The 5% Deposit Scheme after separation

For a lot of people, separation means starting again with a much smaller deposit than they ever expected to have. If that is where you are, the Australian Government 5% Deposit Scheme can look like the obvious answer: buy with a 5% deposit and pay no Lenders Mortgage Insurance (LMI).

Whether it is open to you after a separation usually comes down to one question: have you held an interest in property in the last 10 years? This guide walks through that rule and everything else that matters, written for separated people who do not have dependent children living with them. If you do have children in your care, the Family Home Guarantee is usually the better fit, because it allows a 2% deposit and is open to previous home owners.

1. One scheme, two parts

Housing Australia runs the Australian Government 5% Deposit Scheme. It has two parts that matter after a separation, and the rules are quite different:

• The 5% Deposit Scheme for first home buyers (previously called the First Home Guarantee). This is the part this guide covers.
• The Family Home Guarantee for single parents and single legal guardians. Housing Australia's guide calls it the 5% Deposit Scheme for Single Parents, and still labels it the Family Home Guarantee. We cover it in our Family Home Guarantee guide.

Source: Housing Australia Information Guides for the 5% Deposit Scheme, 1 July 2026. If you are eligible for both parts, the rules say you must apply as a single parent.

2. What changed on 1 October 2025

The scheme was renamed (it used to be the Home Guarantee Scheme) and expanded from 1 October 2025:

• No income caps. The old income limits no longer apply.
• No cap on places. You no longer need to wait for a place to open up.
• Higher property price caps in every state and territory (see the table below).

If you looked into the scheme before October 2025 and were told you earned too much, the answer may be different now. You still need to meet the lender's normal lending criteria, and being eligible for the scheme does not guarantee a loan approval.

3. The 10-year rule after separation

To use the first home buyer part of the scheme, you must be a first home buyer, or you must not have held an interest in property in Australia in the 10 years before your Home Loan Date. The Home Loan Date is the day you sign your new loan agreement.

An interest in property means owning land or real property (freehold), holding a lease of land of 50 years or more, or holding a company title interest. Housing Australia is clear that this applies to any property in any state or territory, residential or commercial, investment or owner-occupied, whether or not it was ever lived in, and whether you held it on your own or with someone else, such as a former partner.

The 10 years are counted back from your Home Loan Date, so what matters is when you last held the interest, not when you first bought it. Here is how that plays out in common separation situations:

4. Separated but not yet divorced

This is one place where the two parts of the scheme work very differently.

For the first home buyer part, Housing Australia says an individual applicant can apply regardless of their relationship status, as long as no one else is listed on the loan and they meet every eligibility check on their own circumstances. So being married but separated, with no dependent children, does not on its own stop you applying.

The Family Home Guarantee is the opposite. It requires you to be single, and Housing Australia says that if you are separated but still married, you are not eligible until your divorce is final.

Either way, a lender will want to understand your settlement before it approves a new loan in your sole name: who keeps which assets, which debts are still in joint names, and whether the property settlement is formally documented. That usually means consent orders or a binding financial agreement. Our guide on whether you need consent orders explains why lenders ask.

5. Using settlement money as your deposit

The scheme is for buyers who have saved at least 5% of the property value but less than 20%. A few rules are worth knowing if your deposit is coming from a property settlement:

• The 20% ceiling. If you have 20% or more saved after covering purchase costs such as stamp duty and legal fees, your loan will not be eligible for the scheme. At that level you would not normally need LMI anyway.
• Use as much as you can. Housing Australia expects you to put as much of your savings towards the deposit as possible, in line with your lender's policies.
• Do not move money around to fit the rules. Housing Australia specifically warns against transferring cash or assets to another person to bring your deposit under 20%.
• Show where the money came from. Settlement proceeds can form part of your deposit. Lenders will usually ask for the orders or agreement and a statement showing the funds arriving in your account.

6. Property price caps

Both the purchase price and the lender's valuation must be at or below the cap for the property's location. These caps apply from 1 October 2025 and are the same for both parts of the scheme:

Regional centres are the Central Coast, Coffs Harbour-Grafton, Illawarra, Mid North Coast, Richmond-Tweed, and Newcastle and Lake Macquarie in New South Wales, Geelong in Victoria, and the Gold Coast and Sunshine Coast in Queensland. Check an exact suburb or postcode with the official price cap tool. Source: Housing Australia, checked 30 October 2026.

7. The other rules to know

• Citizenship and age. You must be an Australian citizen or permanent resident at your Home Loan Date, and at least 18.
• A home to live in. You must move in within 6 months of settlement (or of the occupancy certificate for a new build) and keep living there while the guarantee applies. You cannot rent the property out under the scheme.
• The loan. It must be an owner-occupier, principal and interest loan from a participating lender, with a term of up to 30 years (plus up to 3 years for a build).
• Buying with someone new. You can apply jointly with one other person, such as a new partner, a friend or a family member, but both of you must meet the rules, including the 10-year property test.
• Timeframes. Once your place is pre-approved, you have 90 days to find a home and sign a contract.
• Other help. Using the scheme does not stop you from accessing state or territory grants and stamp duty concessions, but it cannot be used together with the Help to Buy shared equity scheme.
• When the guarantee ends. The guarantee stops if your scheduled repayments bring the loan down to 80% or less of the property value, if you refinance to a lender that is not a participating lender, borrow more against the property from your lender, rent the property out, or sell. You cannot increase the loan amount under the scheme after settlement.

8. If the scheme is not open to you

Many separated people who owned the family home will not meet the 10-year test. That does not mean buying again is off the table. The options worth comparing include:

• The Family Home Guarantee, if you have at least one dependent child and your divorce is final (or you were in a de facto relationship). See our Family Home Guarantee guide.
• Help to Buy, the federal shared equity scheme. It asks whether you currently own property rather than applying a 10-year rule, although it has income caps and is limited to Australian citizens. See Help to Buy after separation.
• An LMI waiver, if you work in an eligible profession. Some lenders waive LMI for eligible doctors, lawyers, accountants and other professionals, with no price caps. See LMI waivers for separated professionals.
• A standard low deposit loan with LMI. LMI is a real cost, but for some people it is better than waiting years to rebuild a 20% deposit. We can show you both paths side by side.
• State grants and concessions. If you have never owned a home in your own name, you may qualify for your state's grant. See the First Home Owner Grant after divorce and stamp duty after separation.

How Lendology helps

You cannot apply to Housing Australia directly; applications go through a participating lender as part of your home loan. We check your eligibility against the scheme rules before anything is lodged, line the timing up with your property settlement, and compare participating lenders on our panel of 60+ lenders. If the scheme is not the right fit, we will tell you plainly and show you what is.

Jason Given

Director & Mortgage Broker · MFAA Member · MFPA Designated
Lendology

Jason specialises in separation finance, helping clients across Australia refinance, restructure, and move forward after relationship changes. He works alongside family lawyers and financial advisers to ensure the finance side is handled with care.

Last reviewed: October 2026

Jason Given and Steve Chin

Licensed mortgage brokers · MFPA designated · MFAA members · Australia-wide

We are not just explaining the process. We arrange the actual finance: refinancing into your sole name, funding a partner buyout, or setting up a new loan independently after settlement. We work with a panel of over 60 lenders to find the one that fits your situation.