Low deposit home loans: 5% and 2% deposit options
You can buy a home with a 5% deposit, or 2% through some government schemes and state lenders, without paying lenders mortgage insurance (LMI). Outside those routes, borrowing more than 80% of the property's value usually means paying LMI, a one-off premium that protects the lender, not you, and is typically added to your loan.
This page explains LVR and LMI, the federal schemes, the state government lenders Keystart (WA) and HomeStart (SA), how a family guarantee works, what the repayments look like on a 95% loan, and the pros and cons of buying with a small deposit.
By Better Rate Mate Editorial Team · Last reviewed
General information only. It doesn't take into account your objectives, financial situation or needs. Check the lender's key facts sheet, credit guide and TMD before you apply. We don't compare every lender, and we may earn a commission if you apply through our links.
LVR: the number that decides your options
Your loan-to-value ratio is the loan amount divided by the lender's valuation of the property. A $760,000 loan on an $800,000 home is a 95% LVR. Lenders set rates, LMI and eligibility by LVR bands, so a few percentage points of deposit can change both your rate and your costs. The RBA's August 2026 figures show new owner-occupier loans at 81% LVR or more averaged 6.33%, against 6.22% below 81%.
| Deposit | LVR | LMI | Notes |
|---|---|---|---|
| 20% or more | 80% or less | Not usually | Access to the lowest LVR-tier rates at most lenders |
| 15% | 85% | Usually | Athena's Tailored loans start from a 15% deposit |
| 10% | 90% | Usually | Unloan's maximum LVR is 90%; Bankwest fixed loans go to 90% including LMI |
| 5% | 95% | Usually, unless using the 5% Deposit Scheme | ING and Bendigo Bank (Flex) publish lending up to 95% |
| 2% | Varies | Not under Help to Buy or the single-parent 5% Deposit Scheme | Only through those schemes; under Help to Buy the government's 30% to 40% share reduces your loan |
What is LMI and how much does it cost?
LMI is insurance the lender takes out, and you pay for, that covers the lender if you default and the sale of the property doesn't repay the loan. It is different from mortgage protection insurance, which covers your repayments.
The premium depends on your LVR, the loan size and the lender's insurer. Helia, an LMI insurer, says the fee typically charged is between 1% and 2% of the loan amount; CommBank says LMI can generally range from 1% to 5%, and that on a $500,000 loan with a 10% deposit it could cost over $10,000. The premium is usually added to the loan, so you also pay interest on it. It is generally non-refundable: Unloan, for example, states that its LMI premium isn't refunded or transferred if you refinance or your LVR later falls below 80%.
Stamp duty can apply to the LMI premium too. Every state except NSW charges insurance duty on it (9% in Queensland, 10% in Victoria, WA, Tasmania and the NT, 11% in South Australia), and the ACT has no insurance duty; see stamp duty on LMI by state, from each revenue office, checked 11 October 2026.
Our LMI calculator works out your LVR, the deposit you'd need for an 80%, 85%, 90% or 95% LVR and an indicative LMI range, and links to the insurers' and lenders' own estimators.
How to buy with a small deposit without paying LMI
There are five legitimate routes, each with its own conditions.
| Route | Minimum deposit | Who it suits | Main conditions |
|---|---|---|---|
| 5% Deposit Scheme | 5% (2% single parents) | First home buyers and single parents | Participating lender, price cap, owner-occupier, 10 years since last owning property |
| Help to Buy | 2% | Lower-income buyers | Citizens only, income caps, government takes a 30% to 40% equity share |
| Profession-based LMI waiver | Varies | Eligible professionals | NAB: may be available for medical, legal and financial professionals; Westpac: special packages based on profession |
| Family guarantee | Varies | Buyers with family who own property | A family member's property secures part of the loan; not every lender accepts guarantors (Unloan doesn't) |
| Save to 20% | 20% | Anyone | Takes longer; prices may move while you save |
State government low-deposit lenders: Keystart and HomeStart
Two states run their own home lenders for buyers with small deposits. Keystart began in 1989 as an initiative of the WA Government and funds its loans mainly through the Western Australian Treasury Corporation. It advertises loans with a 2% deposit and no LMI, purchase price limits of up to $860,000, an Urban Connect shared equity loan in which the WA Government helps increase your price range by up to 35% or $250,000, and a Skilled Start loan for apprentices, skilled, graduate and frontline workers.
