03 Nov 2021

Can I Buy a House with Less than 5% Deposit?

On standard home loans in Australia, you will need a deposit of 10-20% to be approved. However, there are lenders that offer mortgages with a deposit as small as 5% of even less. These 95 percent LVR home loans are a welcome sight for many Australians who may have trouble saving for a large deposit, such as first-time home buyers or young Australians just joining the workforce. However, with such a small deposit, most lenders will require you to pay a higher lenders mortgage insurance premium as well as give you higher interest rates.

Where Can I Get a Mortgage With a Small Deposit? 

Compared to traditional 20% deposit home loans, 5% deposit home loans are considered higher risk. Therefore, not all lenders offer these products. However, some banks and non-bank lenders do offer 5% deposit home loans. You can discover which lenders offer these products by using an online rate comparison tool. It is important to note that even if lenders do offer these products, they may have stricter lending criteria, making it harder for you to be approved for such a loan. 

Advantages and Disadvantages of 5% Deposit Mortgages

There are advantages and disadvantages to every home loan, but the benefits of a 5% deposit mortgage include:

  • Purchasing a home without having to save for a 20% deposit
  • Being able to buy a home when interest rates are low

The risks include:

  • Paying more in lenders mortgage insurance premiums
  • Having higher interest rates, costing you thousands of dollars over your loan term
  • Not having as many loan features to choose from.

If you cannot afford a 20% deposit and are interested in learning more about the 5% deposit home loan options, the brokers at Mortgage House can help.

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