Unlock the Secrets to Buying with 10% Deposit

Can You Buy a Home with 10% Deposit?

You can purchase a property with a 10% deposit, though you will typically pay Lenders Mortgage Insurance and need to demonstrate strong serviceability. Most ADIs and non-bank lenders will accept a 10% deposit provided you meet their credit criteria and can service the loan under the current assessment buffer of 3.0 percentage points above the product rate.

The 10% deposit position sits between the more common 20% deposit threshold, which avoids LMI, and the 5% deposit schemes backed by Housing Australia. For business owners, the key consideration is not just the deposit amount but how your income is assessed and which lender is prepared to structure your application in a way that reflects how you actually earn.

How LMI Works When You Put Down 10%

LMI is required whenever your loan-to-value ratio exceeds 80%. If you are borrowing 90% of the purchase price, the insurer covers the lender's risk exposure above that 80% threshold. The premium is calculated on a sliding scale based on the loan amount and LVR, and is paid by you as the borrower, either as an upfront cost or capitalised into the loan amount.

Consider a business owner purchasing at $950,000 with a $95,000 deposit. The LVR is 90%. The LMI premium on a loan of that size and ratio might fall in the range of $18,000 to $25,000, depending on the lender and insurer. That premium can be added to the loan, bringing the total borrowing to around $880,000. The lender assesses your capacity to service that higher amount, so the impact on repayments is modest but real.

Income Assessment for Business Owners

Banks assess business income differently depending on your structure and the lender's policy. Sole traders and partners in a partnership are typically assessed on their individual tax return, using the taxable income plus any add-backs such as depreciation. Company directors and shareholders are assessed on a combination of salary, dividends, and retained earnings, depending on ownership percentage and lender appetite.

Most ADIs average the most recent two years of financials. Some lenders will accept a single year of tax returns if the trend is upward and the business has been operating for less than two full financial years. A small number of non-bank lenders will assess on a current profit and loss statement verified by your accountant, which can be useful if your most recent tax return does not reflect current trading conditions. The key is matching the lender's policy to your circumstances, not forcing your application into a box it does not fit.

Structuring the Loan to Preserve Flexibility

A home loan with a 10% deposit can be structured as variable, fixed, or split. The choice depends on your cash flow profile and your view on rate movements. Variable loans give you access to offset accounts, which are particularly useful for business owners who carry cash reserves or experience lumpy income patterns. Fixed loans lock in certainty but typically restrict additional repayments and do not offer offset functionality.

A split structure allows you to fix a portion of the loan for rate certainty while keeping the remainder variable with an offset. In our experience, business owners with irregular income prefer to keep at least 50% of the loan variable so they can park surplus cash in offset and reduce interest without losing access to liquidity.

The Role of Offset Accounts in Managing Business and Personal Cash Flow

An offset account linked to your owner-occupied loan reduces the interest charged on your mortgage by the balance sitting in the offset. If you have a loan of $855,000 and $80,000 in your offset, you are charged interest on $775,000. The cash remains available at all times, which is critical if you need to cover a tax bill, make a stock purchase, or manage a short-term gap in receivables.

This structure allows you to reduce your mortgage cost without committing funds to additional repayments that you cannot withdraw. For business owners, that distinction matters. You would not want to pay down your mortgage aggressively only to need a business overdraft or line of credit at a higher rate six months later.

When to Consider the Australian Government 5% Deposit Scheme

The 5% Deposit Scheme is available to first home buyers with no income cap and no annual place limit. If you are purchasing your first home, this scheme allows you to buy with a 5% deposit without paying LMI, provided the property price falls within the cap for your location. In New South Wales capital cities and regional centres, the cap is $1,500,000. In other areas of New South Wales, the cap is $800,000.

If you have a 10% deposit and qualify for the scheme, you could instead use a 5% deposit and retain the other 5% as working capital or offset funds. Not all lenders participate in the scheme, and those that do may have different credit overlays or processing times. Applications are made through a participating lender, not directly through Housing Australia. If your deposit is already at 10% and you are not a first home buyer, the scheme does not apply.

