Saving for a home deposit can be a challenge, particularly when rising living costs make it harder to put money aside. While a 20% deposit is often seen as the standard when buying a home, reaching that target can take years, especially for first home buyers keen to enter the property market.
However, falling short of that savings goal doesn’t necessarily mean putting your plans on hold. Low deposit home loans can make it possible to buy a property sooner, with government schemes and other lending options also available to help eligible buyers take that next step towards home ownership.
What is a low deposit home loan?
A low deposit home loan allows you to buy a property with a deposit of less than 20% of its value. Some lenders may accept deposits as low as 5%, depending on your financial circumstances and their lending criteria.
Aside from the smaller deposit, the home loan itself works like a standard mortgage. You’ll make regular repayments towards the amount you’ve borrowed, plus interest, and may have access to features such as offset accounts, redraw facilities and the option to make extra repayments, depending on your lender and loan product.
The main difference is how much you need to borrow relative to the property’s value, known as your loan-to-value ratio (LVR). For example, if you’re buying a $600,000 home with a 10% deposit ($60,000), you’d need to borrow the remaining $540,000, giving you an LVR of 90%.
How much will you need for a home deposit?
The amount you’ll need to save depends on the property’s purchase price and the deposit percentage required. The table below shows how much a 5%, 10% or 20% deposit would cost across different property prices.
| Property price | 5% deposit | 10% deposit | 20% deposit |
|---|---|---|---|
| $400,000 | $20,000 | $40,000 | $80,000 |
| $500,000 | $25,000 | $50,000 | $100,000 |
| $600,000 | $30,000 | $60,000 | $120,000 |
| $700,000 | $35,000 | $70,000 | $140,000 |
| $800,000 | $40,000 | $80,000 | $160,000 |
| $900,000 | $45,000 | $90,000 | $180,000 |
| $1,000,000 | $50,000 | $100,000 | $200,000 |
| These figures cover the deposit only. Additional upfront costs, such as stamp duty, conveyancing, inspections and lenders mortgage insurance (where applicable), may also need to be considered. | |||
For example, buying a $700,000 property with a 5% deposit would require $35,000 in savings, compared to $140,000 with a 20% deposit. That’s $105,000 less you’d need for the deposit, although you’d also be borrowing an additional $105,000, increasing your mortgage repayments and overall interest costs.
How much does a low deposit home loan cost?
While a smaller deposit means less money to save upfront, it also means taking on a larger mortgage. This can increase your monthly repayments and the total interest you’ll pay over the life of the loan, even if your interest rate is the same.
The table below shows how repayments and interest costs compare when buying a $700,000 property with different deposit amounts, assuming a 30-year principal and interest loan at 6.5% p.a.
| Deposit | Loan amount | Monthly repayment | Total interest |
|---|---|---|---|
| 5% ($35,000) | $665,000 | $4,203 | $848,171 |
| 10% ($70,000) | $630,000 | $3,982 | $803,530 |
| 20% ($140,000) | $560,000 | $3,540 | $714,249 |
| Figures are approximate and assume the interest rate remains unchanged over the 30-year term. They exclude LMI, loan fees and other purchasing costs. Actual repayments will depend on your loan terms and lender. | |||
You can use our home loan repayments calculator to estimate repayments based on your own loan amount, interest rate and term.
Are there extra costs with a low deposit home loan?
On top of borrowing more, a low deposit home loan may come with additional costs. Some lenders charge higher interest rates for loans with higher loan-to-value ratios (LVRs), although this depends on the lender and loan product.
Another potential expense is lenders mortgage insurance (LMI), which generally applies when borrowing more than 80% of a property’s value. LMI protects the lender against certain losses if you default on your mortgage, rather than protecting you as the borrower.
LMI can cost thousands of dollars, depending on your loan amount, deposit and lender. While it’s generally a one-off premium, some lenders allow you to add it to your mortgage rather than paying it upfront. This increases your loan balance and means you’ll also pay interest on the insurance premium.
However, LMI isn’t always required when buying with a smaller deposit. Some government schemes, guarantor arrangements and lender exemptions allow eligible borrowers to avoid it.
What are your options for buying with a low deposit?
| Option | How it works | What to consider |
|---|---|---|
| Standard low deposit home loan | Some lenders allow eligible buyers to purchase with deposits as low as 5% of the property’s value. | LMI will generally apply, and lending requirements may be stricter. |
| Government home buying schemes | Eligible buyers may be able to purchase with a deposit as low as 2% or 5% through government-backed initiatives. | Eligibility requirements, property price limits and other conditions vary between schemes. |
| Guarantor home loan | An eligible family member uses equity in their property as additional security for your loan. | This may help you avoid LMI, but the guarantor takes on financial risk if you can’t meet your repayments. |
| LMI waivers | Some lenders waive LMI for borrowers in certain professions, such as eligible healthcare, legal and financial professionals. | Eligibility depends on the lender and may involve specific income, occupation and deposit requirements. |
Government schemes for low deposit home buyers
The Australian Government offers several schemes designed to help eligible Australians overcome some of the financial barriers to buying a home. Depending on your circumstances, these may allow you to purchase with a smaller deposit, avoid certain upfront costs or build your savings more quickly.
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Australian Government 5% Deposit Scheme
The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase a property with a deposit as low as 5%, without paying LMI. Eligible single parents and legal guardians can access the scheme with a deposit of just 2%.
Expanded in October 2025, the scheme has no income caps or limits on the number of available places. However, property price caps, eligibility requirements and participating lender criteria still apply.
