But here’s the thing – while everyone’s talking about the “5% deposit” headline, the real story lies in understanding what this actually means for your wallet, your timeline, and your future. Let me break it down for you.

What’s Actually Changed?

From 1 October 2025, the Home Guarantee Scheme is getting a complete makeover. The government has removed the income caps (goodbye $125,000 single/$200,000 joint limits), scrapped the annual place limits, and – here’s the big one for Sydney buyers – cranked the property price cap up to $1.5 million.

Yes, you read that right. $1.5 million.

This isn’t just a tweak; it’s a fundamental shift that opens up a vastly different Sydney market to first home buyers. We’re talking about apartments in decent suburbs, townhouses that don’t require a two-hour commute, and family homes that aren’t in postcodes you’ve never heard of.

The industry bodies are cheering, economists are wringing their hands about price inflation, and politicians are doing what politicians do. But what does this mean for you, sitting there wondering if you should buy now or keep saving?

The Numbers Game: What You’re Really Looking At

Let’s get practical. Using the Home Guarantee Scheme means borrowing 95% of a property’s value while the government backs 15% of that loan, eliminating your need for Lenders Mortgage Insurance (LMI). For a $1.2 million Sydney property, that’s potentially saving you around $60,000-$80,000 in LMI costs upfront.

But – and this is where we need to be honest with each other – you’re also looking at significantly higher monthly repayments and total interest costs. On that same $1.2 million property, you’re looking at roughly $1,100 more per month in repayments compared to a 20% deposit scenario, and about $208,000 more in total interest over 30 years.

The trade-off is crystal clear: get into the market now with less upfront cash, but pay more over the long haul.

Is a 5% Deposit all I need?

What the scheme fails to make clear, is whilst the government has increased the caps for housing, the stamp duty concessions they offer have not moved with them.

So for first home owner buying in Sydney up to a value of $800,000, then this 5% deposit is a real thing. For amounts over that, not only does a purchaser need to come up a deposit of 5% of the purchase price, however they also need to have cash available to fund stamp duty on the purchase.

Take an example where you’re purchasing for $1,000,000. There is no stamp duty exemption on this amount therefore the stamp duty payable in NSW is $39,412. So your total savings needed in this instance is the 5% deposit ($50,000) plus the stamp duty ($39,412) being $89,412.

Whilst there remain significant benefits, not all is as simple as it seems.

You should also factor in $3,000 to $5,000 for legals and incidentals for any purchase you are making.

Your Strategic Options: Three Paths Forward

Path 1: You’ve Got 5% Ready to Go

If you’ve already saved your 5% deposit (and stamp duty where applicable), you’re in the driver’s seat. The scheme lets you strike immediately while avoiding that massive LMI bill. This is particularly powerful if you’re confident in your income stability and can comfortably service the higher repayments.

The key advantage? You’re not just avoiding LMI – you’re potentially avoiding years of further price rises while you save for 20%. In Sydney’s market, that protection against inflation can be worth more than the additional interest you’ll pay.

Path 2: The Savers’ Dilemma – Buy Now or Wait?

Here’s where it gets interesting. Let’s say you’ve got $149,000 saved (your 5% for a $1.2 million property plus stamp duty) but you’re wondering whether to buy now or keep saving until you hit $289,000 for a 20% deposit plus stamp duty.

The research shows that if property prices rise by just 10% while you’re saving that extra $140,000, you could end up worse off financially than if you’d bought with 5% today. Why? Because that 10% price rise on a $1.2 million property means you’re now looking at a $1.32 million purchase price, requiring a $319,000 deposit and a larger loan even with 20% down plus stamp duty.

Plus – and here’s the kicker – you miss out on any capital growth during your saving period. In the expanded loan comparison table, all the “buy now” scenarios (whether 5% or 20% deposit) benefit from capital growth, while the “wait and save” approach gets hit with both higher purchase prices and missed growth opportunities.

Path 3: Starting from Scratch

If you’re just beginning your savings journey, this scheme completely rewrites your timeline. Instead of the traditional advice to save 20% (which, let’s face it, takes most Sydney buyers the better part of a decade), you’re now looking at potentially entering the market within two years with disciplined saving.

The psychological benefit here can’t be understated. There’s something deeply motivating about seeing a realistic path to homeownership rather than watching your savings goal move further away as prices rise.

The Lender Reality Check

Here’s where I put on my mortgage broker hat and give you the reality check: eligibility for the scheme doesn’t guarantee loan approval. Lenders are still going to put you through the wringer on serviceability.

For a 95% loan on a property near that $1.5 million cap, you’re looking at needing an annual income of around $238,000 or more. The scheme might be open to everyone, but the banks’ calculators haven’t changed – you still need to prove you can service the debt without ending up in financial stress.

That said, for borrowers with strong, stable incomes, this scheme can be transformative. You’re no longer penalised for having excellent earning capacity but limited savings time.

Maximising Your Strategy

If you’re considering using the scheme, here’s your action plan:

Get Pre-Approved Early: With more buyers entering the market, competition will intensify. Having unconditional pre-approval puts you ahead of the pack.

Model the Full 30-Year Picture: Don’t just look at the monthly repayment – understand the total cost over the life of the loan and compare it to your alternatives.

Stack Your Support: The Home Guarantee Scheme can work alongside NSW stamp duty concessions and the First Home Owner Grant where applicable. For existing homes under $800,000, you’ll pay no stamp duty. For homes between $800,000-$1,000,000, you’ll get concessions. That’s potentially tens of thousands more in savings.

Consider Your Exit Strategy: With only 5% initial equity, your options for refinancing or selling in the early years are limited. Make sure you’re comfortable with your chosen property and area for the medium term.

The Bottom Line

This expanded Home Guarantee Scheme isn’t just a policy change – it’s a fundamental shift in how first home buyers can approach the Sydney market. Yes, there are risks. Yes, you’ll pay more in total interest. And yes, economists are worried about price inflation.

But for buyers with stable incomes who’ve been locked out by the deposit hurdle, this scheme offers a genuine pathway to homeownership that simply didn’t exist before. The key is approaching it strategically, with your eyes wide open to both the opportunities and the responsibilities.

The Sydney property market has always required bold decisions and careful planning. This scheme just gives you another tool in your arsenal – a powerful one, if used wisely.

Ready to explore how the expanded Home Guarantee Scheme could work for your situation? As a Sydney mortgage broker, I’m here to help you navigate these new opportunities and find the strategy that works best for your circumstances. Let’s have a conversation about your path to homeownership.