Low Deposit Home Loans – Monzi Explains

With low deposit home loans, purchasing your first home may be more realistic than you think. Keen to know more? Read on as Monzi investigates what options are available for you. We’ll break down everything you need to know so that you can decide if a low deposit home loan is right for you. Let’s go.

Please note, certain ideas and products presented in this article may not be offered by Monzi nor the lenders we work with. This article presents only general information. Consider seeking professional financial, taxation, legal or other advice to check how the information and ideas presented on this website relate to your unique circumstances.

What are low deposit home loans?

When it comes to low deposit home loans, they’re exactly as described. In short, while standard home loans require a deposit of up to 20%, you can potentially be approved for a home loan and pay a deposit of as little as 5%. As a result, they can potentially provide an accessible mortgage option for first home buyers.

Beyond the deposit, these loans will be essentially identical to any other mortgage on the market. You’ll need to pay a monthly repayment made up of a principal and interest component over a fixed term ranging from 10 to 40 years. Moreover, you may be able to access a range of handy features or additional extras too.

While that covers the basics, there’s much more to know. So, let’s jump in.

How can I get a mortgage with a low deposit?

If you’re after a low deposit mortgage then you will have a few options to choose from. However, in most cases, there will be a trade-off that you must make.

The first and most common way to access a low deposit loan is to have a family member co-sign your loan as a guarantor. As a result, they can use the equity in their home to make up the short-fall.

Another possible option could be to apply with the Australian government’s first home loan deposit scheme. WIth this, you can pay a deposit of as little as 5% and the Australian government will guarantee the rest. However, conditions and eligibility criteria do apply. Read on for further details below.

If neither of these options are a possibility then there is one final option. Lenders may offer low deposit home loans with no guarantor, however, you will need to pay premiums on what’s known as lender’s mortgage insurance. In short, this insurance is designed to protect lenders from potential losses. However, be aware that these premiums can be sizeable.

First home loan deposit scheme

The Australian first home loan deposit scheme (FHLDS) is a handy government initiative designed to assist Aussies in purchasing their first home. While most lenders require borrowers to pay a 20% deposit or pay expensive lender’s mortgage insurance premiums, the FHLDS can help you bypass this.

In short, each year the Australian government will act as the guarantor on 10,000 low deposit loans. With this, eligible borrowers who have saved at least a 5% deposit can enter the property market without needing to find a guarantor or pay insurance premiums. As a result, the savings can be immense and there’s no need to wait years as you try to reach a 20% deposit.

However, keep in mind that this scheme is only available for eligible low and middle-income earners. Moreover, there are only a limited number of spots available per year. So, do your research to determine if it’s an option for you.

Who can guarantee my low deposit home loan?

Typically, the guarantor on your loan must be a family member or spouse. In most cases, this will be your parents, however, other family members such as your grandparents, your adult children, siblings or even uncles and aunts could act as the guarantor.

Unfortunately, friends, business associates or other individuals that you do not share a close relationship with likely will not be accepted as guarantors.

In addition to this, the guarantor must own a property in Australia and owe less than 80% of the outstanding balance. Their home equity is then used to cover the shortfall of your deposit. For instance, if you are only able to pay a 5% deposit, their equity will account for the rest up to 20%. That way, you can avoid paying premiums on lender’s mortgage insurance and possibly get a lower interest loan too.

Can I get a home loan without a deposit?

Yes, it may be possible.

In short, no deposit loans are quite similar to low deposit home loans. However, to be offered a no deposit home loan you must have a guarantor. This is the only way that these loans are possible. After all, the First Home Buyer Loan Deposit scheme is only available to cover the difference between a 5% deposit and 20% of your property value.

Beyond this, in order to be approved for a no deposit home loan, you must also show that you are in a secure financial position. This will include having a high credit score and strong repayment history as well as secure employment and a steady income.

Can I get a low deposit home loan online?


While traditionally most mortgages have been offered by banks, they’re no longer your only option. In fact, there are now a handful of 100% online-based mortgage lenders who can make purchasing your new home as easy as can be.

In addition to this, you may be offered a lower home loan rates too. After all, as these lenders are based online, they’ve got lower overheads. That is, they don’t have to pay the additional costs that come with establishing and running branches. As a result, they can potentially offer you a discount.

Having said this, it is up to you whether you apply with a bank or online loan provider. Both have their benefits so do your research to determine which lender is right for you.

Can I get a fixed rate on a low deposit home loan?

With a fixed rate home loan, you’re able to lock in your interest rate for a defined period of time. In most cases, this period will range from one to five years. Once that period lapses, your rate will switch to the normal variable structure.

