Compare low deposit home loans
Compare low deposit home loans that can help you buy property with less savings. Rates, fees and features can vary, so compare low deposit home loan options from a range of Australian lenders first.
UBank OO 3 Year Fixed
specialLimited time only. Apply by April 29 2021. Application to be settled within 90 days in order to be eligible. ~ Ends in about 2 months
Fix the interest rate on your owner occupier home loan for up to three years and pay no ongoing fees.
Fixed - 3 years
Borrow up to 95%
Lock in a discounted interest rate for 3 years, and pay fewer fees on your home loan and credit card. Plus, eligible refinancers can get cash back, for a limited time only.
Fixed - 3 years
Borrow up to 95%
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Bundle your home loan and credit card with the advantage package and enjoy discounts on selected rates, fees and insurance.
Fixed - 2 years
Borrow up to 94.9999%
Fixed - 5 years
Borrow up to 95%
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What are low deposit home loans?
A mortgage is considered to be a low deposit home loan when the borrower's deposit to the lender is less than 20 per cent of the property value. This is sometimes called having a loan to value ratio (LVR) of higher than 80 per cent.
Borrowers can expect higher interest rates with low deposit home loan products, and therefore higher monthly repayments.
Also, borrowers who deposit less than 20 per cent of the property value will generally have to pay for lender’s mortgage insurance (LMI) to cover the loan, unless it is a guarantor home loan. This could wind up costing thousands of dollars.
Who offers low deposit home loans?
Low deposit home loans are offered by a wide range of banks, credit unions, building societies and non-bank lenders.
These loans are not as readily available as other home loans in Australia, but some financial institutions offer low deposit home loans for first time home buyers, as well as low deposit investment loans.
How do you compare low deposit home loans?
Here's what to consider when you're using RateCity’s home loan comparison tool to look for a low deposit home loan:
- Minimum deposit: The percentage of the property value the borrower will have to initially pay
- Advertised rate: The monthly interest rate to be paid on the loan, either as a variable or fixed rate, or a combination known as a ‘split loan’
- Comparison rate: A combination of the interest and fees the borrower will pay on the loan
- Monthly repayment: How much the borrower is expected to pay per month to the lender
- Total repayments: The amount the borrower will pay during the life of the loan
- Loan fees: The upfront and ongoing fees that the borrower will pay to the lender
- Minimum deposit: The percentage of the property value the borrower will have to initially pay
- Loan term: How long the borrower will have to pay off their loan.
What are the pros and cons of low deposit home loans?
- Low deposit home loans allow borrowers to enter the market months or even years ahead of schedule, and achieve the ‘great Australian dream’ of home ownership sooner than they otherwise might.
- Borrowers can stop spending ‘dead money’ on rent and instead use that money to build equity in their own home or investment property.
- If property prices are rising, borrowers might be able to buy their home for tens of thousands of dollars less than they might have to pay if they had to delay their purchase for a couple of years.
- Borrowers generally have to spend dead money on lender’s mortgage insurance (LMI) for low deposit home loans.
- Low deposit home loans tend to be more expensive than regular home loans, because they usually come with higher interest rates, and sometimes higher fees as well.
- Fewer lenders offer low deposit home loans, which means that lenders don’t have to fight as hard to win borrowers’ business.
Dan and Lisa are first home buyers who want to purchase a $600,000 property. Unfortunately, they only have enough money for a small deposit of 10 per cent ($60,000), which is below the 20 per cent that most lenders demand.
However, by making a home loan comparison, Dan and Lisa find a lender that will lend them 90 per cent of their new home's purchase price, or $540,000.
But there are two catches. First, they have to pay $13,392 in LMI, on top of stamp duty and other upfront costs. Second, their interest rate is 0.30 percentage points higher than it would’ve been if they’d had a 20 per cent deposit.
This hypothetical example is for illustrative purposes only.
How can you improve your chances of being approved for a low deposit home loan?
A low deposit home loan is riskier than a regular home loan, because the borrower has a larger loan amount to repay and is likely to be charged a higher interest rate. Before a lender will approve a home loan with a low deposit, they'll need to feel particularly secure about the borrower’s ability to make monthly repayments, and may require stricter eligibility criteria.
You can improve your chances of being approved for a low deposit home loan by establishing a good credit history, steady employment history and reliable income before making your loan application. You can also improve your chances by finding someone to guarantee your loan.
What are some alternatives to low deposit home loans?
One alternative to low deposit home loans is a guarantor home loan, also known as a guaranteed home loan. Lenders regard guarantor home loans as less risky than low deposit home loans, because the guarantor (usually a close family member) promises to pay off the mortgage if the borrower fails to do so. The guarantor provides further confidence to the lender by offering up their own property as security.
