Many Australians assume they cannot buy a home until they have saved a 20% deposit. While a larger deposit can reduce the loan and help avoid Lenders Mortgage Insurance, it is not the only pathway into the property market.
Depending on your income, profession, credit history and eligibility, you may be able to buy with a 5% deposit, use a government-supported scheme, qualify for a professional LMI waiver, obtain family-guarantee support or consider a specialist structure that finances some or all of the deposit.
The important question is not simply, “What is the smallest deposit I can use?” It is whether the complete loan structure is affordable, sustainable and suitable for the property you intend to purchase.
Key point: a loan described as 97% or 98% LVR “including LMI” is not necessarily a loan that gives you 98% of the property price to complete the purchase. The base loan may still be limited to 95%, with the additional borrowing used to pay the LMI premium.
Do first-home buyers need a 20% deposit?
No. A 20% deposit is often used as a benchmark because borrowing 80% or less of the property value will usually avoid LMI. It may also provide access to a wider selection of lenders and potentially more competitive pricing.
However, waiting until you have saved 20% is not practical or necessary for every buyer. While you are saving, property prices and rents may change. Some buyers therefore consider purchasing earlier with a smaller deposit, even though it may result in a larger loan and additional costs.
Common low-deposit pathways include:
- A conventional home loan with a 5% deposit and LMI.
- The Australian Government 5% Deposit Scheme.
- Professional LMI waivers for eligible doctors and other professionals.
- A family-guarantee home loan.
- A shared-equity arrangement.
- A specialist deposit loan paired with a separate first mortgage.
Each pathway has different eligibility requirements. Some help the buyer avoid LMI, while others permit the LMI premium to be added to the loan. Some reduce the deposit but introduce a guarantee, a second loan or a shared interest in the property.
How does loan-to-value ratio work?
Loan-to-value ratio, commonly called LVR, compares the loan amount with the value of the property used as security.
For example, if a property is accepted by the lender at $700,000 and the base home loan is $665,000, the LVR is 95%.
Lenders generally calculate the LVR using the lower of the purchase price and their accepted valuation. This becomes particularly important when a valuation comes in below the agreed purchase price.
Suppose you agree to pay $700,000, but the lender values the property at $680,000. The lender may calculate its maximum loan against $680,000, leaving you to fund the difference as well as the required deposit and purchasing costs.
What does a 98% LVR home loan mean?
Some lenders may approve a base loan of up to 95% and allow the LMI premium to be capitalised. Capitalising LMI means adding the premium to the loan instead of requiring the borrower to pay it from their savings at settlement.
Once LMI is added, the total loan balance may be approximately 97% or 98% of the property value. The exact percentage depends on the premium and the lender’s maximum permitted LVR.
In this example, the buyer does not receive the additional $18,000 to use towards the property price. It is used to pay the LMI premium. The buyer may still need separate funds for stamp duty, conveyancing and other purchasing expenses.
LMI protects the lender if the borrower defaults and the proceeds from selling the property do not repay the outstanding debt. Although the borrower usually pays the premium, LMI does not insure the borrower against repayment difficulties or a financial loss.
The actual LMI premium must be calculated for the individual application. It can vary based on the loan amount, LVR, property use, borrower circumstances and mortgage insurer. The figures above are illustrative only.
Can stamp duty and purchasing costs be added to the loan?
This is where the difference between the deposit and the total funds required becomes important.
A lender may allow the LMI premium to be added to the loan, but that does not mean all purchasing expenses can also be financed. Depending on the purchase, buyers may need to budget for:
- Stamp duty or transfer duty.
- Land title and mortgage registration charges.
- Conveyancing or legal expenses.
- Building and pest inspections.
- Strata reports for apartments or townhouses.
- Loan application, valuation or settlement fees.
- Settlement adjustments and moving expenses.
First-home-buyer exemptions, concessions and grants may reduce some of these costs. However, the rules depend on the state or territory, the purchase price, the type of property and the buyer’s eligibility.
