Depending on your circumstances, there may be several routes to buying with a smaller deposit. They aren't equivalent, and the right one depends on your eligibility, your family situation, and how much risk everyone involved is comfortable carrying.
Eligible buyers may be able to purchase with a low deposit and without paying LMI, because the government guarantees part of the loan. Eligibility rules and property price caps apply and change periodically. See the current schemes.
A family member – usually a parent – offers equity in their own property as additional security for part of your loan. This can let you buy sooner and avoid LMI without anyone handing over cash.
This is a serious commitment and it should be treated as one. If the loan isn't repaid, the guarantor's own property is at risk. The guarantee also affects their borrowing capacity while it's in place, which matters if they have plans of their own.
Well-structured guarantees limit the guarantor's exposure to a defined portion of the loan rather than the whole thing, and include a clear path to releasing the guarantee once enough equity has built up. I'll walk your family through exactly what they'd be agreeing to, in whichever language suits them – and I'd encourage any guarantor to get independent legal advice before signing.
Outside the schemes, many lenders will lend above 80% of the property value with LMI. The premium varies with the loan size and the deposit percentage, and it can sometimes be added to the loan rather than paid upfront.
Lenders also differ in appetite here. Some are comfortable at higher loan-to-value ratios; others aren't. Knowing which is which saves wasted applications.
Buying with a small deposit means a larger loan, higher repayments, and less buffer if values fall or rates rise. That may still be the right decision – waiting has costs too. But it should be a decision made with both sides visible, and that's the conversation I'd rather have with you than a sales pitch.
Usually yes. Once the property has gained enough value or the loan has reduced sufficiently, the guarantee can generally be released, often after a valuation. Building that expectation in at the start makes the conversation easier later.
It's typically limited to immediate family, most often parents, and requirements vary by lender. The guarantor needs sufficient equity and needs to meet the lender's own criteria.
Some insurers offer a partial refund if the loan is discharged within a short period after settlement, but conditions are strict. It shouldn't be counted on in your planning.
