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Not enough for a deposit? Here are your options.

Making the best decision when your deposit doesn’t quite add up 

A first home buyer’s world can be a daunting one. Between working through contracts and comparing home loan rates, to simply finding the best property for your budget, scraping together a decent deposit for your first home can seem almost impossible.

Coming up short on that expected 20% deposit doesn’t mean losing out on the house of your dreams. There is a range of options available for buyers to bridge the gap, each with their varying pros and cons.


A guarantor allows the equity in his or her own property to be used as additional security for your loan. The primary security for the loan will be your property, but the lender will also take a mortgage over your guarantor’s property. This mortgage will not support the loan directly but will be used to support a guarantee from your guarantor.

  • Pros:

You can borrow the vast majority of your loan with a guarantor’s agreement, giving you the freedom to focus your energy on shopping around for properties rather than saving the 20% deposit.

  • Cons:

Using a guarantor can be risky for both parties. If you’re unable to pay back your loan, your lender can take legal action against both you AND the guarantor. This can place enormous pressure on relationships of the parties involved.

Also note that the guarantor’s own borrowing capacity will be reduced once they agree to help with your loan.

  • Our expert tip:

Life is unpredictable. Get independent legal advice and draw up a contingency plan for the worst-case scenario. You should be all on the same page before any contracts are signed.

Lender’s mortgage insurance

If you are asking to borrow more than 80% of your home loan from the bank, chances are they will make you pay lender’s insurance. This involves a one-off premium when you take out your home loan that you can pay off over time.

  • Pros:

It’s a quick fix solution for people who see can’t quite get enough deposit for their purchase. Lender mortgage insurance can be added to your loan repayments, so you don’t have to find cash fast.

  • Cons:

It’s an added cost after all. Lenders mortgage insurance can costs you thousands on top of your other fees so prepare yourself for how that affects your budgets and repayments.

  • Our expert tip:

Lenders mortgage insurance is either an added expense to your home buying journey, or a non-essential expense. Decided where it sits with your priorities.

First home owner grant

From 1 July 2013, a $10,000 first home owner grant is available when you buy or build your first new home. Your home can be a house, townhouse, apartment, unit or similar, but it must be valued at $750,000 or less and be the first sale of the property as residential premises.

  • Pros:

Free money! (what else can we say?)

  • Cons:

There are strict rules around the first home owner grant, so make sure your application is 100% watertight before allocating your grant money. Also remember that your purchase cannot be an investment property or a holiday house.

  • Our expert tip:

Do your maths. If you can afford to build a property worth more in value thanks to the first home owner grant, it may be a better investment in the long run.

If you’re having trouble saving a deposit, it may be more appropriate to look into a lower house cost or waiting until you have the 20% deposit saved. Often first home buyers will search for their dream home rather than a ‘stepping stone’ into the property market.

If you can’t save enough for a deposit, there’s a high chance you’re borrowing out of your repayment capabilities and could face difficulty making repayments.

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