Traditionally, a 20% deposit is considered the safe minimum by lenders because it reduces their risk. Borrowers with less than 20% usually need to pay Lenders Mortgage Insurance (LMI), which protects the bank if the borrower defaults, but not the borrower themselves. However, LMI can also be used as a tool to enter the market earlier, and for many buyers, paying the premium upfront or folding it into the loan makes more financial sense than waiting for property prices to keep rising.

If you have as little as 5% saved, you could still be eligible for a home loan. Many lenders allow you to borrow up to 95% of the property’s value by charging LMI. The key is to understand the trade-off between time and cost. For example, paying $15,000 in LMI to buy now might be more cost-effective than waiting two more years to save an extra $50,000, especially if prices continue climbing. Some lenders offer discounted LMI or even waive it altogether for certain professionals (like doctors or accountants), so it’s worth shopping around.

One of the fastest-growing deposit solutions is a family guarantee, where a parent (or close family member) offers part of their own home’s equity as additional security. In practice, this means you can borrow up to 100% of the purchase price (plus costs like stamp duty), with your relative’s property acting as backing for the portion you haven’t saved.

There’s no cash outlay from the guarantor, but it’s important they understand the risk. If you default, their home could be on the line. Most lenders allow the guarantee to be released once you've built up sufficient equity in your home, often within 3 to 5 years.

Several government-backed initiatives can help buyers avoid the 20% deposit and LMI altogether.

• First Home Buyers Guarantee (FHBG): This recently expanded scheme allows eligible first-home buyers to purchase with as little as 5% deposit without paying LMI. The government guarantees up to 15% of the loan.
• Regional First Home Buyer Guarantee: Similar to the FHBG but tailored to regional buyers.
• Family Home Guarantee: Designed for single parents with as little as 2% deposit, also without LMI.

These schemes have limited places and specific eligibility criteria, so it pays to act fast and get pre-approved before properties start selling. You can even combine these schemes with any state-based first-home buyer grants or stamp duty concessions for maximum benefit.

Shared equity arrangements are also becoming a practical alternative for buyers who are asset-light but income-strong. In this model, you co-purchase the property with a government body, private investor, or even a family member. You buy a portion (say 70%), and the other party owns the rest. When the property is sold or refinanced, the proceeds are split accordingly. These schemes are growing in popularity in places like Victoria and Western Australia, where state governments offer shared equity programs for eligible buyers. Shared equity isn’t for everyone, but it can work well if structured carefully with legal and financial advice.