We've helped thousands of Australian's buy a property with just a 5% deposit. Here's how low deposit home loans work.
There are many options available for home buyers who don't want to save up a big deposit. This page has over 20 low deposit home loans to compare and useful information on all the ways you can get these loans, plus extra costs and pitfalls to be aware of.
variable rate comparison rate The Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR offers a low variable interest rate with no application fee and ongoing fee.Greater Bank Home Loan Offer
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
Greater Bank Home Loan Offer
Compare mortgages with low deposit options
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Low deposit home loan offers
- Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - 3.74% p.a. comparison rate. Guarantor loan with a competitive rate.
- State Custodians Low Rate Home Loan with Offset - LVR 80% to 90% - 3.89% p.a. comparison rate. Low rate, offset account and available with a 10% deposit.
- Mortgage House Advantage Variable Home Loan - LVR 95 Special (Owner Occupier, P&I) - 4.27% p.a. comparison rate. A flexible mortgage available with a 5% deposit.
- IMB Budget Home Loan - Special LVR <=90% (Owner Occupier, P&I) - 3.69% p.a. comparison rate. Get this low-rate loan with a 10% deposit.
How small can my deposit be?
The standard deposit size for most lenders is 20% of the property's value. In other words, borrowers need a loan-to-value ratio (LVR) of 80%. Low deposit loans come with an LVR of 90 or 95%. This means you can potentially get a mortgage with just a 5% deposit.
If you're buying an $800,000 property, a 20% deposit is $160,000. A 5% deposit is just $40,000. That's a huge difference.
There must be a catch, right?
There is. If you're borrowing more than 80% of a property's value you will have to pay lenders mortgage insurance (LMI) as well. Depending on how much you're borrowing this can be a significant cost, ranging from several thousand dollars up to ten or even twenty thousand dollars.
You can capitalise your LMI, meaning you can add this cost into your borrowing amount. But this can affect how much you can borrow. Learn more about LMI and how if affects low deposit loans.
The low deposit trap: Be sure you have cash to cover all your costs
Saving a 5% deposit is much easier than saving a 20% deposit. But you need to make sure you have money saved up to cover all your other home buying costs. This includes LMI, stamp duty, government fees, conveyancing costs and upfront lender's fees.
Don't forget to add in things like legal fees, conveyancing fees and transfer fees to your total. Find out the true cost of buying a property here.
Is it harder to get approved for a low deposit home loan?
While the banks might advertise that you can borrow up to 95% of the purchase price of your new home, it's important to realise that lending criteria still apply:
- Good credit history. In order to get your loan approved at a high LVR like 95%, you will need to have a clean credit history. This means you should have no defaults showing on your credit report for missed payments on other bills.
- Good employment history. You will also need to demonstrate that you have a stable employment history. This means showing that you've been in the same job for at least 6-12 months, or been working within the same industry in a similar role.
- Genuine savings. If you can show where your 5% savings amount came from, this will go in your favour. For example, showing your savings account statements with regular deposits going into it will be viewed favourably.
- Good asset position. The credit assessor will view your existing assets and consider them in terms of whether you're doing well based on your age and income. For example, if you're a first home buyer and you have 5% savings and a car, this may be considered a positive asset position for your age and income.
- Controlled debts. If you submit your home loan application and it shows that you have several credit cards, a car loan, and a personal loan all outstanding, it's likely your loan will be declined. Consolidate your debts and pay off the most urgent ones. Credit card debt is a bigger red flag for a lender than an HECS student debt, for example.
Get a free credit score check before you apply for a home loan
Can I still get a no deposit home loan?
No deposit home loans are largely a thing of the past. Most banks won't throw 100% of a property's value at you. But there are some exceptions to this rule. These exceptions could be very useful for borrowers who are having trouble saving a deposit.
- Gifted deposit. If you have generous parents with some cash in the bank, they can give you part of your deposit as a gift. If you're able to reduce your loan amount so you're only borrowing 90% of the purchase price, some banks won't ask you to prove that you have genuine savings. This means mum and dad need to come up with 10% of the purchase price and offer it to you as a gift. Learn more about using parental gifts as deposits.
- Guarantee from parents. If your parents own their home and they are happy to act as guarantors on your mortgage, you could borrow 100% of the purchase price of your new home without having any savings. Essentially, the bank takes a guarantee from your parents that is secured by the equity they have in their own property. Just be absolutely sure that you and your parents understand all the implications of guarantorship before you enter into this type of agreement.
- Existing property. If you already have equity in your family home, you may be able to use this to secure the purchase for your next property. Effectively, this lets you borrow 100% of the purchase price of your new property without having any savings.
Can I take out a personal loan for a deposit?
It's possible to take out a personal loan and use that as part of your deposit. For most people it's probably not a good idea. And the lender will still need to see 5-10% in genuine savings.
Using a personal loan for a deposit is a risky idea because these loans have much higher interest rates. You'll have to repay this loan while making mortgage repayments on top. And taking on another debt is a red flag for lenders and may make it harder to get approved.
