Keystart vs 5% Deposit Scheme

TL;DR — 30 SECOND ANSWER

Keystart is the lower-deposit option (2% vs 5%) but charges a meaningfully higher interest rate (~7.60% vs ~6.15-6.55% on big-four bank rates as of May 2026). For most WA buyers who CAN save 5%, the 5% Deposit Scheme will be cheaper over the life of the loan because the bank rates are 1-1.5% lower. Keystart wins if (a) you can only manage 2-4% deposit, (b) your credit history isnt clean enough for bank approval, (c) your purchase is between $700K and $860K (over the typical 5% Deposit Scheme cap but under Keystarts), or (d) you have previously owned property (Keystart accepts non-FHBs in many cases).

Side-by-side comparison

	Keystart	5% Deposit Scheme
Minimum deposit	2%	5%
Current interest rate (May 2026)	~7.60%	~6.15-6.55% (big-four bank panel)
LMI payable	Zero	Zero
Income cap (singles, Perth Metro)	$155,000	None (removed Oct 2025)
Income cap (couples/families)	$228,000	None
Property price cap (Perth)	$860,000	$850,000
Property price cap (regional WA)	Varies by region (Kimberley/Pilbara higher)	$600,000
First home buyer required	No (some products available to non-FHBs)	Yes
Credit history flexibility	High — defaults and bankruptcy can be considered	Standard bank credit policy applies
Lender choice	Keystart only	~30+ participating banks
Offset account	No	Yes (depending on bank)
Places available	Unlimited	Unlimited (cap removed Oct 2025)
Refinance path	Most refinance to bank after 3-5 years once equity passes 20%	Already on bank panel — refinance just for better rate

Which is right for you?

Pick Keystart if…

You can only scrape together a 2-4% deposit
Your credit history is not clean (defaults, bankruptcy, recent missed payments)
Your target property is between $700K and $860K (over typical bank FHB caps)
You have previously owned property (5% Deposit Scheme excludes you, Keystart does not)
You can refinance to a bank in 3-5 years once your equity passes 20%

Pick 5% Deposit Scheme if…

You can save a 5% deposit (or close to it)
You have clean credit history and standard income documentation
You want bank rates (1-1.5% lower than Keystart) plus an offset account from day one
Your target is under $850K in Perth or under the relevant 5% Deposit Scheme cap elsewhere
You are a first home buyer (the 5% Deposit Scheme requires this)

Can you combine them?

You cannot hold both at the same time on the same property — Keystart and the 5% Deposit Scheme are mutually exclusive loan products. However, you can SEQUENCE them: start with Keystart to get into the market fast, then refinance to a bank product once you have built equity to 20% LVR (typically 3-5 years). By that point your equity is past 20% and the 5% Deposit Scheme is irrelevant anyway — you just need a competitive bank rate. Both can be combined with the WA $10,000 First Home Owner Grant on new builds, and both can be combined with the FHSSS for accelerated deposit saving.

FAQs

Is Keystart cheaper than a bank loan in 2026?#

No — Keystarts current rate of ~7.60% (May 2026) is approximately 1-1.5% higher than competitive big-four bank rates (6.15-6.55%). On a $600,000 loan, that 1% difference is roughly $6,000/year in extra interest. Keystarts advantage is access (lower deposit, more flexible credit policy), not cost. Most Keystart borrowers refinance to a bank after 3-5 years.

Can I have a previous property and still use Keystart?#

Yes — many Keystart products do not require first home buyer status. This is unique among AU FHB-adjacent schemes (the federal 5% Deposit Scheme requires you to have never owned residential property; Keystart does not). If you owned a home, sold it, and now need to re-enter the market with a low deposit, Keystart can be a path back in.

What property prices does Keystart cover in 2026?#

For Perth Metro: $860,000 cap on the Low Deposit Home Loan (lifted April 2026 from $800,000). For regional WA: varies — Kimberley and Pilbara have higher caps reflecting cost-of-living differences. Always check keystart.com.au for the current cap matching your specific product and region.