Serviceability and the 3.0 Percentage Point Buffer

Every lender must assess your ability to service the loan at a rate that is at least 3.0 percentage points above the actual product rate. At current variable rates, that means your application is tested at a rate in the vicinity of 9.0% to 9.5%, depending on the lender's floor rate. If the monthly repayment at that assessment rate exceeds the lender's maximum debt-to-income threshold or does not leave sufficient surplus after your declared living expenses, the loan will not be approved regardless of your deposit size.

For business owners, living expenses are often scrutinised more closely than for PAYG employees. Some lenders apply a minimum floor based on the Household Expenditure Measure, others allow you to declare actual expenses supported by transaction statements. If your declared expenses are low relative to your income, be prepared to provide evidence. If your application is marginal on serviceability, reducing the loan amount or increasing the deposit may be necessary, but in some cases switching to a lender with a more favourable income treatment is the more effective solution.

Debt-to-Income Limits and What They Mean at 10% Deposit

From 1 February 2026, ADIs are limited in the proportion of new lending they can write to borrowers with a total debt-to-income ratio of six times or greater. The limit is 20% of new owner-occupier loans and 20% of new investor loans, measured quarterly. If you are borrowing $855,000 and your assessable income is $140,000, your DTI is 6.1. That loan may still be approved, but it falls within the portion of the lender's portfolio subject to the cap.

In practice, this means that some lenders may tighten credit policy or pricing for borrowers above the six times threshold, particularly later in a quarter when they are close to the cap. Non-ADI lenders are not subject to the DTI limit, which can make them a viable alternative if your income is strong but your DTI ratio is above six.

How State-Based Duty Concessions Affect Your Upfront Cost

If you are purchasing in New South Wales as a first home buyer, a full transfer duty exemption applies on properties valued up to $800,000, with a concession phasing out at $1,000,000. On a $950,000 purchase, the concession reduces duty by several thousand dollars compared to the standard rate, though the exact amount depends on where the property falls within the phase-out range. That saving does not increase your deposit, but it reduces the cash required at settlement, which can be redirected to your offset or retained as a buffer.

If you are not a first home buyer, standard duty applies. For an established property at $950,000 in New South Wales, duty is in the order of $38,000 to $40,000. That cost must be paid from your own funds and cannot be added to the loan. When calculating how much cash you need, add duty, legal fees, building and pest inspection, and lender costs to your deposit. A 10% deposit on $950,000 is $95,000, but your total cash requirement at settlement is closer to $140,000 if you are not eligible for a concession.

Choosing Between ADI and Non-ADI Lenders

ADIs include the major banks, regional banks, credit unions and building societies regulated by APRA. Non-ADI lenders are regulated by ASIC and are not subject to the same capital adequacy or macroprudential settings. Both types of lender can write a loan at 90% LVR, but their appetite for business income, credit history, and loan purpose varies.

Non-ADI lenders often have more flexible income assessment policies and may accept a wider range of income types, including trust distributions, single-year financials, or accountant-verified declarations. Rates are typically higher than the lowest ADI rates, but not always by a significant margin. If an ADI declines your application or offers a rate with multiple credit overlays, a non-ADI lender may approve the same scenario with less friction. The trade-off is usually cost and the availability of features such as offset, redraw, or portability.

What Happens If You Want to Refinance Later

Once your LVR falls below 80%, either through principal repayment or property value growth, you can refinance to a new lender without paying LMI again. If you purchased at $950,000 with a 10% deposit and the property is later valued at $1,050,000, your LVR on the original loan amount has improved even before you make a single repayment. At that point, you have access to the full panel of lenders and their sharpest pricing.

Refinancing also allows you to restructure the loan, add or remove an offset, switch from fixed to variable, or consolidate other debts. Some borrowers refinance within two to three years of purchase to access a lower rate and remove any restrictions imposed by the original lender. If you have built equity and your income has increased, your borrowing capacity may have improved as well, which can be useful if you are considering an investment property or business acquisition.

If your income structure has changed or your business has grown, speak to one of our team or book an appointment at a time that works for you. We work with business owners across the Northern Beaches and Australia-wide to structure loans that suit how you earn and where you want to be in three years, not just what you can demonstrate on last year's tax return.

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