What Is a Low Deposit Home Loan?
A low deposit home loan lets you borrow more than 80% of a property's value. Your deposit can be as low as 5%, 10% or even 2% through select government schemes.
Banks want 20% to skip lenders mortgage insurance (LMI). Most Australians haven't saved that yet, and that's totally normal. Low deposit loans bridge that gap.
Low deposit home loans work for owner-occupied purchases and some investment property too. Rates, features, and eligibility criteria vary by lender. We compare 100+ options and match you with the right one.
Who Can Apply for a Low Deposit Home Loan?
Got a solid income and decent savings history? You might be closer than you think.
Wondering how much you need to earn? Lenders typically look for:
- Australian citizen or permanent resident
- Stable income with a consistent employment history
- Good credit history with no significant defaults
- Genuine savings or a government grant to support your deposit
- Deposit of at least 2% to 5% of the purchase price
- First home buyers eligible for the First Home Guarantee or VIC First Home Owner Grant
- Single parents eligible for the Family Home Guarantee (2% deposit)
- Eligible professionals who qualify for LMI waiver programs
Not sure if your credit score is up to scratch? Every lender has different criteria.
We review your full financial picture and match you with the most likely approvers, helping you avoid a rejected home loan application.
Lenders Mortgage Insurance: What It Costs and How to Avoid It
LMI kicks in when you borrow more than 80% of the property value. This protects the lender, not you.
But it doesn't have to be a deal-breaker.
It's a one-off premium added to your loan amount. The bigger the loan and the smaller the deposit, the higher the LMI cost.
Example LMI costs (approximate):
- $600,000 property, 10% deposit ($60,000): LMI approximately $10,000 to $14,000
- $600,000 property, 5% deposit ($30,000): LMI approximately $18,000 to $22,000
- $800,000 property, 10% deposit ($80,000): LMI approximately $15,000 to $20,000
LMI can be paid upfront or capitalised (added to your loan). Just remember, if you capitalise it, you'll pay interest on it for the life of the loan.
How to avoid paying LMI:
- Save a 20% deposit
- Use a government guarantee scheme such as the First Home Guarantee
- Qualify for a professional LMI waiver. LMI waivers are available to eligible teachers, doctors, nurses, and other professionals
- Use a guarantor or explore an offset account to reduce your loan balance faster
Shern Advisory identifies the best strategy to avoid or reduce LMI, based on your specific situation.
Government Schemes That Support Low Deposit Borrowers
Good news: the federal and Victorian governments have schemes to help you buy sooner with a smaller deposit. Here's what's available.
- First Home Guarantee: Buy with a 5% deposit and no LMI. The federal government guarantees the remaining deposit shortfall. Limited places per financial year.
- Regional First Home Buyer Guarantee: Same 5% deposit and no LMI structure for eligible buyers purchasing in regional Victoria.
- Family Home Guarantee: Single parents with dependents can purchase with a 2% deposit and no LMI, backed by the federal government.
- VIC First Home Owner Grant: $10,000 one-off grant for eligible first home buyers purchasing or building a new home in Victoria valued up to $750,000.
- Victorian Stamp Duty Concession: First home buyers in Victoria may be fully exempt from stamp duty on properties up to $600,000. Concessions apply on a sliding scale up to $750,000.
- Victorian Homebuyer Fund: Shared equity scheme where the Victorian Government contributes up to 25% of the purchase price, reducing your home loan repayments and deposit requirement.
Eligibility depends on purchase price, income, and residency. We identify which schemes apply to you and manage the full application process.
Total Costs to Know Before You Apply
Buying with a low deposit? Smart move. But the hidden costs of buying a home can catch you off guard if you're not prepared.
Lenders Mortgage Insurance (LMI)
The biggest extra cost. Can add $10,000–$22,000+ to your loan. Avoidable via government schemes or professional waivers.
Stamp Duty
Victorian first home buyers can be fully exempt up to $600,000. On a $700,000 property for others, it can exceed $37,000.
Application Fees and Monthly Fees
Some lenders charge upfront and monthly fees. Always check the comparison rate, it includes fees, not just the headline rate.
Conveyancing Fees
You'll need a solicitor or conveyancer. Budget $1,500–$2,500.
Government Fees
Title and mortgage registration fees apply to every purchase. They vary by property value and state.
Early Repayment Fees
Fixed rate loans can have break costs if you exit early. Check these before you lock in.
Building and Pest Inspections
Not a loan cost, but never skip it. Budget $400–$800. Discovering structural issues after you've signed is a very expensive lesson.
How the Low Deposit Home Loan Process Works
We handle everything from start to finish. Most borrowers get conditional approval within 2–5 business days.
Step 1 — Free Assessment
We look at your deposit, income, savings history, and goals. We find which products and schemes you qualify for. No credit check. No cost. Response in 24 hours.
Step 2 — Loan Comparison
We compare low deposit home loan rates across 40+ lenders. Interest rates, comparison rates, features, and total costs all side by side. Fixed rate vs variable rate explained clearly.
Step 3 — Application and Conditional Approval
We handle every piece of paperwork and all lender correspondence. Grant and scheme applications lodged simultaneously so nothing slips through the cracks.
Step 4 — Settlement and Rate Monitoring
We see you all the way to settlement. After that, we use Ratetracker to monitor your rate and review your loan annually. If a better deal becomes available, we let you know.
Why Melbourne Borrowers Choose Shern Advisory Mortgage Brokers
We're a boutique Melbourne brokerage with 20+ years of combined experience. We specialise in low deposit loans, first home buyer loans, professional loans for teachers, and refinancing.
MFAA Accredited
We're an accredited member of the Mortgage and Finance Association of Australia (MFAA). That means ongoing education, ethical conduct, and the best interests duty with no exceptions.
ASIC Licensed (ACL 550893)
We hold Australian Credit Licence ACL 550893. We recommend what's right for you, not what's most profitable for the lender.
Principal Broker: Jason Kuan
Jason started in Melbourne real estate in 2013. His background in property sales and market research means he understands more than just the loan. He's helped hundreds of Melbourne buyers get into the market with smaller deposits.
4.9-Star Google Rating
Read reviews from our satisfied customers. 4.9 stars across first home buyers, low deposit borrowers, and investors.
No Cost to You
Our service is completely free to you. We're paid by the lender at settlement. No hidden fees. No obligation.
