Low Deposit Home Loans

A 3% or 97% home loan allows you to borrow up to 95% of the property value plus the cost of Lenders Mortgage Insurance (LMI), a one off fee charged when borrowing more than 80%.

LMI roughly works out to be around 2% of the total property value but to get a more accurate figure, use this easy LMI calculator.

By adding or “capitalising” this amount to your home loan, you can actually avoid paying thousands of dollars in LMI upfront and it pay it off with your mortgage repayments at no interest.

Yes, there are. If your parents own property in Australia, then a guarantor home loan might be the best no-deposit home loan option. With a guarantor home loan:

• You don’t need any savings
• You can borrow 100% plus some more money to cover the cost of stamp duty and or other costs associated with buying a home.
• You save thousands of dollars in LMI.

It’s a good question to ask and one that many would-be borrowers carefully consider.

Granted, with a 20% deposit you can avoid LMI completely and you have much more negotiating power in getting a great deal on your home loan.

However, the longer you spend trying to save, the more property prices will increase. Unless you can put away huge amounts every pay day, for ordinary Australians, it’s like chasing your own tail: you don’t get anywhere.

There are low-deposit home loans available! It wouldn’t hurt to speak with a mortgage broker about which solution would work best for you so you can bite the bullet and get into the property market sooner, rather than later.

When comparing mortgages from different lenders, most people just compare interest rates and maybe what kind of features might help them better manage their home loan.

What most borrowers don’t compare are LMI premium rates and it’s not from laziness. The reason is actually ignorance because, the fact is, lenders don’t advertise these rates to the public!

Apart from differences in the rates themselves, each lender also has different loan brackets and rates actually differ depending on whether you’re providing full documents for your home loan application or you need a low-doc home loan.

Despite the differences, the more you borrow, the more your LMI premium will increase.

Check out the LMI rates table and try the LMI calculator to get an idea of the lowest premium you may qualify for with one of the lenders on our panel.

In most cases, you’ll enjoy the same home loan features as someone with an 80% LVR home loan.

This includes features like a 100% offset, fixed interest rates, basic loans and professional packages.

Does it matter whether I have a 3%, 5%, 10% or a 15% deposit?

No, you’ll still enjoy the same features but bear in mind that with only a 5% deposit or less, line of credit and interest-only terms aren’t normally available.

Your LVR is the amount that you’re borrowing represented as a percentage of the value of the property that you’re purchasing. For example, if you borrow $570,000 to purchase a property valued at $600,000, the LVR of your home loan would be 95%.

You can work out your LVR with this calculator but the important thing to remember is that with most banks, borrowing more than 80% LVR is considered a high risk.

Let’s go through the pros and cons of low-deposit home loans to find out if they are worth it.

The pros are:

• You enter the property market sooner instead of waiting for years to save for a deposit.
• You escape the rent cycle and transform from being a renter to a homeowner.
• There are a range of low-deposit home loan options that suit your financial situation. You can choose the loan terms and repayment schedules that align with your future goals.
• The earlier you enter the property market, the more time your investment has to grow. If the value of your property appreciates, you can access your equity.
• Contrary to common misconceptions, low-deposit home loans can come with competitive interest rates. Lenders understand the demand for these loans and offer attractive rates to make homeownership more affordable.

The cons are:

• When you borrow with a low deposit, you often need to pay Lenders Mortgage Insurance. This additional cost can add thousands to your upfront expenses.
• A low deposit means you'll have a higher Loan-to-Value Ratio (LVR). Some lenders might impose restrictions or have fewer loan options for borrowers with higher LVRs.
• With a smaller deposit, you'll have less equity in your property initially. This could limit your options if you want to access equity for things like renovations or investments in the future.
• If the property market experiences a downturn, homes bought with lower deposits could be more susceptible to negative equity, where the property's value is less than the remaining loan amount.
• Lenders might have stricter criteria for low-deposit loans, including more thorough assessments of your financial stability and creditworthiness.

No, not always.

Although the size of your deposit does have some impact on the interest rate you may be eligible for, it really comes down to your overall situation.

For example, if you only have a 5% deposit but you have a stable job, enjoy a good income and have a good asset position, then this can work in your favour when your mortgage broker is negotiating your deal.

Yes, you can. There are actually a few things you can do.

• To avoid LMI completely, you could organise a guarantor to secure your mortgage with their property. In most cases, this would be your parents’ home and it would allow you to borrow 100% of the purchase plus the costs of completing the purchase, no LMI or genuine savings required.
• If you’re an eligible professional, such as a doctor or a vet, and you have a 10% deposit on the other hand, you may also qualify for waived LMI or at least a reduced premium. This can save you literally thousands off your home loan.
• If you’re not an eligible professional but you can save a little more and bring your deposit to 15%, then two of our lenders have an exclusive LMI waiver.

Please complete our free free assessment form to discover if you’re eligible.