You can purchase with a 5% deposit and avoid paying lenders mortgage insurance.
The Australian Government 5% Deposit Scheme allows eligible first home buyers in Riverside to secure a home loan with just 5% of the property value, backed by a government guarantee that replaces the need for LMI. No income caps apply, and no annual place limits restrict access. The scheme applies to properties up to $700,000 in regional Tasmania, including Riverside, and covers new builds, established homes, and vacant land. Applications are made through participating lenders, and both variable and fixed rate options are available depending on which lender you work with.
Riverside sits just north of Launceston, with established family homes near West Tamar Highway and newer estates closer to the river. Median values have held fairly steady over the past year, and the location remains popular with buyers who want proximity to Launceston's services without the inner-city price tag. For first home buyers with a solid income but limited savings, the 5% deposit option opens up properties that would otherwise require years of additional saving.
How the Government Guarantee Replaces LMI
Housing Australia provides a guarantee to your lender of up to 15% of the property value, which brings the combined total of your deposit and the guarantee to 20%.
Under standard lending criteria, borrowing above 80% of the property value triggers lenders mortgage insurance. LMI protects the lender, not the borrower, and the cost is passed on as a one-off premium added to the loan or paid upfront. On a 5% deposit purchase, the LMI premium can run into thousands of dollars. The government guarantee removes that cost entirely by covering the gap between your 5% deposit and the 20% threshold lenders require to lend without LMI.
Consider a buyer purchasing an established home near Riverside's Windermere precinct. With a 5% deposit, the buyer meets the minimum contribution, and the government guarantee fills the remaining 15%. The lender assesses the application using the same serviceability buffer and debt-to-income limits that apply to any other home loan, but no LMI premium is charged. The buyer's borrowing capacity remains unchanged, and the loan structure can be variable, fixed, or split depending on the products offered by the participating lender.
Eligible Property Types and Price Caps in Riverside
The scheme covers new builds, established homes, house and land packages, and vacant land, provided the property value does not exceed $700,000.
Riverside falls within the regional Tasmania category under the scheme's price cap structure. Both the purchase price and the lender's assessed valuation must be at or below $700,000. If either figure exceeds the cap, the application will not be accepted under the scheme. The property must be intended as your principal place of residence. Investment purchases are not eligible.
A buyer looking at a three-bedroom home on the lower end of the Riverside market might find suitable properties comfortably within the cap, while buyers targeting newer or larger homes closer to the riverfront may need to confirm valuations before proceeding. If the property you want exceeds the cap, refinancing or switching to a standard loan with LMI becomes the alternative. Buyers considering house and land packages should ensure the combined contract value, including all builder costs and allowances, stays within the $700,000 limit.
Serviceability and Borrowing Capacity on a 5% Deposit
Lenders assess your application using a 3.0 percentage point buffer above the loan product rate and apply debt-to-income lending limits.
Even with the government guarantee in place, your lender must confirm you can service the loan under APRA's prudential framework. That means your income, existing debts, living expenses, and other commitments are tested at a rate 3.0 percentage points above the actual rate you'll pay. From February 2026, lenders also operate within a debt-to-income cap that restricts the portion of new lending at six times income or greater to 20% of their owner-occupier portfolio.
In practice, a buyer with a household income of $90,000 and minimal existing debt will have more borrowing capacity than a buyer on the same income carrying a car loan and a personal loan. Lenders also factor in your deposit size when calculating loan-to-value ratio. Borrowing 95% of the property value means higher monthly repayments than borrowing 80%, even though the government guarantee removes the LMI cost. If your income supports the repayments at the buffered rate, the application proceeds. If it doesn't, you'll need to reduce the purchase price, increase your deposit, or address other debts before applying. You can explore your borrowing capacity with a broker before you start searching for properties.
Combining the Scheme with State Grants and Concessions
You can use the Australian Government 5% Deposit Scheme alongside Tasmania's First Home Owner Grant and stamp duty concessions where you meet the eligibility criteria for each.
Tasmania offers a First Home Owner Grant of $20,000 for eligible purchases of new homes from 1 July 2026, subject to final legislation. The grant does not apply to established homes. Stamp duty concessions that applied to first home buyers purchasing established homes up to $750,000 ended on 30 June 2026, and no equivalent concession for established homes is currently in place under Tasmanian law. Buyers purchasing new builds or construction loans may qualify for both the federal scheme and the state grant, reducing the upfront cash required and freeing up funds for settlement costs or post-purchase expenses.
