How to Buy a House with a 5% Deposit in Australia 2026
The biggest barrier to home ownership in Australia is saving a deposit. But you do not need 20 per cent to get started. With government schemes and lender options available in 2026, it is possible to buy with as little as 5 per cent—and in some cases even less.
The First Home Guarantee Scheme
The federal government's First Home Guarantee allows eligible first home buyers to purchase with just a 5 per cent deposit without paying Lenders Mortgage Insurance (LMI). The government guarantees the difference between your deposit and 20 per cent, meaning the lender takes on less risk.
- Deposit required: 5% (sometimes as low as 2% for single parents under the Family Home Guarantee)
- LMI: Not required
- Places available: 35,000 per financial year
- Property price caps: Vary by location—check current limits for your area
Buying with 5% and Paying LMI
If you do not qualify for the government guarantee or places have been filled, you can still buy with a 5% deposit by paying Lenders Mortgage Insurance. LMI protects the lender if you default, and the cost depends on your deposit size and loan amount.
Typical LMI Costs
- $500,000 loan with 5% deposit: LMI approximately $12,000 to $16,000
- $600,000 loan with 10% deposit: LMI approximately $5,000 to $8,000
- $700,000 loan with 15% deposit: LMI approximately $3,000 to $5,000
LMI can usually be added to the loan rather than paid upfront, though this increases your total borrowing.
Other Low-Deposit Options
Family Guarantee (Bank of Mum and Dad)
Some lenders allow a family member to use equity in their own property as security for part of your loan. This can eliminate the need for a cash deposit entirely and avoids LMI. The guarantor's property is only at risk for the guaranteed portion, not the whole loan.
Using Your Super (First Home Super Saver Scheme)
The FHSSS lets you withdraw voluntary super contributions to put toward a deposit. You can access up to $50,000 in contributions plus earnings. Since super contributions are taxed at 15% rather than your marginal rate, this effectively boosts your savings.
What You Actually Need to Save
Beyond the deposit itself, budget for these upfront costs:
- Stamp duty: Varies by state—first home buyers often get exemptions or concessions
- Conveyancing/legal fees: $1,500 to $3,000
- Building and pest inspections: $500 to $800
- Loan application fees: $0 to $600 depending on lender
- Moving costs: $500 to $2,000
Is Buying with 5% a Good Idea?
There are trade-offs to consider:
Advantages
- Enter the market sooner and start building equity
- Stop paying rent and direct payments toward your own asset
- Benefit from capital growth while you would otherwise still be saving
Risks
- Higher repayments due to a larger loan
- LMI adds to costs if not using a guarantee scheme
- Less equity buffer if property values fall short term
Next Steps
A mortgage broker can assess your situation, check your eligibility for government schemes, and find a lender that works for your deposit level. Getting professional advice early can save you thousands and get you into your home sooner.