Another option is for borrowers to delay their purchase until they can save a 20 per cent deposit. If possible, this would allow borrowers to avoid LMI and qualify for lower interest rates. Keep in mind that many lenders prefer that your deposit is made up of genuine savings, such as income earned from your job.
If you're buying property for the first time as an owner occupier, you may be able to apply for your state or territory's first home owners grant (FHOG), which may help to supplement your savings to make up your deposit. There's also the federal government's first home loan deposit scheme (FHLDS) to consider, and other home loan incentives or concessions may also be available.
Remember that even if you don't get the best interest rate on your low deposit home loan, once you've spent some time making loan repayments and building up equity in your property, after a valuation you may be in a position to refinance to a mortgage that better suits your needs.
Property Personal Finance Writer
A property and personal finance writer, Nick Bendel covers property, loans, credit cards, superannuation, and other bank products. Nick has previously written for The Adviser, Mortgage Business, Lifehacker, Business Insider, Yahoo Finance, and InvestorDaily, and loves getting elbow-deep in the latest ABS, APRA and RBA data.
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Frequently asked questions
What is a low-deposit home loan?
A low-deposit home loan is a mortgage where you need to borrow more than 80 per cent of the purchase price – in other words, your deposit is less than 20 per cent of the purchase price.
For example, if you want to buy a $500,000 property, you’ll need a low-deposit home loan if your deposit is less than $100,000 and therefore you need to borrow more than $400,000.
As a general rule, you’ll need to pay LMI (lender’s mortgage insurance) if you take out a low-deposit home loan. You can use this LMI calculator to estimate your LMI payment.
What are the pros and cons of no-deposit home loans?
It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.
The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.
But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.
Does Australia have no-deposit home loans?
Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.
However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.
Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.
How can I get a home loan with no deposit?
Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.
What is a line of credit?
Equity is the value of your property, less any outstanding debt against it. For example, if you have a $500,000 property and a $300,000 mortgage against the property, then you have $200,000 equity. This is the portion of the property that you actually own.
This type of loan is a flexible mortgage that allows you to draw on funds when you need them, similar to a credit card.
What are extra repayments?
Additional payments to your home loan above the minimum monthly instalments, which can help to reduce the loan’s term and remaining payable interest.
How does a line of credit work?
A line of credit functions in a similar way to a credit card. You have a pre-approved borrowing limit and can draw on as little or as much of that sum as you need it, with interest paid on the outstanding balance.
How common are low-deposit home loans?
Low-deposit home loans aren’t as common as they once were, because they’re regarded as relatively risky and the banking regulator (APRA) is trying to reduce risk from the mortgage market.
However, if you do your research, you’ll find there is still a fairly wide selection of banks, credit unions and non-bank lenders that offers low-deposit home loans.
How much deposit do I need for a home loan from ANZ?
Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:
- A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
- The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
- If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).
Can I get a NAB first home loan?
The First Home Loan Deposit Scheme of NAB helps first home buyers purchase a property sooner by reducing the upfront costs required. This scheme is offered based on a Government-backed initiative, with10,000 available places announced in October 2020.
Suppose your application for the NAB first home buyer loan is successful. In that case, you’ll only need to pay a low deposit, between 5 and 20 per cent of the property value and won’t be asked to pay lender's mortgage insurance (LMI). You’ll also receive a limited guarantee from the Australian government to purchase the property.
If you’re applying for the NAB first home buyer home loan as an individual, you need to have earned less than $125,000 in the last financial year. Couples applying for the NAB first home loan need to have earned less than $200,000 to be eligible. To be considered a couple, you need to be married or in a de facto relationship. A parent and child, siblings or friends are not considered a couple when applying for a NAB first home loan.
The NAB First Home Loan Deposit Scheme is currently offered only to purchase a brand new property, rather than an established property.
How much deposit do I need for a home loan from NAB?
The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.
Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.
Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.
How do I take out a low-deposit home loan?
If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.
Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.
How can I apply for a first home buyers loan with Commonwealth Bank?
Getting a home loan requires planning and research. If you are considering a home loan with the Commonwealth Bank, you can find the information you need in the buying your first home section of the bank’s website.
You can see the steps you should take before applying for the loan and use the calculators to work out how much you can borrow, what your monthly repayments would be and the upfront costs you’d likely pay.
You can also book a time with a Commonwealth first home loan specialist by calling 13 2221.
CommBank publishes a property report that may help you understand the real estate market. The bank has also created a CommBank Property App that you can use to search for property. The link to download this app is available on the same webpage.
