Can you get a home loan with a 5% deposit in Australia?

Depending on the lending criteria, some loans will allow you to secure a loan with only 5% of the value of the property.
Ava Crawford
Written by
Ava Crawford
Imogen Baxter
Reviewed by
Imogen Baxter
Last updated
May 17, 2024
0 minute read
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Couple sitting on a yellow couch with their cat

When it comes to putting down a deposit on a new home, you might want to know what your options are. While the recommended amount for a deposit is 20% of the property price, your deposit can actually vary.

This means that if you’re strapped for cash, you can actually use a smaller deposit to secure your property. Depending on the lending criteria, some loans will allow you to secure a loan with only 5% of the value of the property.

Bear in mind that a 5% deposit will mean something very different in different parts of Australia. A 5% deposit in rural NSW will be very different to a metro Sydney postcode, and the same goes throughout the country. In 2022, the average first home buyer in Australia paid a deposit of roughly $120,000.

The higher the percentage of the property value that you pay, the less money you’ll have to borrow. This is called a loan-to-value ratio, or LVR. A low-deposit home loan with a high LVR may come with higher interest rates and stricter eligibility criteria.

What is the minimum deposit for a mortgage?

In terms of managing risk, most banks will recommend that you put down a 20% deposit when you buy a property.

This might be the standard, but there are still plenty of options available for you if you have a small deposit at hand.

The smallest deposit you can have to be considered for most home loans will tend to be 5% (which means you are borrowing 95% of the property’s value).

Since you will be borrowing more money with a smaller deposit, this does mean the home loan application process can be more intensive. You may end up with larger home loan repayments due to this larger loan.

When you pay a low deposit, you will also most likely need to consider Lenders Mortgage Insurance (LMI), to give greater security to your loan provider. This will be required with low-deposit home loans where the LVR is less than 80%.

There are certain instances where you may be able to provide an even smaller deposit, or even no deposit.

These are special circumstances (in the case of the Family Home Guarantee) or different types of home loans (in the case of Guarantor Loans).

Can I get a home loan while on parental leave?

How do I get approved for a home loan with a 5% deposit?

If you’ve decided to apply for a low-deposit home loan, you’ll want to make sure your finances are in the best shape possible to improve your chances for approval.

Since you will be subject to a thorough credit check, this means paying off any outstanding loans and making sure you are on top of any credit card repayments.

You will also want to be able to demonstrate proof of stable employment and genuine savings as evidence of your ability to make home loan repayments. Things like parental leave can also impact your eligibility with some lenders.

Check the loan in question for any specific eligibility criteria and make sure to prepare any necessary documentation.

And remember — though a smaller deposit may be easier to manage now, interest rates change and mortgage repayments shift. You need to be able to make your home loan repayments through thick and thin, so there’s a big risk in overcommitting to something you won’t be able to withstand.


As a first-home buyer, can I get a home loan with a 5% deposit?

As a first home buyer, a small deposit can make the property market seem a bit more approachable.

If you are concerned about needing extra help, there is extra assistance available for eligible first-home buyers.

  • First Home Owner Grant (FHOG): This is a grant of between $10,000 — $20,000 from the Australian government to help first-time home buyers with their property purchase price (conditions vary from state to state and price caps do apply, and properties must be owner-occupied - no investment property).
  • First Home Super Saver Scheme: This scheme allows you to make voluntary contributions to your superannuation and nominate to withdraw it for a first-time home purchase. This is a federal government scheme and the maximum amount deductible is $50,000.
  • First Home Guarantee (FHG): Also called the First Home Loan Deposit Scheme (FHLDS). Eligible first-home buyers may apply for a limited number of guaranteed homes (35,000 in the 2022-2023 financial year). The home guarantee scheme allows first-time buyers to purchase a residential property with a minimum 5% deposit, while the government guarantee the remainder of the deposit up to 20%. This saves you from paying lenders mortgage insurance.

Eligibility for these schemes will vary. It will generally require you to be an Australian citizen or permanent resident and to complete a check of your credit score.

As a single parent, can I get a home loan with a 5% house deposit?

Similar to the First Home Guarantee, the Australian government also has additional places set aside for single parents. This is called the Family Home Guarantee. Eligibility criteria are quite strict in requiring applicants to be single parents to at least one dependent child.

Here, the minimum deposit is lowered even more to make housing accessible for those in need - a 2% minimum deposit is required, with the remaining percentage making up the 20% recommended deposit guaranteed by the Australian government.

There is also a scheme in place for regional Australia. This Regional Home Guarantee helps encourage the growth of areas outside the major metropolitan hubs of Sydney and Melbourne.

Do I have to pay LMI with a 5% deposit?

Lender’s mortgage insurance (LMI) is payable in most cases where you pay a small deposit. Generally speaking, if you pay a deposit of less than 20% of the property’s value, you will need to pay lenders mortgage insurance.

There are a few instances where this may not be the case (such as with a 5% deposit backed by a government scheme - like the First Home Guarantee or Family Home Guarantee scheme, for example). In general, if you are curious as to what the upfront costs of your property will be (like LMI and stamp duty), it is worth doing your research or talking to your mortgage broker.

Are Australian interest rates higher with a 5% deposit?

Interest rates will be different from home loan to home loan, but in general, they tend to be higher with the more risk your borrowing presents to lenders.

A 5% deposit presents a fairly high level of risk, as it tends to go hand in hand with a high loan amount. This means that you may see higher interest rates, thorough checking of credit scores, and stricter lending criteria for these loans.

If you see a low-deposit home loan boasting an eye-catching low-interest rate, it may be worth checking the comparison rate for a more accurate prediction of the interest you will pay over the duration of the loan. This accounts for any introductory offers or interest-only periods. This will also be impacted by your choice between a variable rate and a fixed rate.

What is my LVR with a 5% deposit?

If you take out a home loan on a property using a 5% deposit, you’ll have a loan-to-value ratio (LVR) of 95%.

A 95% LVR is one of the highest loan-to-value ratios that you’ll find. Other lenders will often offer them all the way to 50% - 60%. Because these home loans require such large depots, they are more commonly used as refinance home loans.

Are there any options for home loans with no deposit?

If you have no deposit, you may be more limited in home loan options.

Guarantor loans allow a loved one or family member to use the equity in their property for you to borrow against. Guarantor loans allow you to borrow a greater amount of money — up to 110% of the value of the property. This can be helpful when it comes to upfront costs like stamp duty.

Another option for those with generous friends and family can come in the form of a gifted deposit. This can either stand alone as your house deposit or can top up any deposit that you have already.

If you do receive a gifted deposit, be prepared to demonstrate genuine savings and a strong credit history as a way of proving you will be able to make your monthly repayments. You may also need to prove that the money was gifted in the application process (to prevent people from using money from personal loans or credit cards are their deposits)!

This article is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation, or needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS), or other offer documents before making an investment decision in relation to a financial product (including a decision about whether to acquire or continue to hold).
Prepared by OwnHome Services Pty Ltd ACN 664 492 059. This information does not take your personal objectives, circumstances or needs into account. Always read the disclosure documents for products and services before deciding on a product or service, and consider seeking independent legal, financial, taxation or other advice for your unique circumstances.

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