If you're trying to buy your first home in Perth and you don't have a 20% deposit saved, you've probably heard about both Keystart and the federal 5% Deposit Scheme. They both help you get in sooner. They both avoid Lenders Mortgage Insurance. But they work very differently, and choosing the wrong one could cost you tens of thousands of dollars over the life of your loan.
At Central Lending Solutions, we help Perth buyers work through exactly this decision every week. Here's what you need to know.
What Is Keystart?
Keystart is a home loan provider owned by the Western Australian Government. It was set up specifically to help West Australians who can service a mortgage but can't get past the deposit hurdle with a mainstream lender.
The headline benefit is a 2% deposit with no Lenders Mortgage Insurance. On a home worth $700,000, that means you only need $14,000 saved for the deposit itself — plus purchase costs on top.
Income limits for Keystart were updated in late 2025, rising to $148,000 per year for singles and $218,000 per year for couples and families. Then in April 2026, they were lifted again. As of April 2026, the income limit for singles is now $155,000 and for couples and families it's $228,000.
The property price cap for Perth metro was also raised to $860,000 in April 2026, up from $800,000 in August 2025.
The trade-off is the interest rate. Keystart's variable rate is generally higher than what competitive mainstream lenders offer. As at mid-2026, Keystart's standard variable rate sits at 7.60% per annum (comparison rate 7.68%). You're paying more per month in exchange for a lower entry point — but the intention is that once you've built enough equity (typically to an LVR below 80%), you refinance to a more competitive lender.
Keystart is what's called a transitional lender. You use it more as a stepping stone rather than a long-term, multi-decade destination.
What Is the 5% Deposit Scheme?
The Australian Government 5% Deposit Scheme (previously called the First Home Guarantee) lets eligible first home buyers purchase with just a 5% deposit, also without paying LMI.
The government guarantees the gap between your 5% and the 20% LVR threshold. This means the lender treats it as an 80% LVR loan without requiring you to pay the insurance premium.
On 1 October 2025, the scheme was expanded significantly — income caps were removed, the number of places was made unlimited, and property price caps were increased.
The Perth metro property price cap under the scheme is now $850,000, effective from 1 October 2025.
Because you're borrowing through a mainstream participating lender (CBA, ANZ, Westpac, Bankwest, and many others), you access their competitive rates rather than Keystart's transitional rate. The catch is you need a 5% genuine deposit rather than 2%.
Head-to-Head Comparison
| Feature | Keystart | 5% Deposit Scheme |
|---|---|---|
| Minimum deposit | 2% | 5% |
| Lenders Mortgage Insurance | None | None |
| Income cap (Perth metro, 2026) | $155,000 single / $228,000 couple | No income cap |
| Property price cap (Perth metro) | $860,000 | $850,000 |
| Interest rate | Higher (transitional rate ~7.60%) | Mainstream lender rate |
| Available lenders | Keystart only | 50+ participating lenders |
| Loan type | Variable only | Variable or fixed |
| Investment properties | Not permitted | Not permitted |
| Owner-occupier requirement | Yes | Yes |
Which Should You Choose?
The answer depends on your deposit and your income.
Keystart tends to suit buyers who:
- Can only save 2–4% of the purchase price
- Earn between $80,000 and $155,000 (single) or up to $228,000 (couple) and fit the income test
- Are happy to pay a higher rate in the short term and plan to refinance once their equity builds
- Can't access mainstream lenders due to deposit size or credit history
The 5% Deposit Scheme tends to suit buyers who:
- Have reached 5% savings and want to get into a mainstream lender at a competitive rate from day one
- Previously didn't qualify because of the old income caps (those have now been removed)
- Want to choose from a wide range of lenders and loan products
- Have flexibility on the property price cap ($850,000 under the federal scheme vs $860,000 for Keystart — a $10,000 difference that rarely matters)
The thing most Perth buyers don't realise is that these two pathways are not mutually exclusive in the long run. Plenty of buyers start with Keystart, build equity over two or three years, then refinance to a better rate through a mainstream lender. Keystart has helped more than 122,000 Western Australians achieve home ownership since 1989, and the WA Government regularly updates the scheme to reflect current market conditions.
Don't Forget the First Home Owner Grant
If you're building new or buying a newly constructed home, you may also be eligible for the WA First Home Owner Grant. For eligible transactions from 7 May 2026, the FHOG cap for homes south of the 26th parallel (which includes all of Perth) was increased to $800,000. The grant itself is $10,000, and it can be used alongside either Keystart or the federal 5% Deposit Scheme on eligible new builds.
FAQ
Can I use Keystart and the 5% Deposit Scheme at the same time?
No. They are separate loan products and can't be combined. You choose one pathway or the other based on your deposit, income and property price.
What happens to my Keystart loan once I build enough equity?
Once your LVR drops below 80%, you can refinance to a mainstream lender without paying LMI. Most Keystart borrowers aim to do this within five to seven years to access more competitive rates.
Is there still an income cap for the federal 5% Deposit Scheme?
No. As of 1 October 2025, income caps were removed from the scheme. Any eligible first home buyer can now apply regardless of income, subject to the property price cap and serviceability requirements.
Can I use the 5% Deposit Scheme on an established home in Perth?
Yes. The scheme applies to both new and established properties, provided the purchase price is at or below the Perth metro cap of $850,000.
Do I have to use a specific lender with the 5% Deposit Scheme?
You need to apply through a participating lender — you can't apply directly to the government. A mortgage broker can help you compare participating lenders to find the most competitive rate and loan features for your situation.
The Bottom Line
Both Keystart and the 5% Deposit Scheme are genuine pathways into homeownership for Perth buyers without a full 20% deposit. The right one depends on how much you've saved, what property you're looking at, and whether you want to maximise deposit flexibility or lock in a competitive rate from the start.
Our team at Central Lending Solutions compares both options alongside 30-plus lenders for every first home buyer we work with. Book a free chat and we'll run your numbers across both pathways so you can make the decision with confidence.