If you're on a high income and want to buy a home in a hurry this strategy might be worth it. But for most people it's far from wise.
Can I use my super as a deposit?
There are two possible ways to use your super to buy property.
Self-Managed Super Funds (SMSF)
You cannot use money from a SMSF to buy a home. But you can use it to buy an investment property. This can be a good option for people looking to generate income and capital through an investment property but it doesn't help people looking to buy their own home with a low deposit.
First Home Super Saver Scheme (FHSSS)
First home buyers are able take out some of the extra money they've placed in their super funds to use for a house deposit. You can unlock up to $15,000 per financial year to a total of $30,000 maximum and put it toward your deposit.
There are also tax benefits to doing this, as super contributions are generally taxed at a lower rate.
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Hello
I have $14000 saved. Would this some how be enough to get a mortgage on an existing home
If so what sort of amount of loan value could be attained with annual income of 150k. Just roughly
Thanks
G
Hi Gavin,
Thank you for getting in touch with finder.
Lenders use different important criteria such as your income, outstanding debt level and credit history to determine your eligibility for a home loan. I suggest that you answer all the info asked on this calculator to see the estimated amount you can borrow. It is also a good idea to seek professional help from mortgage brokers regarding your home loan enquiry.
I hope this helps. Please feel free to reach out to us if you have any other enquiries.
Thank you and have a wonderful day!
Cheers,
Jeni
Is Defence bank offering a good deal on their home loans?
Hi Chris,
Thank you for getting in touch with finder.
While we are not allowed to provide specific recommendations, let me give you general information regarding home loan deals from Defence Bank.
Defence Bank offers several different home loan options for its customers that include competitive interest rates and flexible payment options. Several loans are available just for Australian Defence Force members, which allows them to use the Defence Home Ownership Assistance Scheme (DHOAS) subsidies.
Some of the home loans offered by Defence Bank are:
– DHOAS saver home loan
– DHOAS advantage home loan
– DHOAS construction home loan
– Flexi saver home loan
– Flexi choice home loan
– Smart mover home loan
– Interest-only construction home loan
– Basic variable home loan
You may go through the details of these loans on this page.
I hope this helps.
Have a great day!
Cheers,
Jeni
I would like to know which of the lenders listed loan to someone looking at buying a home to reside in the postcode 6714 and the percentage deposit
that is required.
Thank you
Hi Louise!
Thanks for your message and for visiting finder – the leading comparison website & general information service built to give you advice on your buying decision needs. How are you doing today?
All lenders listed on the page you’re in will be able to help you find to a loan that suits you best. It would be best to contact the lender to ask about the percentage deposit and you may also mention to him/her that you’re purchasing a property in the postcode 6714.
Also, please be reminded that the standard deposit size for most lenders is 20% of the property’s value. In other words, borrowers need a loan-to-value ratio (LVR) of 80%. Low deposit loans come with an LVR of 90 or 95%. This means you can potentially get a mortgage with just a 5% deposit.
If you’re buying an $800,000 property, a 20% deposit is $160,000. A 5% deposit is just $40,000. That’s a huge difference.
You may review the lenders on the table above. Just filter your options and once you’ve decided on the lender, click ENQUIRE NOW.
Hope this helps!
Feel free to message us again should you have further questions.
Cheers,
Nikki
Hi Nikki,
At this stage most lenders I have contacted won’t lend past 70% due to the risk of lending to people in the 6714 postcode due to properties dropping $300,000 – $700,000 in price and the rate of mortgagee repossessed homes. CBA is the only one I can find that lends 90% with LMI.
Hi Louise,
Thanks for getting back.
I would suggest that you contact a mortgage broker instead. They can take your circumstance into account and can offer you a range of lending options based on your situation.
Cheers,
May
HI, I’m researching for a first home loan,have a small deposit saved a steady well paying job but numerous credit enquiries on my file from a few years ago.
I also have no credit cards or personal loans but am worried about further enquiries damaging my chances of securing a loan.
should I talk to my bank or a mortgage broker first?
Hi Justin,
Thanks for your question and for reaching out to us. I hope you are doing fine today.
When you apply for a home loan, banks and lenders check your credit file before you can get approved. Your credit file acts as a representation of your credit history and can include: unpaid bills, getting declined from a loan, late payments, if you have applied too often or if you have declared bankruptcy.
The lender will check your credit file and if you do have any negative marks, your options will be limited. All your past dealings with borrowed money are collected and is used as an indication of your future ability to make repayments. This is why your credit history is so important when applying for loans. You may read this page for more information on how your credit affect your ability to access home loans and tips on improving your chances of being approved for a home loan. This page is another must-read so you would have an idea on how likely you are to be approved for a home loan.
One of the tips in buying your first home is to speak to a mortgage broker. You may read this helpful guide for you to know more about the other tips for first home buyers. Moreover, you may click the “Speak to a Mortgage Broker” on the page you’re viewing.
