First-Home Buyers: How Deposit Bonds Help Under the New 5% Deposit Policy

The federal government has introduced changes to the First Home Guarantee Scheme, where eligible first-home buyers can get a government guarantee for their home loan deposit. These updates allow buyers to purchase their first home with a 5% deposit and no Lenders Mortgage Insurance (LMI). 

The First Home Guarantee changes are a big win for first-home buyers, making it easier to get into the property market and potentially save thousands of dollars in upfront costs. However, while lenders may only require a 5% deposit, many vendor contracts still expect a 10% deposit to secure the property. This gap can leave buyers stuck, even though they qualify under the new scheme.

That’s where a deposit bond from Deposit Power can help. Acting as a substitute for cash, a deposit bond lets you secure the property with your 5% deposit while it covers the remaining deposit amount until your home loan settles.

What the First Home Guarantee means for first-home buyers

The First Home Guarantee reform, which started 1st October 2025, makes it much easier for eligible Australians to buy their first home. Under the new rules:

• • Buyers can get into the property market with just a 5% deposit and no LMI.
  • There are no income limits, no regional limits, and no cap on the number of people who can use the scheme.
  • Property price caps have been increased nationwide, meaning buyers can purchase more expensive homes than before: Sydney up to $1.5 million, Melbourne $950,000, and Brisbane $1 million.

The government estimates that first-home buyers could save around $1.5 billion in LMI costs in the first year alone. To put this in perspective, a median-priced home of $844,000 now requires a deposit of just $42,200 – the same amount that would have been enough for a 20% deposit back in 2002. This shows how the scheme can help a new generation of buyers enter the property market much sooner, without years of saving for a deposit.

The 5% deposit and no LMI advantage

 The improved 5% deposit scheme is a real game-changer for first-home buyers. Traditionally, banks required at least a 20% deposit before approving a home loan, and anything less meant paying LMI – an extra cost that could run into tens of thousands of dollars. With this scheme, buyers can enter the market with just 5% of the purchase price saved, without having to pay LMI. This makes homeownership more affordable for a large number of Australians who would otherwise be stuck paying rent on other people’s investments rather than their own.

The vendor 10% deposit challenge

 Even with the First Home Guarantee allowing buyers to enter the market with a 5% deposit, many property contracts still require a 10% deposit upfront. This creates a gap that can be confusing for first-home buyers: while lenders are happy to approve a loan with just 5% saved, the seller often expects double that amount to secure the property. This mismatch can leave buyers in a tricky position, needing to find extra cash quickly or risk losing the property. It’s a common challenge in today’s market, especially for those purchasing higher-priced homes where the difference between 5% and 10% can be tens of thousands of dollars.

Why the vendor still asks for 10%

Many property sellers continue to request a 10% deposit when contracts are exchanged because it has long been the standard practice in Australian real estate. This larger deposit gives vendors a sense of security, showing the buyer is serious and financially committed to the purchase. Legally, the deposit is held as part of the contract, and if the buyer fails to settle, the seller can typically keep it as compensation. Even though the First Home Guarantee allows buyers to enter the market with just 5% saved, the 10% expectation remains a common contractual requirement.

How deposit bonds bridge the gap

 A deposit bond from Deposit Power makes it possible for first-home buyers to meet the vendor’s 10% deposit requirement without needing the full amount in cash. Here’s how it works: you pay your 5% cash deposit and provide a deposit bond for the remaining 5%. The bond acts as a guarantee to the seller that the full deposit will be available at settlement. This means you can secure the property now. When settlement day arrives, your home loan funds the full purchase, and the deposit bond simply expires. This approach removes a major barrier for first-home buyers, making it easier to take advantage of the 5% home deposit offered under the First Home Guarantee. Learn more about how deposit bonds work.

Benefits of using a deposit bond for first-home buyers

Using a deposit bond from Deposit Power makes buying your first home simpler and more flexible:

• • Secure your property faster: You don’t need to save the full 10% deposit upfront to lock in your home. 
  • Peace of mind for both parties: The vendor knows the deposit is guaranteed, and you can move forward with confidence, which is especially useful in competitive markets or at auctions.
  • Flexibility until settlement: The bond covers the remainder of the deposit until your home loan comes through, making the process smoother and less stressful.

Discover the full benefits of a deposit bond.

Eligibility for deposit bonds under the new policy

If you’re a first-home buyer, Deposit Power makes it straightforward to secure a deposit bond under the new First Home Guarantee rules. To qualify, you’ll need to meet the government’s eligibility criteria, which include being an Australian citizen or permanent resident, meeting income caps, and having at least 5% genuine savings towards your property purchase.

You must also be a first-home buyer (or not have owned property in the past 10 years), be at least 18 years of age, and intend to live in the property as your primary residence.

You can check whether you qualify for the First Home Guarantee with this eligibility tool. When applying for a deposit bond with Deposit Power, you’ll need to show us evidence that you have the funds to complete the property purchase. This may include:

• • Loan approval letter
  • Evidence of deposit savings, such as bank statements
  • If applicable, details of a financial gift from family

Deposit Power offers flexible pathways, whether you need a short-term bond for an imminent settlement or a long-term bond for an off-the-plan purchase. You can get an online assessment easily by starting a quote.  Learn more here: How to qualify and apply for a deposit bond.

FAQs about first-home buyer deposits

Can I use a deposit bond with only a 5% deposit

Yes you can. With Deposit Power, the bond amount is flexible and can be issued for up to 10% of the purchase price, depending on what you and the vendor have agreed on. Here are two common scenarios:

• • 5% cash + 5% bond: Put down your 5% cash savings and use a deposit bond for the remaining 5%.
  • 10% bond at exchange: Use a deposit bond for the full 10% at exchange, then simply pay your 5% deposit plus the balance (95%) at settlement.

This flexibility helps first-home buyers compete in the property market without having to save the full 10% before they’re ready to buy.

How quickly can a deposit bond be issued?

Simply submit your application online and you’ll get an immediate response. Our deposit bonds are digital and delivered to you within seconds of being issued.

Do all vendors accept deposit bonds?

While many vendors do accept deposit bonds, it’s always best to confirm first. Your real estate agent or solicitor can check whether the vendor is happy to proceed with a bond.