If you are eligible for the First Home Loan Deposit Scheme, CommBank will help you process your application. The scheme helps first home buyers to purchase a home with a low deposit. You can read details about this scheme here and speak with a CommBank home lending specialist to understand your options.
Can I take a personal loan after a home loan?
Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:
- Higher-income to show repayment capability for both the loans
- Clear credit history with no delays in bill payments or defaults on debts
- Zero or minimal current outstanding debt
- Some amount of savings
- Proven rent history will be positively perceived by the lenders
A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.
As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.
How do I apply for a home improvement loan?
When you want to renovate your home, you may need to take out a loan to cover the costs. You could apply for a home improvement loan, which is a personal loan that you use to cover the costs of your home renovations. There is no difference between applying for this type of home improvement loan and applying for a standard personal loan. It would be best to check and compare the features, fees and details of the loan before applying.
Besides taking out a home improvement loan, you could also:
- Use the equity in your house: Equity is the difference between your property’s value and the amount you still owe on your home loan. You may be able to access this equity by refinancing your home loan and then using it to finance your home improvement. Speak with your lender or a mortgage broker about accessing your equity.
- Utilise the redraw facility of your home loan: Check whether the existing home loan has a redraw facility. A redraw facility allows you to access additional funds you’ve repaid into your home loan. Some lenders offer this on variable rate home loans but not on fixed. If this option is available to you, contact your lender to discuss how to access it.
- Apply for a construction loan: A construction loan is typically used when constructing a new property but can also be used as a home renovation loan. You may find that a construction loan is a suitable option as it enables you to draw funds as your renovation project progresses. You can compare construction home loans online or speak to a mortgage broker about taking out such a loan.
- Look into government grants: Check whether there are any government grants offered when you need the funds and whether you qualify. Initiatives like the HomeBuilder Grant were offered by the Federal Government for a limited period until April 2021. They could help fund your renovations either in full or just partially.
Can first home buyers apply for an ING home loan?
First home buyers can apply for an ING home loan, but first, they need to select the most suitable home loan product and calculate the initial deposit on their home loan.
First-time buyers can also use ING’s online tool to estimate the amount they can borrow. ING offers home loan applicants a free property report to look up property value estimates.
First home loan applicants struggling to understand the terms used may consider looking up ING’s first home buyer guide. Once the home buyer is ready to apply for the loan, they can complete an online application or call ING at 1800 100 258 during regular business hours.
How much deposit will I need to buy a house?
A deposit of 20 per cent or more is ideal as it’s typically the amount a lender sees as ‘safe’. Being a safe borrower is a good position to be in as you’ll have a range of lenders to pick from, with some likely to offer up a lower interest rate as a reward. Additionally, a deposit of over 20 per cent usually eliminates the need for lender’s mortgage insurance (LMI) which can add thousands to the cost of buying your home.
While you can get a loan with as little as 5 per cent deposit, it’s definitely not the most advisable way to enter the home loan market. Banks view people with low deposits as ‘high risk’ and often charge higher interest rates as a precaution. The smaller your deposit, the more you’ll also have to pay in LMI as it works on a sliding scale dependent on your deposit size.
How do I apply for Westpac’s first home buyer loan?
If you’re a first home buyer looking to apply for a home loan with Westpac, they offer an online home loan application. They suggest the application can be completed in about 20 minutes. Based on the information you provide, Westpac will advise you the amount you can borrow and the costs associated with any possible home loan.
When applying for a home loan with Westpac, you’re assigned a home finance manager who can address your concerns and provide information. The manager will also offer guidance on any government grants you may be eligible for.
How much of a deposit do I need for a home loan from the Commonwealth bank?
The minimum deposit the Commonwealth Bank usually accepts is 10 percent of the amount you wish to borrow. However, a deposit of at least 20 percent of the amount you’re borrowing is needed if you wish to avoid Lenders Mortgage Insurance (LMI). LMI is charged for smaller deposits to give the lender extra recourse if the borrower fails to repay their loan.
As an alternative to LMI, some borrowers with smaller deposits may opt to pay the Commonwealth Bank’s low deposit premium fee. It is a one-time, non-refundable charge that is added to a low-deposit home loan.
The deposit and the loan amounts are used to determine the LDP -, the higher the deposit, the lower is this cost.
When calculating how much you need to save, don’t forget to factor in other expenses like stamp duty, insurance, legal fees, and moving costs.
How do you determine which home loan rates/products I’m shown?
When you check your home loan rate, you’ll supply some basic information about your current loan, including the amount owing on your mortgage and your current interest rate.
We’ll compare this information to the home loan options in the RateCity database and show you which home loan products you may be eligible to apply for.