HomeStart Finance, backed by the South Australian Government, offers its HomeStart Loan with as little as a 5% deposit to buy or 8% to build, with no LMI, and 2% for first home buyers building with one of its partner builders. Its Graduate Loan, for people with a Certificate III or higher, starts at 2% to buy an existing home or 5% to build. Both lenders set income, price and other eligibility limits; check them on their sites.
Guarantor home loans
A family guarantee lets a parent or other family member offer their own property as extra security for your loan, so the lender may lend you more, or lend without LMI, even with a small deposit. CommBank, for example, says its Guarantor Support is available with most of its flexible home loans, that the guarantee can cover all or part of your loan, and that you may avoid LMI or its Low Deposit Premium. Not every lender accepts guarantors: Unloan doesn't accept security guarantors.
The risk sits with the guarantor. CommBank warns that a guarantor agrees to repay the loan if you can't, could lose their property, and may see their credit report affected, and it requires guarantors to get legal advice before they sign some types of guarantee.
Repayments with a 5% deposit
A 5% deposit means borrowing 95% of the price, so repayments are higher than on a 20% deposit and you pay interest on more for longer. At 6.33%, the RBA's August 2026 average for new owner-occupier loans at 81% LVR or more:
| Property price | 5% deposit | Loan (95%) | Monthly repayment |
|---|---|---|---|
| $400,000 | $20,000 | $380,000 | $2,360 |
| $500,000 | $25,000 | $475,000 | $2,949 |
| $600,000 | $30,000 | $570,000 | $3,539 |
| $700,000 | $35,000 | $665,000 | $4,129 |
| $800,000 | $40,000 | $760,000 | $4,719 |
Pros and cons of buying with a small deposit
A small deposit gets you into the market sooner, at the cost of a bigger loan.
- Pro: you stop paying rent and start building equity sooner, and avoid prices moving while you save
- Pro: government schemes and state lenders can remove LMI, the biggest extra cost of a low deposit
- Con: you borrow more, so repayments and total interest are higher
- Con: outside a scheme, LMI is added to the loan and you pay interest on it
- Con: with little equity, a fall in property values could leave you owing more than the home is worth if you need to sell
Can I buy a house with a $20,000, $30,000 or $40,000 deposit?
Possibly. $20,000 is 5% of a $400,000 home, $30,000 is 5% of $600,000 and $40,000 is 5% of $800,000. Through the 5% Deposit Scheme, that is enough if the price is under the cap for the area, you're eligible and you can service the loan; outside the scheme, borrowing 95% usually means paying LMI at a lender that lends to 95%. Help to Buy needs only 2%, but it has income limits and its own price caps.
Either way you also need money for stamp duty (unless you're exempt), land titles fees and conveyancing. Our home deposit and upfront costs calculator adds them up for your price and state.
Indigenous Business Australia home loans
Aboriginal and Torres Strait Islander Australians can apply for a home loan from Indigenous Business Australia (IBA), an Australian Government lender. At least one applicant must be of Aboriginal and/or Torres Strait Islander descent, an Australian citizen or permanent resident aged 18 or over, and intend to live in the home. IBA lends to people who, in most cases, are buying their first home and can't borrow all they need from another lender.
IBA's minimum deposit depends on household income: from $1,500 on incomes up to $90,659, rising to $9,000 from $175,986 (amounts effective 26 May 2026). Lower-income borrowers start on a reduced interest rate that rises by 0.25% each year until it reaches IBA's standard Home Loan Rate. IBA charges no application fee and doesn't require you to pay for lenders mortgage insurance, but it doesn't offer redraw or offset accounts, and higher-income borrowers may need to borrow part of the price from another lender.
Do Aboriginals get better interest rates?
