Can I use a personal loan for my home loan deposit?

If you've been struggling to save a larger deposit for your home loan, you may wonder if a personal loan could help you.
Dawn Teh
Written by
Dawn Teh
Ava Crawford
Reviewed by
Ava Crawford
Last updated
August 1, 2023
0 minute read
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home with a green front lawn purchased using a loan for a home loan deposit

Yes, it's possible to use a personal loan to pay for a house deposit in Australia.

Sounds easy? Not quite.

Don't be too quick to apply for one because a personal loan is a financial product with long-term implications for your financial situation.

Keep reading to discover all you need to know about using a personal loan as a house deposit. This way, you can make a more informed decision about whether it's the right choice for you.

Can I use a personal loan to pay my house deposit?

As each year passes, we keep seeing house prices rising along with the minimum deposit required to purchase a property. Depending on the value of the property, your home loan deposit could cost hundreds of thousands of dollars and take a decade to save.

If you've been struggling to save a larger deposit for your home loan, you may wonder if a personal loan could help you.

A personal loan is a type of loan that individuals can use for various reasons - a car, a wedding, renovations or even a holiday. It's typically unsecured, meaning that borrowers don't need to put up collateral, such as a home or car, to secure the loan. Like other loans, it'll come with its own loan structure — like a loan term, variable or fixed rate interest, and monthly repayments.

The short answer is: Yes, you might be able to use a personal loan to pay for your home loan deposit.

But, it's not always guaranteed that lenders will accept a personal loan as a house deposit as some prefer to see that you have your own genuine savings.

Plus, there are key pros and cons to take note of, and it could affect whether it's the right path for you.

If you’re considering taking out a personal loan to cover your home loan deposit, it might be a good idea to first get some financial advice from a mortgage broker. There are low-deposit home loan options available, such as 5% or 10% deposit mortgages, that the broker is aware of that could fit your circumstances and have lower loan repayments than a mortgage and a personal loan.

Get a 20% OwnHome Deposit Boost

The average Australian first-time home buyer takes almost 10 years to save up a 20% house deposit to purchase a home in our capital cities.

Fortunately, an OwnHome Deposit Boost Loan can get you on the property ladder much sooner. A Deposit Boost Loan is not a personal loan; it works like a mortgage.

Here's how OwnHome's Deposit Boost works:

  1. Get a deposit loan (up to 20% of the property's value) instantly for only 1-2% (+GST) upfront.
  2. Pair it with an 80% loan-to-value ratio (LVR) mortgage from another lender. No paying LMI and no need for a family member guarantor.
  3. Start looking for your new home in your ideal postcode when you get pre-approval with your dedicated OwnHome Buyer’s Agent!
Skip the waiting & saving. Get started with OwnHome.
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Pros and cons of using a personal loan to pay for a house deposit


  • Avoid paying LMI

Using a personal loan as a 20% house deposit means you can avoid paying Lenders Mortgage Insurance (LMI) which is usually required when your deposit amount is less than 20% of the property's value. It is insurance that you pay for, but it covers the bank if you default on your mortgage.

  • Enter the property market sooner

Instead of waiting years to save up a 20% deposit on your own, using a personal loan as the deposit will let you buy a home a lot sooner.


  • It could affect your chances of securing a home loan.

Even though you have a loan to make up the 20% deposit, this doesn't mean that you're guaranteed to get a mortgage.

Lenders have to assess your financial situation before approving your home loan application. And anytime you apply for a credit product (personal loans included), it could hurt your credit rating as it might seem like you're taking on too much debt.

  • High interest rates.

Personal loans usually come with higher interest rates than other types of loans. This is because personal loans are usually unsecured — meaning they're not backed by collateral such as a house or car.

This increases the risk lenders take on. So to offset this risk, lenders charge higher interest rates.  Additionally, personal loans can come with lots of additional fees, so be sure to check the comparison rate if the interest rate seems too good to be true.

  • Could be more costly in the long run

While you might be able to avoid paying LMI, you might still end up paying more in the long term because of interest and other fees associated with the personal loan.

Also, after some time, you might find that having such a high-risk additional debt such as a large personal loan might hinder your ability to refinance down the road.

Don't forget to factor in other costs needed to buy a home — like stamp duty and solicitor fees.

How do I get a personal loan for a house deposit?

You'll need to apply for a personal loan with approved credit providers. They will look at your current financial situation to determine your eligibility for a personal loan.

This includes examining:

  • Your credit history and credit rating (or credit score) — include credit card, car loans, and other debt.
  • Whether you have a stable source of income.  
  • Your savings history.
  • The loan amount you're applying for.


What is the first home loan deposit scheme?

The first home loan deposit scheme is now called The First Home Guarantee (FHBG) under the Home Guarantee Scheme — an initiative by the Australian government that helps Australians become homeowners.  

Under this scheme, eligible first-home buyers come up with 5% of their home loan deposit while the government guarantees the remaining 15%.  

As a side note, The First Home Owner Grant (FHOG) is another initiative set up by the government where a one-off amount is given to first-time home buyers. It won't apply if you're buying a second home or refinancing.

Learn more about first-home-buying schemes.

What is LMI?

LMI stands for lender’s mortgage insurance and is another acronym to be aware of pre-auction. If you are paying under 20% of the property value as a deposit, you must pay LMI to minimise risk for the lender.

There are some circumstances where this is waived, such as in government schemes for first-home buyers or single-parent families or for people working in certain occupations.

Why do I need to pay LMI?

Lenders mortgage insurance for your lender, not you. LMI is charged to protect the provider for riskier loans, like ones with a higher loan-to-value ratio. These loans may also attract higher interest rates due to their higher level of risk.

How much deposit do I need to buy a home in Australia?

The recommended deposit in Australia is 20% of the property’s value. However, beyond this, there are low deposit home loans allowing you to put down a minimum 5% deposit.

There are also home guarantee schemes that can allow for lower deposits in very specific circumstances (like for single parents, requiring a minimum 2% deposit).

OwnHome offers an alternative pathway to homeownership, and you don't need to have hundreds of thousands in savings.

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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