Low deposit and guarantor home loans for first home buyers
By Lena Delgado · Updated 2026-07-17
Saving a full 20% deposit before buying isn’t realistic for a lot of first home buyers, especially with property prices where they are. Lenders mortgage insurance is the most common workaround, but it isn’t the only one. Guarantor loans and a handful of low-deposit schemes exist specifically for this gap, each with a different trade-off.
The main low-deposit paths
A standard low-deposit loan lets you buy with less than 20% down, usually as low as 5-10% depending on the lender, but requires lenders mortgage insurance (LMI) to cover the lender’s added risk. The First Home Guarantee scheme, for eligible buyers, replaces LMI with a limited government guarantee, but it has income and price caps and a limited number of places each year. A guarantor loan uses a family member’s property as extra security instead of, or alongside, LMI, which can reduce or eliminate the deposit you need entirely in some cases.
What a guarantor is actually agreeing to
This is the part that deserves the most care, because it’s often discussed too casually. A guarantor, usually a parent, offers equity in their own home as security for part of your loan. They aren’t handing over cash and typically aren’t added to your property title. But if you default and the property sale doesn’t cover what’s owed, the lender can pursue the guaranteed portion of the debt against the guarantor’s property. That’s a real financial exposure, not a signature of goodwill.
Before anyone agrees to guarantee a loan, both sides should understand:
- exactly how much of the loan the guarantee covers, not the full amount in most structures;
- that the guarantor’s own borrowing capacity for other things (like their own future loans) can be affected while the guarantee is in place;
- the process, and any conditions, for releasing the guarantor once you’ve built enough equity;
- what happens to the arrangement if the property loses value or your circumstances change.
It’s also worth talking through the emotional side, not just the paperwork. Family finances can get complicated when a loan is involved, so setting clear expectations early, including what happens if repayments become difficult, tends to prevent the kind of awkward conversations that strain relationships later.
Comparing the paths
| Path | Deposit needed | Main cost | Best suited to |
|---|---|---|---|
| Standard loan with LMI | As low as 5-10% | LMI premium, one-off or added to the loan | Buyers without a family member able to guarantee |
| First Home Guarantee scheme | As low as 5% (eligibility dependent) | No LMI, but capped places and price/income limits | Eligible first home buyers who can secure a place in the scheme |
| Guarantor loan | Can be reduced significantly, sometimes to near zero | No LMI, but real risk transferred to the guarantor | Buyers with a family member willing and financially able to guarantee |
Getting the conversation right
If you’re considering asking a parent or family member to guarantee your loan, involve a broker in that conversation rather than working it out informally between yourselves. A broker who works with first home buyers regularly can model different deposit and guarantee scenarios, explain the release conditions clearly to both parties, and flag whether the guarantor’s own financial position makes this a sound idea. Independent legal advice for the guarantor, separate from your own, is also worth arranging before anyone signs.
A broker can also model how quickly the guarantee is likely to be released based on realistic repayment scenarios, so both you and your guarantor have a genuine timeframe to work with rather than an open-ended commitment. That clarity tends to make the whole arrangement feel less daunting for everyone involved.
This is general information, not financial or legal advice for your specific situation; the right structure depends on your numbers and your family’s circumstances. Brokers working with first home buyers can talk through what’s realistic for you, and our methodology explains how we assess brokers on this kind of scenario planning. Start from our home page to compare a few before you commit to a conversation with family.
FAQ
- How small a deposit can I buy with?
- It depends on the path. A standard loan with lenders mortgage insurance can go as low as around 5-10% for many lenders. A guarantor loan or the First Home Guarantee scheme can sometimes bring that lower again, subject to eligibility and the lender's own policy.
- What exactly is a family member agreeing to with a guarantor loan?
- Usually they're offering equity in their own property as additional security, not handing over cash. If you default and the sale of your home doesn't cover the debt, the lender can pursue the guaranteed portion against the guarantor's property, so it's a real financial risk for them, not a formality.
- Can a guarantor be released from the loan later?
- Often yes, once you've built enough equity (through repayments and, sometimes, property value growth) that the loan no longer needs the extra security. This usually requires a formal request to the lender and isn't automatic.
- Is a guarantor loan the same as someone co-signing?
- No. A co-borrower shares responsibility for the whole loan and is usually also on the property title. A guarantor typically isn't on the title and is only liable for the portion of the loan their guarantee covers.