Low Deposit Home Loans
Twenty per cent is the number lenders prefer. It is not the number you need. There are four established ways into a home with less, and they cost very different amounts. The useful question is not "can I buy with a small deposit" but "which of these four is cheapest for me".
Why 20 per cent matters at all
A lender's risk is the gap between what it lends and what the property would fetch in a forced sale. At 80 per cent of the value, that gap is comfortable. Above it, the lender wants protection, and there are only a few ways to provide it: an insurance policy you pay for, a government guarantee, or someone else's property standing behind part of the loan.
Everything below is a different answer to the same question. None of them change how much you can borrow, which is set by your income and your existing debts. They change what you need in the bank to get started.
The four routes, compared
1. The Australian Government 5% Deposit Scheme
The government guarantees the gap between your deposit and 20 per cent, so the lender treats the loan as fully secured and there is no lenders mortgage insurance to pay. Since 1 October 2025 there are no income caps and unlimited places, and the Sydney property price cap is $1.5 million, with $800,000 applying to the rest of New South Wales outside Newcastle, Lake Macquarie and the Illawarra.
Best when: you are an eligible first home buyer and the property is under the cap. It is usually the cheapest route by a clear margin.
Watch for: eligibility criteria you must meet, and the fact that the scheme place is arranged through a participating lender. Confirm current rules at Housing Australia.
2. Lenders mortgage insurance
You pay a one-off premium, usually added to the loan, for an insurance policy that protects the lender rather than you. It is available to almost anyone, with no first home buyer requirement and no price cap.
Best when: you do not qualify for the schemes, have no family able to help, and want to buy now rather than in two years.
Watch for: the cost. Premiums rise steeply as your deposit shrinks, and adding the premium to the loan means paying interest on it for the life of the loan. Estimate the premium.
3. A family guarantee
A parent pledges a limited amount of equity in their property as extra security. Your effective loan-to-value ratio falls below 80 per cent, so insurance generally falls away, and no money changes hands.
Best when: your family has equity but not cash, you are buying above the scheme cap, or you are not a first home buyer.
Watch for: it is a real liability for your guarantor and it affects their own borrowing while it is in place. How guarantor loans work.
4. A gifted deposit
Family gives you money towards the deposit. If the gift takes you to 20 per cent, insurance is avoided entirely. If it takes you part of the way, it reduces the insurance premium rather than removing it.
Best when: family would rather give money than take on a liability against their home.
Watch for: lenders want evidence that a gift is genuinely a gift and not a loan, usually in writing, and many still want to see some genuine savings of your own. What lenders ask for.
How lenders assess a low deposit application
A smaller deposit means more scrutiny, not different arithmetic. These are the areas where it shows.
Many lenders want to see part of the deposit built up over three to six months, rather than appearing suddenly. Rent paid on time can sometimes count.
Probation, casual work and recent job changes get closer attention at high loan-to-value ratios. Buying while on probation.
Small defaults and missed payments matter more when the deposit is thin. Worth checking your credit file before applying, not after.
Some lenders reduce the maximum loan-to-value ratio for apartments, small units or high-density postcodes. The property is assessed too.
Bank statements are read. Buy-now-pay-later accounts, gambling transactions and undisclosed debts all come up.
Assessed at a rate well above the one you will pay. A small deposit does not lift this ceiling. Estimate your borrowing power.
The risks worth naming
A small deposit means a large loan, and a large loan is more sensitive to rate movements. It also means less equity, so if values fall you can find yourself owing more than the property is worth. That is only a real problem if you need to sell, but it is worth understanding before you sign rather than discovering later.
The second risk is the buffer. If the deposit consumes every dollar you have, there is nothing left for a broken hot water system, a special levy or a period out of work. Lenders look for a small cash reserve after settlement, and so should you.
Costs beyond the deposit
The deposit is not the only cash you need. Transfer duty where it applies, conveyancing, building and pest or strata inspections, a mortgage registration fee, council and water adjustments and moving costs all come out of the same savings.
For eligible NSW first home buyers, no transfer duty is payable up to $800,000, with a concession to $1 million, which removes the single largest of those costs. Check the duty at your price, then model the whole cash requirement.
Documents you will generally need
Identification, recent payslips and usually a year-to-date figure, three to six months of bank statements covering your savings and everyday spending, statements for any existing debts, and details of credit card limits, personal loans, car loans, buy-now-pay-later accounts and HECS-HELP.
