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Home Loans9 October 2026

Can I Buy a Home With a 5% Deposit?

How Does a 5% Deposit Home Loan Work?

A 5% deposit means you contribute 5% of the property's purchase price, while the lender provides the remaining 95%.

For example:

  • Purchase Price: $600,000

  • 5% Deposit: $30,000

  • Loan Amount: $570,000

While this can significantly reduce the time needed to save, it's important to understand that additional costs may also apply, including legal fees, government charges, building inspections, and potentially Lenders Mortgage Insurance (LMI).

What Is Lenders Mortgage Insurance (LMI)?

LMI is an insurance premium that protects the lender when a borrower has a smaller deposit.

Generally, if you're borrowing more than 80% of a property's value, LMI may apply. However, there are government initiatives and lender policies that may allow eligible buyers to reduce or avoid this cost altogether.

Can First Home Buyers Avoid LMI?

Depending on your circumstances, you may qualify for government support schemes designed to help eligible first-home buyers enter the market with a smaller deposit.

These programs can allow some buyers to purchase with a 5% deposit without paying LMI, potentially saving thousands of dollars upfront.

Eligibility requirements apply and may change over time, so it's important to seek current advice before proceeding.

Is a 5% Deposit Right for Everyone?

While entering the market sooner can be beneficial, it's important to consider your overall financial position.

Questions to ask yourself include:

  • Do I have sufficient savings after settlement?

  • Can I comfortably manage future repayments?

  • Do I have an emergency buffer?

  • Is buying now better than continuing to save?

Every situation is different, and the right strategy depends on your goals, income, and long-term plans.

Final Thoughts

The idea that you need a 20% deposit to buy a home is one of the biggest misconceptions in the property market. Many buyers successfully purchase with a 5% deposit and start building equity sooner.

If you're unsure how much you need to save or whether you're eligible for any first-home buyer assistance, speaking with a mortgage broker can help you understand your options before you start house hunting.