A buyer purchasing a new home in one of Riverside's newer subdivisions could access the $20,000 grant, use a 5% deposit under the federal scheme, and avoid LMI entirely. The combined benefit reduces both the deposit amount and the upfront costs, though buyers still need to account for conveyancing, building and pest inspections, and any adjustments at settlement. Buyers considering established homes will not receive the state grant but can still use the federal scheme if they meet the first home buyer criteria and the property value stays within the cap.
Fixed, Variable, and Split Loan Structures
Participating lenders offer different loan products under the scheme, and the choice between fixed, variable, or split rates depends on your lender's panel and your financial situation.
A variable rate moves with market conditions, which means your repayments can increase or decrease over time. A fixed rate locks in your repayments for a set period, typically one to five years, which provides certainty but removes flexibility if you want to make extra repayments or refinance during the fixed term. A split loan divides your borrowing between fixed and variable portions, giving you some stability and some flexibility.
Under the 5% deposit scheme, not every participating lender offers all three structures. Some lenders may offer variable rates only, while others provide fixed or split options. The rate you receive depends on the lender's pricing, your deposit size, and your financial profile. Buyers with a 5% deposit typically pay a slightly higher rate than buyers with a 20% deposit, reflecting the higher loan-to-value ratio. If fixed rate terms appeal to you, confirm which participating lenders on the panel offer that structure before submitting your application.
What You'll Need to Apply
Applications are made through participating lenders, not directly to Housing Australia, and you'll need to provide proof of income, savings history, identification, and details of the property you intend to purchase.
Lenders assess your genuine savings, which typically means funds held in your account for at least three months and accumulated through regular contributions rather than one-off windfalls. Gifted deposits from family members may be accepted depending on the lender's policy, but most lenders require at least some portion of your deposit to come from your own savings. You'll also need to show payslips, tax returns if you're self-employed, bank statements, and identification documents.
Once your home loan pre-approval is confirmed, you can start making offers. Pre-approval gives you a clear picture of your borrowing limit and confirms your eligibility under the scheme before you commit to a contract. After you sign a contract of sale, the lender orders a property valuation to confirm the home's market value. If the valuation comes in below the purchase price, you may need to renegotiate with the seller or increase your deposit to cover the shortfall. Settlement typically occurs six to eight weeks after contract signing, and you'll need to have funds available for settlement costs, including conveyancing and any adjustments.
Participating Lenders and How to Access the Scheme
The scheme is available through a panel of participating lenders, including major banks and non-major lenders, and a mortgage broker in Riverside, Tasmania can help you compare products and submit your application.
Housing Australia expanded the lender panel in October 2025 to include 3 major banks and 28 non-major lenders, with further expansion continuing through 2026. Each lender sets its own interest rates, product features, and eligibility criteria within the framework of the scheme. Some lenders offer offset accounts, others do not. Some allow unlimited extra repayments on variable loans, while others impose caps or fees. Working with a broker gives you access to multiple lenders and allows you to compare rates, features, and approval terms without submitting separate applications to each institution.
Brokers also manage the application process, including document collection, liaising with the lender's credit team, and coordinating valuation and settlement. If you're applying under the scheme and also accessing the Tasmanian First Home Owner Grant, your broker can confirm which lenders accept grant funds as part of your deposit and ensure all documentation is submitted correctly. Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
Can I use a 5% deposit to buy an established home in Riverside?
Yes, the Australian Government 5% Deposit Scheme covers new builds, established homes, and vacant land in Riverside, provided the property value does not exceed $700,000. The scheme is available to eligible first home buyers and does not require lenders mortgage insurance.
What is the property price cap for the 5% deposit scheme in Riverside?
The price cap for regional Tasmania, including Riverside, is $700,000. Both the purchase price and the lender's assessed valuation must be at or below this amount to qualify under the scheme.
Do I need to pay lenders mortgage insurance with a 5% deposit?
No, the government guarantee replaces lenders mortgage insurance. Housing Australia provides a guarantee of up to 15% of the property value, bringing the combined total of your deposit and the guarantee to 20%, which removes the need for LMI.
Can I combine the 5% deposit scheme with the Tasmanian First Home Owner Grant?
Yes, you can use the Australian Government 5% Deposit Scheme alongside the Tasmanian First Home Owner Grant if you meet the eligibility criteria for both. The state grant applies to new homes only and is $20,000 for eligible purchases from 1 July 2026.
How do I apply for the 5% deposit scheme?
Applications are made through participating lenders on the Housing Australia panel, not directly to Housing Australia. A mortgage broker can help you compare lenders, confirm your eligibility, and submit your application with all required documentation.