Through IBA, eligible Aboriginal and Torres Strait Islander borrowers can get a starting rate below IBA's standard rate, depending on income, which rises each year until it reaches the standard rate. Other lenders price loans the same way for every borrower. Check the current rates and conditions on iba.gov.au, because IBA sets them by income band and changes them over time.
How common are low deposit loans?
Common. APRA's figures show 29.7% of new bank home loans in the June quarter 2026 had an LVR of 80% or more. The RBA's March 2026 Financial Stability Review noted that high-LVR lending to first home buyers increased alongside the expansion of the 5% Deposit Scheme in October 2025.
General information only. It doesn't take into account your objectives, financial situation or needs. Check the lender's key facts sheet, credit guide and TMD before you apply. We don't compare every lender, and we may earn a commission if you apply through our links.
What to watch for
- LMI is added to the loan, so you pay interest on it for as long as the loan runs.
- A valuation below the price raises your LVR, which can mean LMI or a higher LMI band.
- Higher-LVR loans often carry higher rates as well as LMI.
- LMI generally isn't refunded if you refinance or sell early.
- Guarantor loans put a family member's property at risk if you can't pay.
Common questions
Can you avoid lenders mortgage insurance?
Yes: use the 5% Deposit Scheme (first home buyers) or Help to Buy, qualify for a profession-based waiver (NAB and Westpac publish these), use a family guarantee, or save a 20% deposit.
How much is LMI on a 10% deposit?
It depends on the loan size and lender. CommBank says LMI on a $500,000 loan with a 10% deposit could cost over $10,000, and that LMI can generally range from 1% to 5% of the loan amount; Helia, an insurer, says it is typically between 1% and 2%. Our LMI calculator shows the range for your loan.
Can I get a home loan with a 2% deposit?
Only through a government scheme or state lender: Help to Buy (2% minimum, income limits apply), the 5% Deposit Scheme for single parents and legal guardians (2% minimum), Keystart in WA, or some HomeStart loans in SA.
How much of a down payment do I need for a $300,000 house?
$15,000 (5%) through the 5% Deposit Scheme, which is enough anywhere in Australia because every price cap is above $300,000, or $60,000 (20%) to avoid LMI without a scheme.
What is the minimum down payment on an $800,000 house?
$40,000 (5%) through the 5% Deposit Scheme where $800,000 is under the local price cap, or $16,000 (2%) through Help to Buy if you're eligible and under its caps. Without a scheme, $160,000 (20%) avoids LMI.
How much deposit do I need for a $500,000 house?
$25,000 (5%) with the 5% Deposit Scheme if the home is under the price cap, or $100,000 (20%) to avoid LMI without a scheme. Add stamp duty and purchase costs.
What is the minimum deposit required for a $1,000,000 house?
$50,000 (5%) if you're eligible for the 5% Deposit Scheme and $1,000,000 is at or under your area's price cap (it is in Sydney and the NSW regional centres, Brisbane and the Queensland regional centres, and the ACT); otherwise $200,000 (20%) avoids LMI. Stamp duty and purchase costs are extra.
Can I buy a house with a $20,000 deposit?
Possibly: $20,000 is 5% of a $400,000 home, enough through the 5% Deposit Scheme if you're eligible and the price is under the cap. Otherwise borrowing 95% usually means paying LMI, and you still need money for stamp duty and fees.
Do Aboriginals get better interest rates?
Aboriginal and Torres Strait Islander Australians can apply for a home loan from Indigenous Business Australia, a government lender, which offers deposits from $1,500 and, for lower-income borrowers, a starting rate below its standard rate that rises each year. Check current rates and eligibility on iba.gov.au.
Is LMI tax deductible?
Not on your own home. On an investment property, the ATO treats LMI as a borrowing expense claimed over five years or the loan term if shorter.
About rates on this page
We don't quote lenders' interest rates: they change daily and with every RBA decision, and we don't have a live rate feed. The averages we quote are the RBA's published figures for the month shown. Always get the lender's key facts sheet, which shows the rate and comparison rate for your loan amount.