The idea behind a fixed rate period is to provide you with security and certainty. You’ll know exactly what your repayments will be and won’t have to worry about harmful interest rate changes. As a result, the fixed period is usually applied at the start of your loan to allow you a smooth transition into making your repayments.

For most low deposit home loans, you will have the option to fix your rate. However, before applying, check with your lender to ensure that this is an option for you.

What about a variable rate?

A variable rate home loan is the standard form a mortgage will take. As a result, if you are offered a low deposit home loan then it will almost certainly be a variable rate loan.

As a guide, variable rate loans are often considered advantageous because of the flexibility they provide. While rate changes may be positive or negative, you may have the option to make additional repayments, repay your loan early or make use of redraw facilities. However, extra features may vary based on your lender or circumstances.

What about a split rate?

With a split rate loan, your loan balance is divided into two components: fixed and variable.

On the fixed portion, you’ll pay a single fixed rate and repayment amount. On the variable portion, your rate will fluctuate based on various market factors. Typically, this will remain in place for a period of between one and five years before reverting to a standard variable structure.

The idea of these loans is to provide you with the benefits of both. You get the security that comes with a fixed rate and the flexibility of a variable rate. However, whether this option will be offered on a low deposit home loan will be up to your lender.

Do low deposit home loans apply to land and construction loans?


Whereas with a home loan you are purchasing a home that is already built, with a land loan and construction loan you are borrowing the money needed to purchase your plot and build your house.

Generally speaking, it may be possible to access land loans with just a 5% deposit. As a result, you may be able to commit more funds to your construction. However, remember that eventually you will have to make repayments on both loans. Although, lenders may provide handy options that combine them into one easy repayment.

What are the pros and cons of low deposit home loans?

Before you apply for a low deposit home loan, it’s important to understand that they are not the perfect mortgage option. While there are a number of benefits, there are also a few downsides that you must consider.

From a positive perspective, the benefits include:

  • You can purchase your home sooner (i.e. you don’t have to save as much).
  • You’ll pay less up-front.
  • Can make purchasing a home more accessible for some borrowers.
  • Can make use of various government schemes designed to assist first home buyers.

On the other hand, potential drawbacks of low deposit loans include:

  • You may need to pay lender’s mortgage insurance premiums.
  • You will be borrowing more which may increase your interest payments and loan term.
  • May attract higher home loan interest rates given that they are riskier for lenders.
  • Am I eligible for a low deposit home loan?

    Exact eligibility requirements will vary from lender-to-lender. As a result, it is impossible for us to say whether or not you will be eligible for a low deposit home loan.

    Generally speaking, in order to receive approval you will typically need to have good credit, steady employment and earn a regular income. However, exact credit requirements and income thresholds may not be consistent across lenders. In other words, while some lenders may be willing to approve your application, others may not.

    Given this, do your research and compare each lender’s requirements to your financial situation. From there, you may be able to determine if a home is a reasonable option for you.

    What information do I need to provide?

    For most home loan applications, lenders will require documentation and evidence that covers three categories: identification, income and expenses as well as assets and liability.

    Starting with identification, you will typically need to provide 100 points of ID. This may include your driver’s licence, birth certificate, passport or a number of other documents that prove your identity.

    Next, you will need to provide proof of your income. Typically, this will include payslips as well as bank statements covering at least the past three months. With this, you’ll also be asked to supply information about your regular living expenses (e.g. bills, rent, food). Lenders will use this information to get an idea of your budget.

    Finally, lenders need to know about your current assets and liabilities. From an asset perspective, this could include cars, shares, other securities and even other homes that you own. Liabilities typically include current, on-going debt repayments (e.g. car loans).

    If you fail to provide this information then your application may experience delays or be denied all together.

    What repayment term should I select?

    While it is your decision, a handy rule is to select the shortest repayment term that you can afford.

    Home loan repayment terms can range from 10 to 40 years, however, they are traditionally broken into five year segments (e.g. 20, 25 or 30 years). If you select a term that is too long then you may have to pay unnecessary additional interest, fees or charges. However, if it is too short then you may find yourself cash-strapped and unable to make your repayments.

    Given this, it’s crucial to have a clear idea of what repayments that you can afford. Consider your income and expenses to determine how much you can afford to pay for the month. Then, use that information to select the corresponding loan term.

    Low deposit home loans used to purchase white home with sloped roof

    Can you get a home loan with a low credit score?

    Potentially, however, unlike with bad credit personal loans, lenders are usually hesitant to offer home loans to borrowers with bad credit.

    This is understandable given that lenders and banks will be allowing you to borrow amounts well over $100,000. As a result, they want to be absolutely certain that you will make your repayments. If you’re a bad credit borrower then a lender may not trust your ability to do this.

