The 20% deposit is one of the most persistent myths in Australian property. Buyers assume it is the minimum required to purchase. It is not.
Twenty per cent is the threshold at which lenders do not charge lenders mortgage insurance. It is not a legal requirement for purchasing property. Buyers purchase with deposits well below 20% every day in Australia through a combination of government schemes, lender policies, and alternative deposit structures.
When you purchase with a deposit below 20% of the property's value, two things typically happen.
First, the lender charges lenders mortgage insurance, or LMI. This is an insurance premium paid by the buyer that protects the lender, not you, in the event you default. On a $750,000 property with a 10% deposit, LMI can add $15,000 to $25,000 to the cost of purchase depending on the lender and the deposit size.
Second, the lender may apply stricter assessment criteria to the loan application, depending on the loan-to-value ratio.
Several mechanisms exist to purchase with a smaller deposit without paying LMI or with LMI waived.
The First Home Guarantee allows eligible first home buyers to purchase with a 5% deposit. The federal government guarantees up to 15% of the purchase price, eliminating the need for LMI. Income thresholds of $125,000 for singles and $200,000 for couples apply. Property price caps vary by location.
The Family Home Guarantee allows eligible single parents and single legal guardians to purchase with a 2% deposit. The government guarantees up to 18% of the purchase price. There are no income caps under current rules. This scheme is not limited to first home buyers.
The Regional First Home Buyer Guarantee applies the same 5% deposit structure to eligible buyers purchasing in designated regional areas.
Some lenders waive LMI for buyers in specific professions regardless of deposit size. Medical practitioners, lawyers, accountants, and some other professionals can access LMI waivers with deposits as low as 10% or sometimes less. The specific professions and thresholds vary by lender and are worth asking about if you work in a qualifying field.
A parent who owns property with sufficient equity can act as a guarantor on your home loan. The guarantee uses the parent's property as additional security, which can allow you to purchase without a traditional deposit or with a very small one. If you default, the lender can pursue the guarantor's property to recover the debt. This is a significant commitment for the guarantor and should only be entered into with independent legal advice for both parties.
Through Coposit, eligible off the plan developments can be secured with $10,000 upfront. The remaining deposit is paid through weekly instalments during the construction period, interest-free and fee-free.
At settlement, the buyer arranges a home loan to cover the purchase price minus the deposit already paid through instalments. Standard lending criteria apply at settlement. The Coposit structure changes when and how the deposit is accumulated, not the lending requirements at settlement.
You can buy property in Australia without a 20% deposit. Many buyers do. But the mechanisms available to you depend on your income, your profession, your family situation, and the type of property you are purchasing.
The First Home Guarantee's 5% deposit is the most broadly accessible option for first home buyers. The Family Home Guarantee's 2% deposit is one of the most significant housing support schemes currently available for eligible single parents. Parental guarantees work for buyers whose parents have suitable equity and are willing to take on the commitment. Off the plan through Coposit works for buyers who have $10,000 available and can sustain weekly instalments over the construction period.
Browse eligible off the plan developments on the Coposit projects page, download the Coposit app, or contact the Coposit team to understand how the deposit structure works for your situation.
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