Government guarantee schemes
Can you avoid LMI entirely?
Federal schemes allow eligible buyers to purchase with a small deposit without paying LMI, subject to income caps, property price caps and available places.
LOW DEPOSIT
Buying without a twenty per cent deposit
There are several routes in with a smaller deposit. They cost different amounts, and they suit different people.
IN SHORT
A smaller deposit does not rule you out — it changes the route in
Lenders generally treat twenty per cent as the point below which additional protection is required. Below it you can still borrow, but something has to bridge the gap: lenders mortgage insurance, a government guarantee, or security offered by a family member.
Which of those is available to you depends on your income, your occupation, whether you are a first home buyer, and the price of what you are buying.
The other thing that changes with a small deposit is scrutiny. Lenders look more closely at savings history, employment stability and spending patterns when there is less equity in the deal.
WHY IT HELPS
The routes in
A family guarantee
Can family help without giving cash?
A guarantor offers equity in their own property as additional security, which can remove the need for LMI without anyone transferring money.
Paying LMI
Is paying it ever the right call?
Often, yes. If prices are rising faster than you can save, the premium can cost less than another two years of waiting. It is a calculation worth doing properly.
HOW IT WORKS
What lenders look at when the deposit is small
With less equity in the transaction, the lender's margin for error narrows, and the assessment tightens accordingly. None of it is unreasonable, but it is worth preparing for.
- Genuine savings — funds accumulated over time rather than recently gifted
- Employment stability, particularly time in your current role
- Clean conduct on existing accounts and no missed repayments
- Spending patterns in recent statements, which are read closely
- The property itself, since it carries more of the risk at high LVR
IS IT RIGHT FOR YOU
Buying with a small deposit
This tends to suit you if
- Your income comfortably services the loan — capacity, not deposit, is the real constraint.
- You have consistent savings history — which lenders weigh heavily at high LVR.
- You qualify for a scheme — the schemes remove the largest single cost.
- Family can offer security — a guarantee can replace the missing deposit entirely.
Worth weighing up
- You will pay more for the money — either as LMI or through higher-LVR pricing.
- Little equity means little buffer — a fall in value can leave you with very thin margins.
- Refinancing is harder early on — until the balance falls or the value rises.
- Approval standards are tighter — there is less room for an imperfect application.
How working with us actually goes
Step 1
We start with a conversation, not an application
Step 2
We work out what you can borrow and what it costs
Step 3
We prepare the application and deal with the lender
Step 4
We stay across the loan long after settlement
COMMON QUESTIONS
Questions we get asked about this
What is the smallest deposit a lender will accept?
Some lenders will consider a deposit as low as five per cent for eligible borrowers, with LMI applied, and government guarantee schemes can support similar levels without LMI.
Availability depends on your income, the property and the lender. It is not universal, and the options narrow as the deposit shrinks.
What counts as genuine savings?
Funds you have accumulated yourself over a period, usually demonstrated over three to six months of statements. Some lenders also count rent paid on time as evidence of savings discipline.
A recent gift or an inheritance may not qualify as genuine savings on its own, though many lenders will accept it alongside other evidence.
Can I use a gift from my parents as a deposit?
Usually yes, though lenders generally require a statutory declaration confirming it is a gift rather than a loan.
Some lenders also want to see evidence of genuine savings in addition to the gift, particularly at higher LVRs.
Is it better to wait and save more?
It depends on what prices do while you save, what you pay in rent meanwhile, and what the LMI premium actually is.
It is a calculation rather than a principle, and it is worth running both ways with real numbers before deciding.
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GET IN TOUCH
Find out where you stand before you commit to anything.
Would rather talk it through?
(02) 9659 1694Important information
Government guarantee schemes are administered by federal agencies and have eligibility criteria, price caps and limited places that change from time to time. Confirm current criteria before relying on a scheme.
The information on this page is general in nature. It has been prepared without taking your objectives, financial situation or needs into account, so it is not personal advice and you should consider whether it is appropriate for you before acting on it.
Any rates, figures or examples shown are indicative only. Lending is subject to approval, and lender eligibility criteria, terms, conditions, fees and charges apply. Talk to us about what your own circumstances allow.