How to buy property with a small deposit in 2025

The median Melbourne house price sits near $920,000. For most first-home buyers, scraping together a 20 per cent deposit feels impossible. But 2025 has opened new pathways for those willing to move strategically.

The reality is stark: a 10 per cent deposit on a $600,000 apartment in suburbs like Coburg or Brunswick leaves you with $60,000 upfront instead of $120,000. That's the difference between buying now and waiting three more years. Lenders mortgage insurance (LMI) costs around $15,000–$25,000 on smaller deposits, but it can be rolled into your loan, meaning you don't need extra cash on settlement day.

Suburbs beyond the inner ring are absorbing first-home buyer demand. Frankston corridor properties—think Carrum Downs or Langwarrin—are sitting 15–20 per cent below inner-Melbourne valuations, with units under $500,000 common. Preston and Reservoir offer similar spreads. A $550,000 apartment there needs just $55,000 down with LMI, compared to $85,000+ in Bentleigh East.

The state government's First Home Buyer Support Scheme remains active: eligible buyers can claim grants up to $10,000 or avoid stamp duty entirely on properties under $600,000. Combined with a small deposit, this shaves thousands off your entry cost. Many buyers aren't aware the scheme applies to both established and new properties.

Second mortgages are staging a quiet comeback. Non-bank lenders now offer loans covering the gap between your deposit and the 80 per cent LMI threshold. Interest rates are higher, but bridging that 5–10 per cent gap means avoiding expensive LMI altogether. Talk to a mortgage broker; banks won't advertise this.

Location discipline matters. Properties within 500 metres of train stations—Footscray, Coburg, Oakleigh—hold value better and rent faster if circumstances change. Parks like Dallas Brooks Reserve or the Yarra River trail add appeal without premium pricing.

The trade-off is real: a smaller deposit often means a less desirable property, further from the CBD, or a longer mortgage. But with migration pressure sustaining Melbourne rents at $450–$550 weekly for units, buying on a 10 per cent deposit beats renting forever.

Get pre-approved, not just pre-qualified. Sellers take small-deposit offers seriously when they see genuine lending capacity. Work with a buyer's advocate familiar with Frankston, Preston, and outer-bayside suburbs—they know where deposit-friendly stock clusters and can identify properties likely to clear at auction.

The door hasn't closed for first-home buyers. It's just moved further out.

This article was compiled by AI from the sources linked above and screened before publishing. See our editorial standards.