
Can I get a home loan without a 20% deposit?

Saving up a deposit is one of the biggest hurdles involved in purchasing a home, and for many Australians, clearing it can seem almost impossible. Below, we explore some of the workarounds for homebuyers who don’t have the 20% deposit that banks like to see.
Do I really need a deposit of 20%?
It’s true that lenders prefer to deal with borrowers who have a deposit of at least 20% saved up. But that doesn’t mean they’ll turn you away if your deposit falls short.
Many lenders will let you borrow up to 95% of a property’s value so long as you take out lender’s mortgage insurance (LMI). This is a form of insurance which protects your lender if it turns out you’re unable to service your loan.
LMI is calculated on a sliding scale, so the lower your deposit (and, consequently, the more you have to borrow), the higher your LMI costs will be.
Fortunately, most lenders will have options for low deposit borrowers who can’t afford to pay LMI upfront, e.g. paying it off in instalments alongside your usual home loan repayments.
Should I take out a loan with a deposit of 5%?
A low deposit loan can help you get on the property market sooner, which can be beneficial if property values are climbing and you’re worried about being priced out. But it pays to be aware of the risks involved.
For starters, a smaller deposit means you’ll need to borrow more, which translates to more interest paid over the life of your loan.
The table below shows how much interest you can expect to pay when buying a $500,000 property with a deposit of various sizes.
Interest paid on a $500,000 property purchase at 5.00% p.a. over 25 years
Minimum deposit | Monthly repayments | Total interest paid | |
20% deposit | $100,000 | $2,338 | $301,508 |
15% deposit | $75,000 | $2,485 | $320,352 |
10% deposit | $50,000 | $2,631 | $339,197 |
5% deposit | $25,000 | $2,777 | $358,041 |
A low deposit also means that you will have less equity in your property during the early stages of your loan. This can cause problems if property prices fall and you wind up owing more on your loan than your property is worth.
This is known as negative equity, and it can be an extremely difficult position to find yourself in. That’s because if your situation worsens and you’re forced to sell your home, the proceeds of the sale won’t be enough to cover your debt.
What are the alternatives?
If you’re looking for alternatives to borrowing with a low deposit, consider the following:
Boost your deposit with help from your family
If your parents have the means and are willing to assist you, they can step in to get your deposit over the line. Depending on their financial situation, they might be able to draw on their savings, superannuation, or money from assets they have sold.
Your lender might request a statement confirming the money was given unconditionally and there’s no obligation to repay it. If that isn’t the case and the money was loaned to you, it will be added to your list of liabilities and will ultimately affect how much you can borrow.
RELATED: Gifted deposits for home loans
Use a guarantor
Another option is to ask your parents or a family member to be your guarantor. This involves using their home or another property they own as additional security for your loan.
While most lenders will be willing to accommodate this arrangement, there are plenty of risks involved, so make sure you and your guarantor seek out independent legal and financial advice before making any decisions.
Typically, guarantors will only need to provide enough security to get you past the 20% threshold banks like to see. So if you’re buying a $500,000 property and you’ve saved up 10% ($50,000), your guarantor will be asked to provide $50,000 worth of equity in their property to bring it up to 20%.
Once you’ve made enough progress on your loan that your LVR reaches 80%, or a rise in property prices pushes the equity you have in your home beyond that point, you can apply to have your guarantor released from the loan arrangement.
Use a government grant
You might also be eligible for one of the many government grants currently available. These programs are designed to help first home buyers and other groups who may struggle to buy a home.
Some of the grants and assistance programs you may be eligible for include:
- First Home Guarantee
If you’re looking to start your property journey, browse our home loans comparison page, where you’ll be able to filter your search by rate and type, or browse the selection below.
Home loan comparisons on Mozo - last updated 3 December 2023
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Featured Product
Mozo experts choice awards won:
- Low Cost Home Loan - 2023
Unloan Variable
Owner Occupier, Refinance Only, LVR <80%
interest rate
comparison rate
Initial monthly repayment5.74% p.a. variable5.65% p.a.For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.
CompareCompareUnloan Variable
For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.
- interest rate
- 5.74% p.a. variable
- comparison rate
- 5.65% p.a.