Please take time to review the relevant details as well as the Product Disclosure Statements / Terms & Conditions when you are comparing options so you would be able to choose the one that suits your needs.
I hope this helps.
Cheers,
Judith
We are looking for a first home loan, we have a deposit of 60,000 but also have a personal loan for 40,000 which we have been servicing regularly.
We have a combined income of 9500 per month.
Is there currently a loan provider that would consider consolidating the personal loan in to the first home loan.
Hi Adelina,
Thanks for reaching out.
Refinancing to a debt consolidation loan involves reviewing your existing debts (and mortgage), and combine them together into a new mortgage that way you only have one monthly repayment vs. having several. On this page you should see a cross section of lenders who offer debt consolidation refinance.
Before you decide to refinance your mortgage with a debt consolidation loan, it would be best that you seek expert advise from a licensed mortgage broker or financial adviser
Cheers,
Joanne
why can’t income protection be classed as income?
Hi Belle,
Thank you for your inquiry.
As the term implies, income protection insurance is your “protection” by the time you lose your income if you are no longer able to work due to injury or sickness. So lenders may not consider this as your proof of income.
In terms of a home loan, your financial situation such as your income, assets, liabilities and credit history will be evaluated by the lender when they consider your application. As for your income, lenders would need to check whether you have income from an employment, business, pension etc. Please note though that each lender has their own set of eligibility requirements and this differ from lender to lender. On this page you can find some tips about lending criteria for home loans, which you may find useful.
Cheers,
May
Hi, when I was in my mid 20’s I became bankrupt. Now in my late 30’s it is no longer on my credit record, and I have $40k in savings averaging $3k per month. Do I have to declare my past bankruptcy even if well over 10 years ago? And if I do, would I still be able to access the 95% loans?
Hello Jezame,
Thank you for your question.
Yes. Although information is eventually cleared from your credit file, if you’re declared bankrupt, your name and personal details are recorded on the National Personal Insolvency Index (NPII) permanently. It is a public record that can be viewed by anyone for a fee and maintained by the Australian Financial Security Authority (AFSA). Your lender would verify the date of discharge and will weigh in your current financial situation. If you have not declared this and your creditor found out, this may result to exclusion immediately.
95% loans is generally available for those with good or higher credit standings, as higher mortgage ratio increases “Default risk”. You may instead check Home Loans For Discharged Bankrupts.
Hope this helps.
Cheers,
Jonathan
Hi
I am 54 my wife is 44.I been working same job last 11 years we wan’t to build a new home. we have about $10,000 in savings never own our own home we are eligible for Victoria first home owners grant would banks look at us ?
Hi Robbie,
Thanks for your inquiry.
The $10,000 First Home Owner Grant is available to eligible applicants buying or building a new home valued at up to $750,000. From 1 July, a $20,000 First Home Owner Grant will be available to applicants buying or building a new home in regional Victoria valued up to $750,000.
Also, if you are buying your first home and it is valued at less than $600,000, you may be eligible for a duty reduction of up to 50%. This concession applies to new and established homes.
From 1 July, first home buyers purchasing a new or established home valued below $600,000 will be exempt from stamp duty, while buyers purchasing a new or established home valued between $600,000 and $750,000 will be eligible for a stamp duty concession, applied on a sliding scale.
Please see the full guide here.
Hope this information helped.
Cheers,
Arnold
My partner is 52 and is a self employed tiler who owned a house over twenty years ago. We have one child. I am a stay at home mum whob never owned a house. Can he access his Super to purchase a home in Qld State and would we qualify for the first home loan grant? Would we need to apply for low document loan given he is self employed & can you explain low document application loan verses a standard loan?
Hello Sue!
Thanks for the inquiry! :)
One of the determination in QLD government in qualifying for the grant is you or your spouse should not held an interest in residential property before 1 July 2000, regardless of how the property was used. You can check the full guide on this page.
As for the difference between low doc loans versus a regular home loan, two main points. First is the requirement, wherein low doc loans is more beneficial for self-employed because they provide self-certification document instead of traditional proof of income such as pay stubs, income tax return and company financials. Second is on the rates, generally low doc loans due to their intrinsically higher risk, have a bit higher rate. Although some lenders recently give almost the same rates for low doc and regular home loans. You can check our full guide on this page.
Hope this helps.
Cheers,
Jonathan
HI, Which lenders will take A 5% deposit and also let you put the LMI on top of that?
Hi Jason,
Thank you for your question.
On this page, you can actually compare a range of loans in the market with only 5% deposit.
As for the LMI, we only have limited information about this but usually, LMI will be taken out by a lender when they allow you to take out a loan with a higher LVR, say 95%. Also, as LMI is not automatically applied for, you must organise it with the application to the loan.
Seeking a professional advice from a mortgage broker would also be best as they’ll be able to take all your circumstances into account and offer you a range of lending options.
Cheers,
May