How to Get a 5% Deposit Home Loan in Australia

There are four ways to buy with a 5% deposit in Australia, and only one of them is free. Knowing which one you are using changes what the loan costs you by tens of thousands.

Route 1: the government 5% Deposit Scheme

The cheapest route, and since 1 October 2025 the most widely available. The government guarantees up to 15% of the price, so the lender treats you as though you had a 20% deposit and charges no lenders mortgage insurance.

There is no income test any more and no annual cap on places. The only real limit is the price of what you buy: $1.5 million in Sydney, $1 million in Brisbane and Canberra, $950,000 in Melbourne, $900,000 in Adelaide, $850,000 in Perth, $750,000 in Darwin and $700,000 in Hobart.

You apply through a participating lender rather than to the government. Our full breakdown of the 5% scheme covers the eligibility rules in detail.

Route 2: pay the LMI yourself

If you are not a first home buyer, or you are buying above the price cap, a lender will still lend you 95% — you just pay lenders mortgage insurance for the privilege.

LMI is a one-off premium that protects the lender, not you. At a 95% loan it is expensive, often $25,000 to $40,000 on a typical Sydney purchase, and it is usually added onto the loan so you pay interest on it for thirty years.

Not every lender will go to 95% with LMI, and the ones that do apply tighter rules on your employment, your credit history and where the property is.

Route 3: a guarantor

A parent or close family member uses equity in their own property to cover your shortfall, which takes the loan under 80% and removes LMI entirely. You can sometimes borrow the full price plus costs this way.

The guarantee is usually limited to a set amount rather than the whole loan, and it can be released once you have built enough equity. It is still a real liability for the person giving it. Read our guide to how guarantor loans work before raising it with family.

Route 4: a professional LMI waiver

Some lenders waive LMI up to 90% — and in a few cases 95% — for certain occupations. Doctors and other medical professionals get the widest waivers. Lawyers, accountants and some other professions get narrower ones from a smaller group of lenders.

These are lender policies rather than a government scheme, so they change, and they are not advertised in rate comparison tables.

What a 5% deposit costs you every month

The deposit is the part people plan for. The repayment is the part that decides whether the purchase works.

Borrowing 95% rather than 80% of a $900,000 home means $855,000 of debt rather than $720,000. At around 6%, that difference is roughly $800 a month, every month, for the life of the loan. Lenders also test you at 3 percentage points above the real rate, so you need to show you could cover the repayment at about 9%.

What lenders want to see

• Genuine savings. Most lenders want to see at least 5% of the price saved over three months or more. A gift counts towards the deposit but is assessed differently, and usually needs a letter confirming it is not repayable.
• Stable employment. Past probation is the usual bar. Self-employed buyers generally need two years of tax returns.
• Clean recent credit. Twelve months of on-time payments matters more than a perfect score. Defaults narrow your options rather than ending the conversation.
• Room in your budget. Credit card limits count against you whether you use them or not, so closing an unused card often lifts your borrowing capacity more than a pay rise.

The order to do it in

Save the 5% and keep the account tidy. Work out which of the four routes applies to you. Get pre-approval from a lender that offers that route, assessed by a person rather than generated by a calculator. Then shop inside the number you were given, not above it.

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FAQs

Can I really get a home loan with a 5% deposit?

Yes, through four routes: the government 5% Deposit Scheme with no LMI, a 95% loan where you pay LMI, a guarantor loan, or a professional LMI waiver if your occupation qualifies.

Which is cheapest?

The government scheme, by a wide margin, because it removes an LMI premium that would otherwise be $25,000 to $40,000 on a typical purchase.

Do all lenders offer 95% loans?

No, and fewer offer them than advertise low rates. Not every lender participates in the government scheme either, which is usually the deciding factor in who you apply to.

Can my parents gift me the deposit?

Yes. Most lenders accept a gift but treat it differently from savings, and will want a letter confirming it is not repayable. Some still want to see genuine savings on top.

How much will the repayment be?

Borrowing 95% instead of 80% of a $900,000 home adds about $800 a month at current rates. Lenders assess you at 3 percentage points above the real rate, so you must show you could cover roughly 9%.

Is LMI refundable if I sell early?

Partially, with some insurers, and only within the first year or two. Treat it as a sunk cost rather than something you get back.