You Don't Need 20% — How to Buy a Home with 2–5% Deposit

Here are the real, available-right-now options for buying with a low deposit in 2026:

1. First Home Guarantee (FHBG) — 5% deposit, NO LMI

The federal government guarantees the gap between your 5% deposit and 20%. You avoid LMI entirely — saving $10,000–$30,000. Since October 2025, places are unlimited. You must be an Australian citizen, earn under $125,000 (single) or $200,000 (couple), and be buying a property under the price cap ($700,000 for Brisbane).

2. Help to Buy — 2% deposit, government equity

Launched December 2025. The government contributes up to 40% equity for new homes or 30% for existing homes. You only need 2% deposit. Income caps: $90,000 (single), $120,000 (couple). When you sell, you repay the government's percentage share. Up to 40,000 households eligible.

3. Family Home Guarantee — 2% deposit for single parents

Single parents (including widowed) can buy with just 2% deposit and no LMI. Available for new and existing homes. You don't need to be a first home buyer.

4. Family Guarantee (Guarantor Loan)

Your parents (or other family members) use equity in their own property as additional security for your loan. You can borrow up to 100% of the purchase price (or even 100% + costs) with no deposit and no LMI. Your parents don't give you cash — they just guarantee a portion of your loan against their property. Once you've built enough equity (usually 1–3 years), the guarantee is released.

5. Standard Low Deposit (10–15%) with LMI

Most lenders accept deposits from 5–15% with Lender's Mortgage Insurance. LMI protects the lender (not you) but it's the cost of getting into the market sooner. It can be added to your loan so you don't need to pay it upfront.

6. Specialist 2.20% Deposit Lenders

Some non-bank lenders allow you to borrow the entire deposit — you only need 2.20% upfront. These products have higher rates, but they get you into the market immediately. We use these for clients who have strong income but haven't had time to save a full deposit.

Lender's Mortgage Insurance (LMI) is a one-off premium paid when you borrow more than 80% of a property's value. It protects the lender if you default — not you.

How much does LMI cost?

• $400,000 loan at 90% LVR: ~$5,000–$8,000
• $500,000 loan at 90% LVR: ~$8,000–$12,000
• $600,000 loan at 90% LVR: ~$12,000–$18,000
• $600,000 loan at 95% LVR: ~$22,000–$30,000

LMI increases significantly as the LVR goes above 90%. The jump from 90% to 95% LVR roughly doubles the LMI cost.

5 ways to avoid paying LMI:

1. Save 20% deposit — no LMI required by any lender
2. First Home Guarantee — government covers the gap, no LMI
3. Family guarantee — parent's equity provides additional security, no LMI
4. Professional packages — some lenders waive LMI for doctors, lawyers, accountants, and other professionals at 90% LVR
5. Lender promotions — some lenders periodically waive LMI for specific products or borrower types

Family guarantee (also called a parental guarantee or security guarantee) is one of the most powerful tools for low-deposit buyers. Here's how it works:

The structure:

• You borrow 100% of the purchase price (or 100% + costs)
• 80% is secured against your new property (standard mortgage)
• The remaining 20% is guaranteed by your parents using equity in their property
• Your parents don't give you money — they provide a limited guarantee
• No LMI is payable because the lender has 100% security

What does it mean for your parents?

• Their property has a second mortgage registered against it — but only for the guarantee amount (typically 20% of your purchase)
• They don't make any repayments — you make all the repayments
• Their risk is limited to the guarantee amount, not your entire loan
• Once you've built enough equity (usually when your loan is below 80% LVR through repayments + property growth), the guarantee is released and their property is free

Example: You buy a $600,000 home with a family guarantee.

• Your loan: $600,000
• Secured against your property: $480,000 (80%)
• Guaranteed by parents: $120,000 (20%)
• Your deposit required: $0
• LMI: $0
• If your property grows 5%/year, you can release the guarantee in approximately 2–3 years

This is the biggest question for low-deposit buyers. Let's do the maths:

Scenario: Buying a $600,000 home in Brisbane

Option A — Buy now with 5% deposit ($30,000):

• Loan: $570,000 (or $600,000 with guarantee)
• LMI cost: $0 (using First Home Guarantee)
• You're in the market immediately
• If property grows 5%/year: worth $630,000 in 12 months

Option B — Wait 3 years to save 20% ($120,000):

• You need to save an additional $90,000 (about $2,500/month for 3 years)
• If property grows 5%/year during those 3 years: $600,000 → $694,575
• Your $120,000 deposit is now only 17.3% of the new price — you STILL might need LMI
• You've also paid 3 years of rent ($500/week = $78,000)

The gap: By waiting 3 years, you've "saved" $90,000 in deposit but the property costs $94,575 more. Plus you've paid $78,000 in rent. You're $82,575 worse off.

This is the "deposit treadmill" — in a growing market, saving for a bigger deposit can actually make home ownership HARDER, not easier. Time in the market almost always beats timing the market.

Important caveat: this analysis assumes property growth. If you believe prices will fall, waiting can make sense. But over any 10-year period in Brisbane's history, property has always grown.

Can I use a gift from family as my deposit?

Yes. Most lenders accept gift funds for all or part of the deposit. The gifting family member needs to sign a statutory declaration confirming the money is a gift (not a loan) and doesn't need to be repaid. Some lenders require the gift to be in your account for 3+ months — we know which ones don't.

Can I use my First Home Super Saver (FHSSS) withdrawal as my deposit?

Yes. The FHSSS allows you to withdraw up to $50,000 in voluntary super contributions to use as a home deposit. You apply to the ATO before signing a contract. The withdrawn amount counts as genuine savings.

Will I pay a higher interest rate with a low deposit?

Possibly. Some lenders charge a small premium (0.10–0.25%) for loans above 80% LVR. However, with the First Home Guarantee and family guarantees, you can access standard rates even with a 5% deposit. We'll find the most competitive option.

Can I get a low deposit investment property loan?

Investment loans typically require at least 10% deposit, with 20% strongly preferred. The government guarantee schemes are for owner-occupiers only. However, if you have equity in an existing property, we can use that equity as your deposit — effectively buying an investment with no new cash.

I'm single — is it harder to buy with a low deposit on one income?

It's more challenging on one income simply because borrowing capacity is lower. But single buyers are especially well-suited to the Family Home Guarantee (2% deposit for single parents) and the standard FHBG (5% deposit). We also know which lenders are most generous in their serviceability calculations for single applicants.