Case study: buying a first home with a 5% deposit and no LMI

The situation

Two first home buyers, both PAYG, combined income of $172,000, with $52,000 in savings built up over three years. They were looking in Melbourne's outer north-west with a budget they believed was around $560,000.

They had never had their borrowing power assessed and were budgeting for a 20% deposit because that's what they'd been told they needed.

The challenge

• Saving a 20% deposit at their target price was still years away
• They had a $9,000 car loan reducing borrowing capacity
• First Home Guarantee places are limited and property price caps apply
• They needed to know the total funds required, not just the deposit

What we did

We confirmed eligibility for the First Home Guarantee and checked the price cap for their region. With the guarantee, a 5% deposit meant no LMI at all — on a $650,750 loan, that saved roughly $24,000.

We worked backwards from their $52,000 as total funds available rather than as a deposit: $34,250 deposit, stamp duty covered by the first home buyer concession, conveyancing and inspections at about $3,200, and lender fees waived. That left a genuine buffer at settlement.

Paying out the car loan lifted their borrowing power by about $58,000, which took their realistic ceiling to just under $700,000.

The outcome

• Purchased a three-bedroom house at $685,000
• 5% deposit ($34,250) with the government guaranteeing the balance
• No LMI — approximately $24,000 saved versus a standard 95% loan
• First home buyer stamp duty concession applied
• Settled with roughly $11,000 of savings intact as a buffer

What made the difference

Two things. First, checking scheme eligibility before assuming they needed 20%. Second, clearing a small car loan — a $9,000 debt was costing them $58,000 of borrowing capacity, which is a terrible trade.