Before deciding that a 5% deposit is sufficient, calculate the complete amount required to reach settlement. Our guide to first-home-buyer grants and stamp-duty concessions provides more information about these potential savings.
Buying through the Australian Government 5% Deposit Scheme
Eligible home buyers may be able to purchase with a minimum 5% deposit without paying LMI through the Australian Government 5% Deposit Scheme. A different minimum contribution may apply to eligible single parents.
Under the scheme, the buyer still borrows from a participating lender. The government guarantee supports part of the lender’s exposure; it is not a cash payment to the buyer and does not reduce the amount the buyer must eventually repay.
Eligibility rules, property price caps, participating-lender requirements and acceptable deposit sources can apply. The applicant must also satisfy the lender’s normal serviceability and credit assessment.
You can explore the structure and eligibility requirements in our Australian Government 5% Deposit Scheme guide .
Can doctors buy with a 5% deposit without paying LMI?
Some lenders offer professional LMI waivers to eligible medical practitioners. Depending on the lender and the applicant’s circumstances, a qualifying doctor may be able to borrow up to 95% of the property value without paying LMI.
This can produce a substantial difference compared with an ordinary 95% home loan. Instead of adding an LMI premium to the loan - or paying it from savings - the eligible doctor may be able to proceed with a 5% property contribution plus applicable purchasing costs.
Eligibility may depend on factors such as:
- The applicant’s medical occupation or speciality.
- Current Australian Health Practitioner Regulation Agency registration.
- Whether the doctor is fully qualified, a specialist or a junior doctor.
- The requested loan amount and total LVR.
- The property type, location and lender valuation.
- The doctor’s income, liabilities and ability to service the loan.
- The doctor’s ownership share in the property.
Not every healthcare occupation receives the same treatment. Policies for doctors, dentists, nurses, pharmacists and allied health professionals vary between lenders.
An LMI waiver also does not remove the need to meet the lender’s credit, serviceability and security requirements. Stamp duty and other purchase costs may still be payable.
For profession-specific information, visit our home loans for doctors page.
Is it possible to borrow 100% of the property price?
In limited circumstances, yes. However, it is important to understand how the financing is structured.
A specialist no-deposit pathway may combine a deposit loan with a conventional first mortgage. The specialist facility can fund part or all of the 20% deposit, while a separate 80% LVR home loan funds the remaining property price.
Although the combined facilities may finance up to 100% of the property price, the buyer is responsible for two loans. Applicants generally need strong income, a good credit profile and enough borrowing capacity to service the repayments on both facilities.
This type of structure may suit a buyer who earns enough to meet the repayments but has not accumulated a conventional deposit. It may be less suitable for someone whose budget would be stretched by the combined repayments.
No deposit does not necessarily mean no money upfront. The buyer may still need funds for stamp duty, government charges, conveyancing and other costs. A separate product premium, fee or higher interest rate may also apply.
Before using a two-loan structure, compare the combined interest, fees and repayments with a government-supported loan, an LMI-backed 95% loan and a family-guarantee arrangement. It is also sensible to consider how and when the deposit facility could be repaid or refinanced.
How does a family-guarantee loan differ?
A family-guarantee loan may allow a buyer to purchase with a small deposit or, in some circumstances, without a cash deposit. Instead of using a separate deposit loan, an eligible family member provides additional security - usually limited to an agreed portion of the borrowing.
A correctly structured guarantee may help the buyer avoid LMI. However, the guarantor’s property is exposed if the borrower cannot meet the loan obligations and the lender cannot recover the debt from the purchased property.
The guarantor should understand the extent and duration of the guarantee and obtain independent legal advice. The borrower should also have a realistic strategy for releasing the guarantee after building sufficient equity or reducing the loan.
