What is the Lowest Deposit for a Mortgage?

Can you buy a home with a low deposit? Here are low deposit and no deposit home loans to help you own your home sooner.


August 16, 2022

What is the smallest deposit for a mortgage

Owning your first home might seem to be further out of reach with the rising cost of living, rental costs on the sharp increase and interest rate rises that seem to dominate the headlines lately. Don’t despair as you may not be aware that there are many pathways to owning your first home.

It’s a great time to get into the market! CoreLogic’s latest Home Value Index reports Sydney’s and Melbourne’s ‘values fell -2.2% and -1.5% respectively. Brisbane also edged into negative growth territory for the first time since August 2020, with values down -0.8%, while Canberra (-1.1%) and Hobart (-1.5%) were also down over the month.

Since we’re now in the buyer’s market, which means you have the upper hand, don’t miss your greatest chance to enter the property market at a lower price point. Here are the lowest home loan deposits to help you own your first home faster and smarter:

What is the Lowest Deposit for a Mortgage?

What is the minimum deposit for a home loan in Australia?

Your deposit depends on several factors, such as your lender, situation and buying history. Typically, lenders require 20% of the purchasing price of a home, so you loan 80% of the value.

Lenders require this much as a safety net. They need to ensure that you are reliable and stable to make regular repayments on your home loan. No need to lose hope though. Some lenders let you loan up to 95% of the home’s value.

What is the lowest deposit for a mortgage?

Some lenders may allow low deposits (3%, 5%, 10% or 15%). Anything less than a 20% deposit is considered a high-risk loan, so there are strict criteria you should meet. 

Also, you may be required to pay lenders’ mortgage insurance (LMI). LMI protects lenders and gives them the confidence to allow you to borrow up to 95%. Despite the downfall of paying LMI, low deposit loans also come with perks.

If you’re a first-home buyer or a single parent, you may be exempted from paying LMI if you qualify for the Home Guarantee Scheme:

  • First Home Guarantee Home: First-home buyers can deposit as low as 5% without paying LMI. From 1 July 2022 to 30 June 2023, a maximum of 35,000 guarantees are available each financial year.
  • Family Home Guarantee: Whether first-time buyers or previous owners, single parents can deposit as low as 2% without paying LMI. This means that you can deposit $10,000 for a property valued at $500,000!

If you’re a medical professional, chiropractor, veterinarian, optometrist, physiotherapist, lawyer, or accountant, we also have 5%-10% home loan deposits available. Our brokers are experts in these schemes. One free chat can be your key to a low deposit home loan!

To help you weigh whether a low deposit loan is for you, here are some pros and cons you can think about:

What is the Lowest Deposit for a Mortgage?

Pros of low deposit home loans

  1. Buy sooner: Low deposit loans help you to get into the property market earlier than you think you can. These loans also allow you to react quickly to opportunities that present themselves in the market. For example, if the house prices are down (like right now), you can buy your first home sooner even if you only saved up to 3% of your dream home. 
  2. Invest in your future: Buying sooner means your money goes towards your mortgage rather than rent. Over time, your financial position improves as you own an expensive asset.
  3. Generate wealth: The more you pay back on your mortgage, the more equity you build up. The more equity you build up, the more you can use to borrow against later. This means you may be able to purchase an investment property as you build your equity faster.

Cons of low deposit home loans

  1. Higher interest rates: Some lenders may charge you with higher interest rates because of the riskier nature of low deposit home loans. Also, your repayments will be higher and longer since you borrow more. 
  2. Lenders’ mortgage insurance: You may need to pay LMI if you deposit lower than 20% of the property’s value. This is also due to the higher risk involved with a low deposit home loan. 
  3. Stricter criteria: Banks and lenders see you as a high risk if you deposit lower than 20%, so you need to meet stricter eligibility criteria.
What is the Lowest Deposit for a Mortgage?

Can I get a no deposit home loan?

Technically speaking, no lender will allow you to borrow 100% of the purchase price of the property plus the additional fees. It may seem impossible, but there are options for no deposit home loans

  • Guarantor home loans: If your parents own a property, you can apply for a guarantor home loan. A guarantor is a direct or immediate family member who allows you to put the equity in their property as security for your home loan. 

This means that your guarantor is responsible for your loan in case you fail to meet your repayments. To minimise the risk, your guarantor can guarantee only a portion of the loan. 

  • First Home Owner’s Grant: If you’re a first-time buyer, you may qualify for the First Home Owner’s Grant (FHOG). It is one-time financial assistance to first-home buyers who meet certain eligibility criteria. The amount and eligibility criteria vary per state. 

You can use this grant or add it to your savings as a deposit for your first home. You may also qualify for stamp duty concessions or exemptions depending on the state. You can estimate the cost using our stamp duty calculator

  • Home equity: If you already own a property, you can use your existing equity as a deposit for another home, including an investment property. Home equity is the difference between your home’s current market value and your outstanding loan balance. 

This is how it works:

Property value: $500,000

Outstanding balance on your home loan: $250,000

Home equity: $250,000

Keep in mind that you may not be able to access the maximum of your equity as a deposit. To know how much of your equity you can borrow against, calculate 80% of your home’s current value minus your outstanding debt. 

For example, your property’s value is $500,000, and you still owe $250,000. Here’s how you calculate your usable equity:

$500,000 x 0.8 = $400,000

$400,000 – $250,000 (outstanding debt) = $150,000  

Your usable equity is $150,000. If you want to start or grow your investment portfolio, our brokers can help you find and manage your best options. To find out a property’s value, you can get your FREE property report

Aside from the deposit, you should also consider other hidden costs of buying a home:

What is the Lowest Deposit for a Mortgage?

Is a low deposit home loan for you?  

Our honest and best advice is for you to chat with our expert brokers for a free consultation. Everyone’s circumstances are different. Take that first step or let us help with the next one, so you can buy sooner, faster and smarter.

Have a question? You can always ask with just one click! 

Stay tuned for our upcoming blog about what you need to know about paying off your mortgage early.





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