    Given this, if you’re looking to apply for a home loan then it’s important to get your credit in order. While there are no quick fixes and it will take time, strategies that can potentially improve your credit score include:

    • Paying your bills on time.
    • Keeping credit balances low.
    • Only opening new credit accounts when you need them.
    • Monitoring your credit report to ensure that it remains error-free.

    How much money do you need for a home deposit?

    The exact sum of money that you need will vary. After all, deposits are calculated as a percentage of your home value.

    For a standard home loan, lenders will typically ask for a mortgage deposit of 20%. As an example, for a home with a value of $500,000, your deposit would be $100,000.

    On the other hand, for a low deposit home loan the amount you need will obviously be much lower (e.g. as little as 5%). However, as we’ve already mentioned, in order to access the loans you may need a guarantor or be a first home buyer applying with the FHLDS. Without either, you may need to pay the lender’s mortgage insurance.

    Can I get a low deposit home loan on Centrelink?

    If Centrelink benefit payments account for some or all of your income then you may still be able to purchase a home. In other words, it alone will not mean that you are ineligible. However, approval is not certain.

    As with all loans (e.g. personal loans for Centrelink customers), you must still prove that you are in a secure financial position and have the capacity to repay the money that you borrow. Unfortunately, if your income is made-up solely of benefit payments then, in most cases, it will not be sufficient to meet the minimum income requirements.

    What about if I’m unemployed?


    If you are unemployed then you will not be approved for a home loan. After all, you must prove that you are able to meet your contractual loan repayments. Without secure employment and steady income, this will not be possible.

    Will I receive an outcome on the same day that I apply?

    In short, it may be possible.

    These days, a range of online lenders are pioneering quick and innovative processes that mean that you can potentially receive same day loan approval. However, in most cases, this won’t occur.

    Having said this, you may be able to receive pre-approval. In short, pre-approval is a soft assurance that a lender may be willing to offer you a loan. With this, they will often give you an idea of how much you can borrow too. Ultimately though, final approval and agreement will usually take a minimum of a few business days.

    What other costs should I consider?

    If you’ve got your heart set on buying a home then you’re probably focusing on saving for your deposit. While that is important, it’s also crucial to understand that there are a number of other costs that come with purchasing a house too. These can include:

    How do I compare low deposit home loans?

    Finding the right mortgage is essential. Not only can you find terms that suit your circumstances, you can potentially save yourself a ton of money too. As a result, it’s crucial to compare loan products before applying.

    If you’re not sure what you need to compare, that’s okay. We’ve assembled this quick loan comparison guide to help you out. See below:

    • Interest rates: the lower the better. A slightly lower interest rate can produce considerable savings over time.
    • Fees and charges: fees can come in a range of forms, from one-off application to on-going account fees. Aim to minimise them where possible.
    • Comparison rate: combines your rates and fees to give you a single annual percentage that represents your total loan costs. Use it to compare loans by cost.
    • Additional features: what options and benefits come with the loan. Do you have the option to open an offset account or make use of a redraw facility?
    • Terms: lenders may offer repayment terms from 10 to 40 years. Ensure there is an option that’s affordable for you.
    • Monthly repayment amount: how much will you be paying?
    • Fixed or variable rate: do you get the security of fixed rate or the flexibility of a variable rate?

    What options and features come with low deposit home loans?

    In short, we cannot say.

    Lenders will vary on the features, benefits and options that they offer on their home loans. Moreover, your access to these features may vary based on your financial situation.

    As a guide, common additional features include:

    Finally, keep in mind that while these additional features may be useful, you may need to pay a premium for the right to access them. As a result, always consider the costs before making a decision.

    Can I refinance a low deposit home loan?

    In short, it may be possible. However, you may need to wait until you have established at least 20% equity in your home before you will be eligible to do so.

    In short, home loan refinancing involves taking out a new home loan at a lower rate to reduce your total costs. Typically, this will occur at least a few years after you’ve taken out your initial loan. In addition to this, you may also refinance to consolidate date or access a greater range of loan extras (e.g. option to make additional repayments).

    Finally, keep in mind that if you do refinancing, then you may need to pay a fee for breaking the loan. As a result, you must consider the costs involved before doing so.

    Who should I ask for advice?

    A home loan is by the far the largest financial commitment that you will make in your life. As a result, it’s important to never rush in. Moreover, it’s never a bad idea to seek professional advice either.

    If you get in touch with a paid mortgage professional (e.g. mortgage broker) they may be able to help you determine what’s affordable for you as well as how you could potentially access a loan that works for your circumstances.

    Alternatively, there are a wide-range of simple, online resources that can potentially help you make the right decision. For example, the Australian government’s Moneysmart website has provided a handy guide breaking down how to select the right home loan.