Comparing low-deposit home-loan options
The following comparison is a general guide. Actual requirements and product availability depend on the lender and the applicant’s circumstances.
| Pathway | Possible starting position | LMI treatment | What to consider |
|---|---|---|---|
| Conventional home loan | Approximately 20% plus costs | Normally avoided | A smaller loan and stronger equity position, but more time may be needed to save. |
| High-LVR insured loan | Approximately 5% plus costs | Usually payable or capitalised | The total LVR may reach approximately 97%–98% after the LMI premium is added. |
| Government-supported loan | From 5% for eligible buyers | Generally avoided | Scheme eligibility and participating-lender rules apply. |
| Professional LMI waiver | Commonly from 5% | May be waived | Occupation, registration, loan and property requirements apply. |
| Family guarantee | Potentially little or no deposit | May be avoided | The guarantor provides additional security and assumes financial risk. |
| Specialist split-loan structure | Potentially no property deposit | An alternative premium or fee may apply | The applicant may have two loans and two repayment obligations. |
What are the risks of buying with a small deposit?
A low-deposit loan can help an eligible buyer enter the market sooner, but it also creates a higher starting debt relative to the property value.
Higher repayments and interest
Borrowing more generally means higher repayments and more interest over the life of the loan. If LMI is capitalised, interest is also charged on the premium while it remains part of the loan balance.
Limited equity at the beginning
A buyer who starts at a very high LVR may have little equity after settlement. If the property value falls, the loan could temporarily exceed the property’s market value.
Fewer refinancing options
Refinancing may be difficult if there is insufficient equity. Changing lenders could also trigger a new LMI assessment, even when LMI was paid on the original loan.
Greater sensitivity to unexpected expenses
Using nearly all available savings for a purchase can leave a limited emergency buffer. Buyers should consider moving expenses, repairs, insurance, strata contributions and potential changes in income or interest rates.
A low-deposit home loan is not automatically unsuitable. The decision should be based on the buyer’s income stability, repayment buffer, purchasing costs, alternative pathways and expected time in the property—not the deposit percentage alone.
How to prepare for a low-deposit application
High-LVR applications can receive closer scrutiny because the lender has less equity protection. Preparing early can reduce uncertainty.
- Separate the deposit from the costs. Calculate how much is available for the property contribution after allowing for duty, legal fees and other expenses.
- Review existing debts. Credit-card limits, personal loans, car finance, HELP debt and buy-now-pay-later commitments can affect borrowing capacity.
- Check your credit history. Confirm that repayment information is accurate and address any unexplained issues before applying.
- Keep evidence of savings. Some lenders or schemes may require evidence showing how the deposit was accumulated or where gifted funds originated.
- Avoid choosing a property too early. Apartments, small units, regional properties, unusual titles and certain postcodes may attract lower maximum LVRs.
- Obtain a detailed assessment. A calculator provides an estimate, but it cannot account for every lender’s income, credit and property policies.
A pre-approval assessment should establish both the likely borrowing limit and the amount of money required to complete the purchase. Read our first-home-buyer home-loan guide to understand the broader process from preparation through to settlement.
The smallest deposit is not always the lowest-cost option
A first-home buyer may have more pathways than they initially expect. A 95% loan with capitalised LMI could produce a total loan of approximately 97% or 98% LVR. Eligible buyers may avoid LMI through a government scheme, a professional waiver or a family guarantee. Some specialist structures can potentially finance the full property price by combining two loans.
These pathways solve different problems. One may reduce the time needed to save, another may remove LMI, while another may replace the deposit with a second repayment obligation. Comparing the total cost and risk provides a much clearer answer than looking only at the advertised deposit.
Not sure which deposit option fits your position?
Triple O Finance can assess your available funds, borrowing capacity, purchasing costs and possible lender pathways before you make an offer on a property.
Request a first-home-buyer assessment
Written by Nishant Ramavat
Nishant helps Australian borrowers understand lender policies, borrowing structures and the practical costs of financing property. His approach focuses on examining the borrower’s complete position before comparing suitable lending pathways.
