Low Deposit Home Loans: Your Options With 5-10% Saved
The 20% deposit is a benchmark, not a rule. Plenty of Australians buy with 5-10% saved — the question is which path you take to get there, because each one prices the smaller deposit differently. There are three main routes: pay lenders mortgage insurance, use a guarantor, or qualify for the federal Home Guarantee Scheme. Here is how each works, plus the genuine savings rules that apply to all of them.
How much deposit do you actually need?
Most lenders will lend up to 90-95% of a property's value, so the practical minimum deposit is around 5% — plus purchase costs like transfer duty, legal fees and inspections, which the loan will not cover. Your loan-to-value ratio (LVR) is the loan amount divided by the property value, and it drives everything: above 80% LVR you are in low-deposit territory, where lenders apply stricter credit assessment, LMI or a guarantee becomes necessary, and interest rates are often slightly higher than for lower-LVR borrowers. Check where your numbers land with our [LVR and LMI calculator](/calculators/lvr-lmi) before you go further.
Path 1: Pay LMI and buy now
The default low-deposit route is paying lenders mortgage insurance — a one-off premium that protects the lender if you default. Premiums are priced in LVR bands and rise steeply as your deposit shrinks, with the 90-95% band the most expensive. Most borrowers capitalise the premium into the loan rather than paying cash at settlement.
The honest case for this path: it requires no family help and no scheme eligibility, and buying years earlier can outweigh the premium if prices rise while you would otherwise be saving. The honest case against: it is a significant cost that buys you no protection, and it is generally not refundable or transferable if you refinance later. Our [LMI explained guide](/articles/first-home-buyers/lmi-explained) covers the pricing bands and profession waivers in detail.
Path 2: Use a guarantor
If a parent or close family member owns property, they can offer part of their equity as additional security for your loan. That extra security brings the lender's effective LVR to 80% or below, so no LMI applies — sometimes even with no cash deposit at all, though you still need to cover purchase costs.
The guarantee is usually limited to a set portion of the loan, and it can be released once your loan balance or the property's value gives you 20% equity in your own right. The catch is that the risk is real: if you default, the guarantor's property is on the line for the guaranteed amount. Lenders require guarantors to take independent legal advice for good reason. Read our [guarantor home loans guide](/articles/first-home-buyers/guarantor-home-loans) — and make sure any guarantor reads it too.
Path 3: The federal Home Guarantee Scheme
Under the Home Guarantee Scheme, Housing Australia guarantees part of your loan to a participating lender, so eligible buyers can purchase with a deposit as low as 5% (and lower for some cohorts under specific guarantees) without paying LMI. The scheme has included streams for first home buyers, regional buyers and single parents, each with its own eligibility criteria and property price caps that vary by location.
Eligibility rules, price caps and scheme settings have changed several times and may change again. As at July 2026, treat any summary — including this one — as a starting point and confirm the current criteria directly with [Housing Australia](https://www.housingaustralia.gov.au) or a participating lender. Note that the guarantee removes LMI, not risk: you are still borrowing at a high LVR, so a small equity buffer means less room to move if your circumstances or the market change.
A 15-minute chat is usually enough to map your options — free, no obligation.
Genuine savings: the rule that trips people up
Most lenders apply a genuine savings test to low-deposit loans — typically wanting to see around 5% of the purchase price genuinely saved or held over at least three months. The point is to prove you can consistently set money aside, not just that money exists.
What usually counts: regular savings accumulated over time, shares or term deposits held for three months or more, and equity in existing property. What often does not count on its own: a fresh gift from parents, a tax refund, a bonus or proceeds that just landed in your account. Two useful workarounds exist — gifted money that then sits untouched in your account for three months can become genuine savings at many lenders, and some lenders accept a clean 12-month rental history as a substitute. Policies differ, so this is worth checking lender by lender before you apply.
Choosing your path
A rough decision guide:
- Family with property and willingness to help, and everyone understands the risk: the guarantor route usually costs least
- Eligible for the Home Guarantee Scheme and buying under the price caps: the scheme is often the next best, if a place and a participating lender line up
- Neither available: paying LMI is a legitimate price for buying sooner — sharpen it by adding a little deposit to reach a cheaper LMI band, and check whether your profession qualifies for a waiver
Whichever route you take, low-deposit applications face closer scrutiny, so clean bank statements, stable employment and minimal other debts matter more than usual. See our [first home buyers page](/loans/first-home-buyers) for how we approach these applications.
Talk it through with a broker
The cheapest low-deposit path depends on your family situation, scheme eligibility and which lenders suit your income and savings history. [Get in touch](/contact) and we will map all three routes against your actual numbers before you commit to any of them.
Frequently asked questions
Can I buy a house with a 5% deposit in Australia?
Yes. Many lenders will lend up to 95% of a property's value, and the Home Guarantee Scheme allows eligible buyers to purchase with 5% (or less under certain streams) without LMI. Outside the scheme, expect to pay LMI or use a guarantor, and remember you also need to cover purchase costs like transfer duty on top of the deposit.
What are genuine savings and why do lenders care?
Genuine savings are funds you have saved or held yourself — typically around 5% of the purchase price over at least three months. Lenders use the test as evidence you can consistently live below your means. Gifts and windfalls often do not count immediately, but many lenders will treat gifted money as genuine once it has sat in your account for three months, and some accept a solid rental history instead.
Is it better to pay LMI or wait until I have 20%?
It is a genuine trade-off. Paying LMI costs you a real premium but gets you into the market years earlier; waiting avoids the premium but risks prices rising faster than you can save. There is no universal answer — compare the LMI cost against realistic saving timelines for your situation, and check guarantor and Home Guarantee Scheme options before deciding.
Who is eligible for the Home Guarantee Scheme?
The scheme has included streams for first home buyers, regional buyers and single parents, each with its own eligibility criteria and location-based property price caps, accessed through participating lenders. Settings have changed several times, so confirm the current criteria with Housing Australia before building the scheme into your plans.
Do low deposit home loans have higher interest rates?
Often, yes. Many lenders price loans by LVR tier, so borrowing above 80% — and especially above 90% — can attract a higher rate than the same loan at 60-80% LVR. It is one more reason to revisit your loan once you build equity: refinancing to a lower LVR tier later can improve your pricing.