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Help to Buy Scheme
The Help to Buy Scheme is a shared-equity initiative that allows eligible buyers to purchase a home with a deposit of just 2%. Under the scheme, the government contributes up to 30% of the purchase price of an existing home or 40% for a newly built home, reducing the amount you need to borrow.
In exchange, the government retains an equity share in the property, which may need to be repaid over time or when the home is sold. Income limits, property price caps and other eligibility requirements apply.
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First Home Super Saver Scheme
The First Home Super Saver Scheme (FHSS) allows eligible first home buyers to save for a deposit through voluntary contributions to their superannuation fund, potentially benefiting from the concessional tax treatment of super.
You can make up to $15,000 in eligible voluntary contributions per financial year, up to a total of $50,000 across multiple years. The amount you can withdraw depends on the type of contributions made, with associated earnings also included under the scheme’s rules.
Unlike the other schemes, FHSS doesn’t reduce the minimum deposit required by a lender, but can help you build your savings towards one.
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State and territory assistance
Depending on where you’re buying, you may also qualify for state or territory first home owner grants, stamp duty exemptions or concessions. These vary by location and can help reduce the upfront costs of purchasing a home.
Who can apply for a low deposit home loan?
You don’t have to be a first home buyer to apply for a low deposit home loan. They’re also available to existing homeowners and property investors, although getting approved will depend on your financial situation and the lender’s requirements.
Even if you’ve saved enough for a 5% or 10% deposit, that doesn’t automatically mean you’ll qualify for a loan. Lenders generally take a closer look at applications with smaller deposits, as they’re taking on more risk. As well as checking that you have enough saved, they’ll want to see that you can afford your repayments and manage your other financial commitments.
Some of the main things they’ll consider include:
- Income and employment: you’ll need to show you have a reliable income, whether you’re employed full-time, part-time, casually or are self-employed.
- Savings: some lenders want to see evidence of genuine savings built up or held over time, often at least three months. Money gifted by family may also count towards your deposit.
- Credit history: a strong repayment history can work in your favour, while missed payments or defaults could make approval more difficult.
- Existing debts: having a credit card, car loan or other debts won’t necessarily rule you out, but lenders will consider these alongside your regular living expenses.
- The property: some lenders have restrictions on the types of properties they’ll finance with a smaller deposit, or where they’re located.
Additionally, if you’re using a government scheme, you’ll need to meet additional eligibility requirements to qualify for that scheme.
What documents do you need to apply for a low deposit home loan?
When applying for a low deposit home loan, you’ll need to provide documents that help the lender verify your identity, income, savings and financial commitments. The exact requirements vary between lenders, but you’ll generally be asked for:
- Proof of identity: a driver’s licence, passport or other accepted identification.
- Proof of income: recent payslips, employment details or tax returns and financial statements if you’re self-employed.
- Savings and deposit history: bank statements showing how much you’ve saved and where your deposit is coming from. Some lenders may also require evidence of genuine savings or a gift declaration if family members are helping with your deposit.
- Details of existing debts and expenses: statements for personal loans, credit cards and other debts, along with information about your regular living expenses.
- Property information: details of the property you’re buying, including the contract of sale if you’ve already found a home.
If you’re applying through a government home buying scheme, you may also need to provide additional documents to confirm your eligibility, such as evidence of your first home buyer status or other required declarations.
Your lender or mortgage broker can let you know exactly what’s needed for your application, as additional documents may be requested depending on your circumstances.
Pros and cons of low deposit home loans
Pros
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Buy a home sooner
You may be able to enter the property market without waiting until you’ve saved a full 20% deposit.
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Smaller upfront deposit
You can put less of your savings towards the purchase price, potentially leaving more funds available for other expenses.
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Access to government assistance
Eligible buyers may qualify for schemes that reduce the deposit required or help them avoid LMI.
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Start building equity sooner
As you repay your mortgage, you can gradually build equity in your home, although property values can also fall.
Cons
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Higher repayments
A smaller deposit means a larger loan, increasing your monthly repayments and total interest costs.
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Lenders mortgage insurance
You may need to pay LMI, which can add thousands of dollars to the cost of your loan.
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Fewer loan options
Some lenders have stricter requirements or offer fewer products to borrowers with smaller deposits.
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Greater risk of negative equity
With less equity in the property initially, a fall in its value could leave you owing more than the home is worth.
Top tips for getting a low deposit home loan
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Check your credit history
A good credit history can improve your chances of approval. Check your credit report for errors and make sure you’re keeping up with existing repayments.
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Show you have a reliable income
Lenders want to see that you can comfortably afford repayments. Stable employment can help, although casual, contract and self-employed applicants may also qualify.
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Build consistent savings habits
Regular savings can demonstrate that you manage your money well. Some lenders also require evidence of genuine savings when assessing low deposit applications.
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Reduce your existing debts
Paying down credit cards, personal loans and other debts can improve your borrowing capacity. Even unused credit card limits can affect how much you can borrow.
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Set a realistic property budget
Buying a less expensive property reduces the deposit you’ll need and the amount you borrow. Focus on repayments you can comfortably manage rather than your maximum borrowing capacity.
How can a mortgage broker help with a low deposit home loan?
Finding a suitable low deposit home loan isn’t always straightforward, as lenders have different requirements around deposits, borrowing limits and eligibility. Some may accept a 5% deposit, while others may offer more competitive rates or waive LMI for eligible borrowers.
A mortgage broker can help you navigate these differences, assess your borrowing capacity and compare loans from a range of lenders. They can also help you explore government schemes and other options that may make buying with a smaller deposit more affordable.
