5% Deposit Scheme or a family guarantor?
If the home is under your area's price cap and you qualify, the 5% Deposit Scheme usually wins: it costs your family nothing and puts nobody else's home at risk. A guarantor makes more sense when the price is over the cap, you've owned property in the last 10 years, or you need freedoms the scheme doesn't allow, such as renting the home out later. If neither fits, paying lenders mortgage insurance can still be the right answer.
The four things that actually decide it
Both routes avoid lenders mortgage insurance, so cost is rarely the difference. These are:
The price cap.
The scheme has a maximum price for each area. A guarantor loan doesn't.
Who carries the risk.
On a scheme loan, the government guarantees the lender in place of mortgage insurance. A family guarantor puts their own home behind yours.
What you can do while you own it.
The scheme comes with rules: you must live there, and you can't rent it out or increase the loan while it's in place.
How it ends.
The scheme's guarantee stops on its own. A guarantor has to be released by the lender.
Start with the price cap
Both the price and the lender's valuation must be at or under the cap for your area, or the scheme isn't available at all. In Queensland, for example, the cap is $1,000,000 in Brisbane, the Gold Coast and the Sunshine Coast, and $700,000 in the rest of the state. Each state, and the Northern Territory, has its own pair; the ACT has one cap, $1,000,000, for every area.
If the home you want is over the cap, the choice is made: it's a guarantor, a profession waiver if you qualify for one, or paying the insurance.
The same purchase, three ways
An illustration, not a client file: a $700,000 home in Brisbane, and a $35,000 deposit (5%). Purchase costs are left out to keep it simple.
| 5% Deposit Scheme | Family guarantor | Paying the insurance | |
|---|---|---|---|
| Your loan | $665,000 | $665,000 | $665,000, plus the premium if it's added |
| Lenders mortgage insurance | None | Usually none | About $30,000 |
| Your family's exposure | None | Up to $105,000, secured on their home | None |
| Who it's open to | First buyers, citizens or permanent residents, under the cap | Lender's own criteria | Lender's own criteria |
| Ends when | The loan reaches 80% of the value on scheduled repayments, automatically | You apply, the lender revalues and agrees | Doesn't end; the premium is paid once |
The insurance figure is 4.51% of the loan, from one lender's first home buyer rate card at 95%. It's indicative, not a quote, and it varies a lot between lenders. The guarantor figure is the amount needed to bring the loan on your own property down to 80% of the price.
What each one asks of your family
The scheme. Nothing. Your family doesn't sign anything, and their home isn't involved.
A guarantor. A parent, or another close family member, puts part of their home's equity behind your loan. If you can't pay and selling your home doesn't clear the debt, the lender can ask them for the guaranteed amount, and enforce against their home if they can't pay it.
This is the difference that matters most and gets talked about least. It's worth the person you'd ask reading it before you ask.
If you can't keep up the repayments
On either route, you owe the whole loan. The scheme and the guarantee both protect the lender, not you.
With the scheme, the government's guarantee is to the lender, in place of mortgage insurance. Your family isn't involved.
With a guarantor, the lender can call on the guarantor for up to the guaranteed amount, with interest and costs, after your home is sold.
If you're worried about the repayments themselves, neither route fixes that. Work out what you can afford first.
How each one ends
The scheme ends on its own. Once the loan falls to 80% of the property's value, on your scheduled repayments, the guarantee stops. Extra repayments you can redraw don't count toward getting there.
A guarantor has to be released. You apply, the lender usually revalues the home and checks your record, and it decides. There's no set date, and a flat market makes it longer.
When the scheme is clearly better
The home is under the cap and the valuation will be too.
You've saved at least 5% but less than 20% after purchase costs such as stamp duty.
You're a first buyer, or haven't owned any property in the last 10 years, including land or a commercial property.
You'll live there for as long as the guarantee lasts.
You'd rather not ask family, or they'd rather not sign.
When a guarantor is clearly better
The price is over the cap for your area.
You've owned property before and fail the scheme's 10-year test.
You may want to rent the home out, or move and keep it. The scheme doesn't allow that while it's in place.
You may want to increase the loan, for a renovation, say. The scheme doesn't allow that either.
Your family is comfortable with the risk, has the equity, and has had independent legal advice.
When neither is right, and paying the insurance wins
Paying lenders mortgage insurance costs money, about $30,000 in the example above, but it asks nothing of your family and comes with none of the scheme's rules. It can be the right answer when the price is over the cap, no one in the family can or should sign, or you want the freedom to rent the home out or borrow more later.
Some lenders also waive the insurance for certain professions, such as doctors, lawyers and accountants, usually up to 90% of the value and in some cases 95%.
Scheme or guarantor questions
Usually, if the home is under the price cap and you qualify, because it puts nobody else's home at risk. A guarantor is better when the price is over the cap, you've owned property in the last 10 years, or you need to rent the home out or increase the loan later.
Deciding between the two?
Tell me the price you're looking at, where it is, what you've saved, and whether family could help. I'll set out the scheme, a guarantor and paying the insurance side by side on your numbers, and which lenders would do each.
You'll hear back within the hour in business hours, and by 9am the next business day after hours.
Sources
- 1
Housing Australia, 5% Deposit Scheme guide dated 1 July 2026 (https://
firsthomebuyers.gov.au/ ): the guarantee to the lender in place of mortgage insurance, price caps, deposit test, 10-year test, occupancy, no renting or loan increase, guarantee ending at 80% on scheduled repayments. Checked 29 September 2026.sites/ default/ files/ 2025-09/ Australian%20Government%205%25%20Deposit%20Scheme%20Information%20Guide .pdf - 2
First Home Buyers (Australian Government), 5% Deposit Scheme: no income caps, no waiting list. Read 26 August 2026.
- 3
Lenders mortgage insurance: one lender's first home buyer rate card, indicative. Confirmed current 1 October 2026.
- 4
Profession waivers: lender policy, read 1 October 2026.
- 5
MoneySmart (ASIC), Going guarantor on a loan, updated 6 August 2026. Read 28 August 2026.
Updated 3 October 2026