Though the standard recommendation for a deposit on a home loan in Australia is 20% of the property value, you will find many lenders offering options if you have a 10% deposit.
Though a smaller deposit might suit your financial situation, it may have consequences in how things look over the life of the loan.
A home loan with a deposit below 20% will mean that you may need to pay lenders mortgage insurance or LMI. This fee lowers the risk of a low-deposit loan to a provider in the event you are unable to make your repayments.
A lower deposit can also lead to stricter lending criteria, so make sure to get your credit score and supporting documentation in top shape before applying.
What are my options for a low-deposit home loan?
If you are looking for a home loan with a smaller deposit, there are options out there for you. If you’ve been a diligent saver and put aside 10% of the property value for your house deposit, pathways for home loans include:
- Guarantor Loans— A loved one or family member can act as a guarantor on your property purchase, which makes your loan less risky to a lender. In this case, providers will look to make sure your guarantor has enough equity in their property and check their creditworthiness as well as yours.
- Gifted Deposit— This is where a family member or loved one contributes to your deposit. This is helpful to those with a smaller deposit, as making up the remainder of the recommended 20% deposit can prevent you from needing to pay lenders mortgage insurance. If you are gifted money for a deposit, be prepared to show evidence of genuine savings and stable income to show that you will be able to make your repayments. You will also need to demonstrate that the money was received as a gift — this is to prevent people from using borrowed money from credit cards or personal loans to put down house deposits.
- 90% LVR Home Loan - A 10% deposit will leave you with a 90% loan-to-value ratio. Many loan specialists will offer home loans for this LVR, though they may have stricter eligibility criteria and less competitive interest rates.
Remember that if you do start your home loan with a high LVR, you may be able to refinance later. This could let you move to a home loan with a better interest rate and more desirable conditions once you have some equity in your property.
An alternative: An OwnHome Deposit Boost Loan
OwnHome allows customers to get a foot on the property ladder without hundreds of thousands of dollars upfront.
Backed by some of Australia’s most trusted financial institutions, OwnHome is working alongside the big players to help you get ahead in the game.
What is it?
With an OwnHome Deposit Boost Loan, all you need is the Low Deposit Premium upfront (up to 2.2% of the purchase price, minimum $9,500), and we’ll cover the rest of your 20% deposit - so you don’t pay Lenders Mortgage Insurance (LMI)! Then, when you pay your Low Deposit Premium upfront, OwnHome's team of experienced Buyer's Agents will guide you through the entire house-hunting journey - helping you find and buy a property.
Bridge your deposit gap - For a Low Deposit Premium of up to 2.2% of the purchase price (minimum $9,500), we’ll cover the deposit you need to unlock your very own 80% LVR mortgage.
Hello, pre-approval - Pair your OwnHome deposit with an 80% LVR home loan.
Find your dream home - When you pay your Low Deposit Premium upfront, our buyer's agents can help with your search and purchase.
Monthly repayments - You repay your OwnHome Deposit Boost Loan over time, just like you would with your mortgage. Think of it as paying for your deposit while you live in your home.
Who is eligible for OwnHome?
OwnHome exists to help aspiring homeowners who need a boost to their deposit. Key requirements for a Deposit Boost Loan are:
- Credit in good standing
- Proof of employment
- Permanent residency or citizenship for at least one applicant (confirm with credit)
- Looking to buy an owner-occupier property
- Savings to cover the Low Deposit Premium (up to 2.2% of the purchase price, minimum $9,500)
Interested in buying a home without the hundreds of thousands of dollars upfront usually required? Use our upfront costs calculator to estimate your upfront costs.
Can I get help as a first-home buyer with a 10% deposit?
Feeling overwhelmed at the prospect of saving up your deposit? Thankfully, first-home buyers can find some assistance with their quest for home ownership - even with a smaller deposit.
Government schemes
The government offers assistance to first home buyers. Major Australian government schemes to consider include the First Home Owners Grant (FHOG) and the Australian Government 5% Deposit Scheme (formerly the First Home Guarantee).
- First Home Owners Grant — The FHOG is an Australian grant aiming to help get first-time buyers into homes. It is generally between $10,000 and $30,000 (the NT's HomeGrown Territory Grant is $50,000, and the ACT has no FHOG) and can be used in most states for buying or building a new home, but can only be used by owner-occupiers. Stamp duty concessions are separate and depend on your state.
Each state has different grant amounts and restrictions. NSW, for example, offers a $10,000 grant for the purchase or construction of new homes (property value must not exceed $600,000). If buying land to build a property, the combined land and property value must be below $750,000.
Eligibility criteria across all states include that you (and your partner, if applicable) have never owned property and that you intend to live in the home for a minimum period, which varies by state (for example, 6 continuous months in QLD). View your state’s site for more information.
- 5% Deposit Scheme — This is a different government scheme that helps eligible first home buyers buy with a deposit as low as 5%. Places are uncapped and there are no income caps, but property price caps apply.
If you qualify, the government will guarantee the remainder of the 20% minimum deposit. This means you do not have to pay LMI. - The 5% Deposit Scheme also has a Single Parent Stream, which lets eligible single parents buy with a 2% deposit, and you don't need to be a first home buyer. Regional buyers use the same scheme, with regional price caps.