- interest rate
- 5.74% p.a. variable
- comparison rate
- 5.65% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $10,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Unloan Unloan Variable
-
Home Variable Rate
Owner Occupier, Principal & Interest, Refinance Only
interest rate
comparison rate
Initial monthly repayment6.15% p.a. variable6.15% p.a.Enjoy a competitive variable interest rate from Up. No application, monthly, annual, redraw, or discharge fees to pay. Up to 50 free offset accounts available. Up home loans are only available to owner-occupiers buying or refinancing in major Australian cities. Up is 100% owned by Bendigo Bank. New joiners get $10 by signing up to the app using code UPHOMEMOZO. (T&Cs apply) Mozo Experts Choice award winner.
CompareCompareHome Variable Rate
Enjoy a competitive variable interest rate from Up. No application, monthly, annual, redraw, or discharge fees to pay. Up to 50 free offset accounts available. Up home loans are only available to owner-occupiers buying or refinancing in major Australian cities. Up is 100% owned by Bendigo Bank. New joiners get $10 by signing up to the app using code UPHOMEMOZO. (T&Cs apply) Mozo Experts Choice award winner.
- interest rate
- 6.15% p.a. variable
- comparison rate
- 6.15% p.a.
- interest rate
- 6.15% p.a. variable
- comparison rate
- 6.15% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - up to $30,000
- Redraw facility
- yes - free
- Offset account
- yes
- Maximum loan to value ratio
- 90.00%
- minimum borrowing amount
- $50,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Up Home Variable Rate
-
Offset Home Loan
Package, Owner Occupier, LVR<60%, Principal & Interest
interest rate
comparison rate
Initial monthly repayment6.14% p.a. variable6.39% p.a.Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.
CompareCompareOffset Home Loan
Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.
- interest rate
- 6.14% p.a. variable
- comparison rate
- 6.39% p.a.
- interest rate
- 6.14% p.a. variable
- comparison rate
- 6.39% p.a.
- Upfront fees
- $350
- Ongoing fees
- $248.00 yearly
- Discharge Fee
- $400.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- yes
- Maximum loan to value ratio
- 60.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Macquarie Offset Home Loan
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Flex Home Loan
Owner Occupier, Principal & Interest, LVR <80%
interest rate
comparison rate
Initial monthly repayment6.19% p.a. variable6.43% p.a.Competitive variable rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process.
CompareCompareFlex Home Loan
Competitive variable rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process.
- interest rate
- 6.19% p.a. variable
- comparison rate
- 6.43% p.a.
- interest rate
- 6.19% p.a. variable
- comparison rate
- 6.43% p.a.
- Upfront fees
- $250
- Ongoing fees
- $250.00 yearly
- Discharge Fee
- $300.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- yes
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- -
- maximum borrowing amount
- -
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the ubank Flex Home Loan
-
Mozo experts choice awards won:
- Packaged Home Loan - 2023
Variable Rate Home Loan Special Offer
Package, Owner Occupier, Principal & Interest, LVR<80%
interest rate
comparison rate
Initial monthly repayment6.14% p.a. variable6.51% p.a.Package benefits across Home Loans, Visa Credit Card, Personal Loans and Term Deposits. No package fee for the first year. No application, settlement or redraw fees to pay. Quick and easy application. Free CoreLogic RP Data property reports. *Terms, conditions and lending criteria apply.
CompareCompareVariable Rate Home Loan Special Offer
Package benefits across Home Loans, Visa Credit Card, Personal Loans and Term Deposits. No package fee for the first year. No application, settlement or redraw fees to pay. Quick and easy application. Free CoreLogic RP Data property reports. *Terms, conditions and lending criteria apply.
- interest rate
- 6.14% p.a. variable
- comparison rate
- 6.51% p.a.
- interest rate
- 6.14% p.a. variable
- comparison rate
- 6.51% p.a.
- Upfront fees
- $0
- Ongoing fees
- $395.00 yearly
- Discharge Fee
- $350.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- yes
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- -
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- $0 package fee for the first year.
Read our Mozo Review to learn more about the Credit Union SA Variable Rate Home Loan Special Offer