If a gift is involved, a signed letter from the giver confirming it is a gift and not repayable. If a guarantee is involved, your guarantor's own identification, property details and a certificate of independent legal advice.
What we do
Work out which of the four routes is genuinely cheapest for your situation, which often is not the one people assume. Check eligibility for the schemes properly rather than by rule of thumb. Match you to a lender whose maximum loan-to-value ratio, genuine savings policy and property rules all fit before an application goes anywhere near a credit file.
And say so plainly if the honest answer is that waiting six months puts you in a materially better position. Start with the first home buyer guide.
Put numbers on it
Deposit strategy
Five, ten or twenty per cent on the same purchase price, side by side.
OpenLVR and insurance cost
Your loan-to-value ratio and a ballpark insurance premium.
OpenGuarantor calculator
How much family equity a guarantee would need to cover.
OpenCan I afford this property?
The full cash requirement at a specific price.
OpenNSW stamp duty
First home buyer exemption and concession, at any price.
OpenBorrowing power
The ceiling your income sets, regardless of deposit.
OpenGet your free First Home Buyer Report
A written report showing where your deposit actually sits, which of the four routes is likely to be cheapest for you, and what the next step is. Free, no credit check.
Common questions about low deposit home loans
What is the smallest deposit I can buy with?
Five per cent is the practical floor for most buyers, through the Australian Government 5% Deposit Scheme if you are eligible, or with lenders mortgage insurance if you are not. With a family guarantee it is possible to borrow the full purchase price and costs, subject to lender policy. In every case you still need cash for purchase costs, and you still have to satisfy the lender on serviceability.
Is lenders mortgage insurance a waste of money?
It protects the lender, not you, which is why it feels like one. Whether it is worth paying depends on the alternative. If saving another 15 per cent would take three years and prices move in that time, the premium can be the cheaper outcome. If you would reach 20 per cent within a year, it usually is not. It is an arithmetic question rather than a matter of principle, and it is worth actually doing the arithmetic.
What are genuine savings and why do lenders care?
Genuine savings are funds you have accumulated yourself over time, usually three to six months, rather than a lump sum that appeared recently. Lenders use it as evidence you can set money aside consistently, which is a reasonable proxy for being able to meet repayments. Policy varies: some lenders accept rent paid on time as a substitute, and requirements are often relaxed at lower loan-to-value ratios.
Can I use a gift and the 5% scheme together?
Often yes, though the details depend on the lender and on the current scheme rules. A gift can supply part or all of the deposit while the government guarantee removes the need for insurance. Some lenders still want a portion of genuine savings even where a gift covers most of the deposit. It is worth confirming with the specific lender before you rely on it.
Does a small deposit mean a higher interest rate?
Often, yes. Many lenders price by loan-to-value ratio, reserving their sharpest rates for borrowers at or below 80 per cent. The difference varies between lenders and changes over time. It is one reason refinancing becomes worth reviewing once your ratio drops below 80 per cent, whether through repayments or a change in the property's value.
Should I wait and save more instead?
Sometimes that is genuinely the better answer, and you should expect to be told so if it is. Waiting improves your rate, removes the insurance premium and builds a buffer. It also means paying rent for longer and buying into whatever the market does in the meantime. There is no universally correct answer, only a clearer one once your actual numbers are on the table.
Do all lenders offer low deposit loans?
No. Maximum loan-to-value ratios differ, and some lenders reduce them further for apartments, small units, high-density postcodes or certain employment types. Not every lender participates in the government scheme either. This is the main reason a small deposit benefits from comparison across a panel rather than an application to whichever bank you already bank with.
Related reading
Guarantor home loans
Family equity instead of a cash deposit, and how it is released.
OpenGifted deposit home loans
Using money from family, and the evidence lenders ask for.
OpenBorrowing power assessment
The other half of the equation, and the one a deposit cannot fix.
OpenFirst home buyers
Deposits, schemes, borrowing power and the path to keys.
OpenLMI waivers for professionals
Some occupations skip the premium entirely.
OpenThe cash you need at $800,000
Deposit, duty and every cost at the NSW threshold price.
OpenFind out which route is cheapest for you.
Five questions and you will know where your deposit sits and which of the four options is worth pursuing. No credit check, nothing saved.