Low Deposit Home Loans: Buy with 5% in Australia

Saving a 20% deposit in Australia's property market can take a decade in major cities. The good news: you don't need 20%. Thousands of Australians buy homes every month with 5–10% deposits — using government schemes, guarantor arrangements, or by simply paying LMI. Here's a complete guide to your low-deposit options.

Option 1: The First Home Guarantee (5% deposit, no LMI)

The federal government's First Home Guarantee allows eligible first home buyers to purchase with just 5% deposit without paying Lenders Mortgage Insurance. The government guarantees the remaining 15% to the lender. There are 35,000 places available each financial year.

• Eligibility: Australian citizen or permanent resident, first home buyer, income under $125,000 (single) or $200,000 (couple)
• Property price caps: Vary by location — $900,000 in Sydney/Melbourne, $750,000 in Brisbane/Gold Coast, $650,000 in regional areas
• Property types: New and established homes, house and land packages, off-the-plan apartments
• Lenders: Only participating lenders offer the scheme — your broker will identify which ones
• Genuine savings: You still need 5% in genuine savings (held for 3+ months)

Option 2: Pay LMI and buy with 10% deposit

If you don't qualify for the First Home Guarantee (or places are exhausted), you can still buy with 10% deposit by paying Lenders Mortgage Insurance. LMI is a one-off premium that protects the lender — not you — if you default. It's typically capitalised into the loan (added to your loan balance) so you don't need to pay it upfront.

Option 3: Guarantor loan (borrow up to 105%)

A guarantor loan allows a parent or close family member to use equity in their own property as additional security for your loan. This can allow you to borrow up to 105% of the purchase price (covering stamp duty and costs) without paying LMI. The guarantor's property is at risk if you default — so this arrangement requires careful family discussion and independent legal advice for the guarantor.

Option 4: First Home Super Saver Scheme (FHSS)

The FHSS allows first home buyers to make voluntary contributions to their superannuation and then withdraw them (plus earnings) for a home deposit. Contributions are taxed at 15% (vs up to 47% in personal income) — making it a tax-effective way to save. You can withdraw up to $50,000 under the scheme.

Which option is right for you?

• First Home Guarantee: Best for eligible first home buyers who can save 5% — avoids LMI entirely
• LMI: Best when property prices are rising faster than you can save, or when you don't qualify for the guarantee
• Guarantor: Best when parents have equity and are willing to help — allows you to buy sooner with no LMI
• FHSS: Best as a savings strategy to build your deposit tax-effectively over 2–4 years
• Combination: Many buyers use FHSS to build their deposit, then use the First Home Guarantee to buy