    At the end of the day, read widely and don’t be afraid to ask for advice. It will almost certainly pay off in the long-run.

    Low deposit home loans and Monzi

    While that covers our comprehensive guide to low deposit home loans, it’s important to understand that Monzi does not offer home loans. However, what we do offer is one of Australia’s leading personal loan lender-finder services.

    In short, if you’re in the midst of a cash shortfall then Monzi might be able to help. We work with lenders who offer quick cash loans from $300 to $10,000 with repayment terms between 12 and 24 months. Just apply and our automated system will attempt to pair you with an available lender from our network. It’s the simple and easy way to find credit providers online.

    Am I eligible to apply for a personal loan through Monzi?

    Before you begin your application, you must make sure that you are eligible. At Monzi, we have four simple boxes that you must check for your application to progress. So, check them out:

    • Australian citizen or permanent resident
    • At least 18 years of age
    • Have an active email address and contact phone number
    • Hold an online bank account with at least three months of transaction history

    Once you’ve confirmed that you are eligible, you’re free to move onto your application. Find out how below.

    How do I apply?

    Applying with Monzi couldn’t be easier. In short, it’s a 100% online process that you can potentially have completed in minutes. There’s no paperwork or drawn-out meetings required. All you need to do is follow these easy steps:

    1. Select your loan amount and repayment period (note that loans under $2,000 come with fixed 12 month repayments).
    2. Enter the required details then submit your application.
    3. We’ll take over as our automated system attempts to pair you with an available lender who is willing to assess your application. If you apply during business hours then this may take as little as 60 minutes.
    4. We’ll contact you to let you know the outcome of our search. If a lender is found then we will step aside and they will contact you to conduct an assessment.

    What can I spend the money on?

    The lenders that Monzi works with understand that personal expenses come in a wide-range of forms. As a result, you can potentially apply and be approved for a loan to cover almost any personal expense that you encounter. All you need to do is provide the reason when you apply.

    As a guide, some of the most common reasons that Aussies apply with Monzi include:

    What products do Monzi’s lenders offer?

    At Monzi, we’ve developed an extensive network of diverse and understanding lenders. While they can offer a range of loan amounts, they can also potentially offer different credit products too. As a result, if your circumstances aren’t the best or you’re after something specific, Monzi might be able to help.

    To give you an idea, credit products that may be offered by Monzi’s lenders include:

    However, availability and approval is not certain. Lenders vary in their individual policies and requirements meaning we cannot guarantee if you will be offered one of these loans.

    Contact us

    We’re always happy to answer any questions that you have about Monzi or what our service involves. Simply email us hello@monzi.com.au and one of our friendly customer service team members will get back to you with a response that addresses all of your queries and concerns.

    Keep in mind though that we cannot speak on behalf of other organisations. As a result, if you have questions about the loan products on offer or a cash loan that you’ve taken out, contact your lender directly.

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    Loan amount

    $300 - $2,000


    12 months (minimum)

    12 months (maximum)


    20% upfront establishment fee

    + 4% monthly fee


    Loan Amount of $1,000 over 6 months repayable weekly (25 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $240 (fees based on 4% per month over 25 weeks) = $1,440 total repayable in 25 weekly installments of $57.60.

    Under the current legislation, most small personal loan providers don’t charge an annual interest rate (you’ll know this as an APR) %. The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. The maximum comparison rate on loans between $300 and $2000 is 199.43%. The minimum and maximum loan term is 12 months. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

    Loan amount

    $2,001 - $4,600


    13 months (minimum)

    24 months (maximum)


    48% Annual Percentage Rate (APR)

    67.41% Comparison Rate p.a.


    Loan Amount of $3,000 over 18 months repayable weekly (78 weekly repayments). $3,000 (Principal Amount) + $400 (Establishment Fee) + $1,379.06 (reducing interest) = $4,779.06 total repayable over 18 months with weekly installments of $61.27.

    The Annual Percentage Rate (APR) for Secured Medium Loans is 48%. The Typical Comparison Rate is 67.41% p.a. The minimum loan term is 13 months and the maximum loan term is 24 months. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.

    Loan amount

    $5,000 - $10,000


    13 months (minimum)

    24 months (maximum)


    21.24% Annual Percentage Rate (APR)

    48% Comparison Rate p.a.


    Loan Amount of $10,000 over 24 months repayable weekly (104 weekly repayments). $10,000 (Principal Amount) + $5,577.12 (Interest) = $15,577.12 total repayable over 24 months with weekly installments of $149.78.

    The Annual Percentage Rate (APR) for Secured Large Amount Loans is 48%. Maximum Comparison Rate is 48% p.a. The minimum loan term is 13 months and the maximum loan term is 24 months. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.