirements	Must pay principal and interest repayments to your Bank for up to 30 years.

What are the potential risks?

1. Bank requirements & expectations

Banks will have specific requirements as to your borrowing capacity and will set a loan limit, conditional on your ability to meet their expected loan repayment plan.  Your loan repayments will be significantly higher as you will be borrowing 95% of the purchase price for the property.  You should consider whether you can satisfy the bank’s loan repayment expectations and regular interest rate fluctuations as it may significantly impact on your financial circumstances.

2. Contractual requirements

It is essential that prior to exchange of contracts, you seek written consent for a 5% deposit with the Vendor’s representative, which is usually paid to the agent.  If consent is not obtained, you will be required to pay 10% deposit under a Contract for Sale of Land in NSW to the agent upon exchange of contracts.

In recent years, a request for a less than 10% deposit has become more common and acceptable for purchasing property in NSW.  However, you need to bear in mind it is at the Vendor’s discretion whether they agree to the request and you will need to consider alternate options if this is not viable.

3. Increased demand on the property market

With more Australians obtaining the 5% Deposit Scheme it will also drive the property market.  This means that property prices will increase in value with the on-set of first home buyer demands and could potentially rise above the property price cap.  This will make it more difficult to get first home buyers into the current property market.

4. Owner occupier requirements

The Scheme only allows for you to live in the property (within the first 12 months of purchase) and that it is not bought as an investment property.  Failure of meet this requirement, will forfeit your guarantee with the Government[4], and in turn, you may be required to pay Lender Mortgage Insurance as the loan could be over 80% of the purchase price.

5. Hidden costs

There are various additional costs associated with the purchase of a property that need to be considered.  You should ensure that you have budgeted for expenses such as the following:

• stamp duty (if applicable),
• legal fees,
• relocation costs,
• mortgage repayments, and
• on-going living and utility expenses ie. electricity, internet, house and/or contents insurance, council and water rates, strata levies.

Final Views

Provided you can meet the required criteria, your dream of being a home owner can become a reality.  Taking advantage of the 5% Deposit Scheme will provide increased opportunities for more Australian to own their first home.  Reduced timeframes to get into the current market, less deposit required to be saved and avoiding payment of Lenders Mortgage Insurance makes this Scheme more attractive to establish a foothold in the market.

However, if you are thinking of applying for the Scheme, you should carefully consider whether you can meet: higher loan repayments, increased controls on the purchase, fluctuation of interest rates, and demand pressures of a potentially rising property market.

Being well prepared is essential for the purchase, and this should include:

• Selecting an appropriate property within a realistic price range;
• Budgeting for the hidden and on-going costs;
• Researching various banks and their loan options; and
• Obtaining legal advice on contractual obligations.

Legal assistance

If we can assist you in realising your dream to purchase your first home, please contact us on 02 4951 8199 or send an email to lawyers@ohlaw.com.au.

We can provide you with:

1. Expert advice for the purchase of property in NSW and understanding the Contract for Sale, and
2. Assistance to prepare your First Home Buyers Application Form and submitting the application, with the required evidence, to the ATO on your behalf.

References:

For further information, please see Government websites below.

First Home Buyers Website: https://firsthomebuyers.gov.au/

Housing Australia Website – https://www.housingaustralia.gov.au

First Home Buyers Scheme Brochure – https://firsthomebuyers.gov.au/sites/default/files/2025-09/Australian%20Government%205%25%20Deposit%20Scheme%20Information%20Guide.pdf

Eligibility Tool – https://firsthomebuyers.gov.au/australian-government-5-percent-deposit-scheme/5-percent-tools-and-resources/5-percent-eligibility

 

[1] https://firsthomebuyers.gov.au/australian-government-5-percent-deposit-scheme/first-home-buyers?utm

[2] https://www.housingaustralia.gov.au/media/unlimited-places-higher-property-price-caps-first-home-buyers-1-october-2025?utm_

[3] https://firsthomebuyers.gov.au/sites/default/files/2025-09/Australian%20Government%205%25%20Deposit%20Scheme%20Information%20Guide.pdf

[4] https://firsthomebuyers.gov.au/australian-government-5-percent-deposit-scheme/first-home-buyers?utm_source

 

The material included in this website is produced by O’Hearn Lawyers Pty Limited.  It is designed and intended for general information purposes only.  The contents do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such.  You should seek legal advice or other professional advice in relation to any particular matters you or your organisation may have.

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