2% Deposit Home Loan, Key Facts
Rates current as at 8 May 2026. Comparison rates based on a $150,000 loan over 25 years. Subject to change and to approval. All figures are indicative.
What Is a 2% Deposit Home Loan?
A 2% deposit home loan lets you buy a property with just 2% down and no Lenders Mortgage Insurance (LMI). Instead of LMI, the loan uses a split structure with an upfront rate reduction fee that is set lower than the equivalent LMI premium. Owner occupier rate: 6.39% p.a. (comparison rate 6.42% p.a.) as at 8 May 2026. Lend & Loan (ACL 511092) can assess your eligibility. Call 02 8046 3933.
A 2% deposit home loan allows you to purchase a property by contributing just 2% of the purchase price as your deposit. You borrow the remaining 98%, which is known as a 98% loan-to-value ratio (LVR). The LVR is the amount you borrow expressed as a percentage of the property's value.
Normally, borrowing above 80% LVR triggers Lenders Mortgage Insurance (LMI), a one-off premium that can cost tens of thousands of dollars. LMI protects the lender, not you. The 2% deposit home loan eliminates LMI entirely, replacing it with an upfront rate reduction fee that is capitalised into your loan balance. This fee is set to be lower than the equivalent LMI premium, saving you money at the outset.
The loan is available for both owner occupiers and investors, with properties valued up to $3.5 million across metro and outer metro postcodes in NSW, VIC, QLD, SA, WA, TAS and the ACT.
How Does the Split Loan Structure Work?
Every 2% deposit home loan is structured as a split loan. This means your borrowing is divided into two parts:
- Primary loan: covers 0% to 80% of the property value. This portion sits within the standard LVR range and carries a redraw facility, allowing you to make extra repayments and access those funds later if needed.
- Secondary loan: covers the remaining portion above 80% LVR, up to 98%. This portion allows unlimited fee-free prepayments, helping you pay down the higher-LVR balance faster.
Both portions carry the same interest rate and the same loan term. The split is purely administrative. It keeps the headline rate competitive while removing the need for LMI. Instead of a large insurance premium, a capitalised upfront rate reduction fee is applied. This fee varies by purchase price and LVR but is designed to cost less than traditional LMI.
There is no offset account. However, the redraw facility on the primary loan offsets interest in a similar way, letting you reduce interest charges by parking surplus funds in the loan.
The split loan structure is what makes the 2% deposit product possible without LMI. By separating the high-LVR portion, the cost to the borrower is reduced compared to a single loan with a large LMI premium capitalised on top. You get one repayment, one rate, and one term, but with a structurally lower cost of entry.
2% Deposit vs 20% Deposit vs Capitalised LMI
The table below illustrates how a 2% deposit home loan compares to a traditional 20% deposit loan and a standard high-LVR loan with capitalised LMI. These figures are indicative and based on a $900,000 purchase price.
| Feature | 2% Deposit (98% LVR) | 20% Deposit (80% LVR) | 95% LVR + Capitalised LMI |
|---|---|---|---|
| Cash deposit needed | $18,000 | $180,000 | $45,000 |
| LMI cost | $0 | $0 | $25,000 to $35,000 (approx.) |
| Upfront rate reduction fee | Yes (capitalised, lower than LMI) | N/A | N/A |
| Interest rate type | Variable, P&I | Variable or fixed | Variable or fixed |
| Loan amount (approx.) | $882,000 | $720,000 | $855,000 + LMI |
| Time to save deposit | Shorter | Significantly longer | Moderate |
| Genuine savings required | 5% of purchase price | Varies by lender | Varies by lender |
Figures are indicative only, based on a $900,000 purchase. LMI estimates are approximate and vary by lender and insurer. Rates as at 8 May 2026. Seek professional advice for your specific situation.
Who Is a 2% Deposit Home Loan Best For?
This product suits borrowers who want to enter the property market sooner rather than waiting years to save a 20% deposit. Typical profiles include:
- First home buyers with stable income but limited savings, who want to stop renting and start building equity.
- Upgraders who need to purchase before selling their current home and want to minimise the deposit gap.
- Investors looking to acquire a property with minimal capital outlay to preserve liquidity for other opportunities. See investment property loans.
- Borrowers who would otherwise pay large LMI premiums and prefer a lower-cost alternative structure.
You must be a natural person (not a company or trust), over 18, an Australian tax resident, and either an Australian or New Zealand citizen or an approved visa holder. Joint applicants must be in a spousal or de facto relationship. Full eligibility details are covered in who qualifies for a 2% deposit home loan.
Owner Occupier vs Investment Loans
Both owner occupier and investment loans are available under the 2% deposit structure, with different rates reflecting the risk profile:
- Owner occupier: 6.39% p.a. variable (comparison rate 6.42% p.a.), as at 8 May 2026. Full details on owner occupier 2% deposit home loans.
- Investment: 6.79% p.a. variable (comparison rate 6.82% p.a.), as at 8 May 2026. Investment loans have additional rules around existing property holdings, strata plan size, and rental yield assessment. See 2% deposit investment property loans.
Both are variable rate, principal and interest, with terms of 20, 25 or 30 years. No fixed rate, interest-only, low doc, or alt doc options are available. All loans require full documentation.
What Are the Costs?
Instead of LMI, you pay an upfront rate reduction fee that is capitalised into your loan. This fee varies by purchase price and LVR but is set to be lower than the equivalent LMI premium. Beyond this, the fee schedule is straightforward:
- Settlement fee: $395
- Valuation fee: $395
- Discharge fee: $795
- No application, monthly, or annual fees
- Government charges (stamp duty, mortgage registration) are payable by the borrower. The dual loan structure means two mortgage registration fees apply.
For a full breakdown of rates, fees, and a worked cost comparison against LMI, see 2% deposit home loan rates and fees.
How Does the Process Work?
The journey from enquiry to settlement follows seven steps: eligibility check, pre-approval (available without a specific property), property search, formal application, valuation (ordered after an executed contract of sale), unconditional approval, and settlement. If you have already purchased or exchanged contracts, the application can go straight to unconditional approval.
Documents such as payslips and bank statements must be current within 30 days at formal approval, not just at pre-approval. For the full step-by-step process, see how the 2% deposit loan process works.
What Income Is Accepted?
PAYG salary, part-time wages, self-employed sole trader income (minimum 2 years), commission, bonuses, overtime, parental leave, and several other income types are accepted, each with specific assessment rules. Casual employment is not accepted as a primary income source. The serviceability buffer is 300 basis points above the loan rate.
For the full list of accepted income types and how each is assessed, see income requirements for a 2% deposit home loan.
What Properties Qualify?
Houses, apartments, villas, and townhouses on acceptable postcodes are eligible, subject to zoning, size, title, and floor count rules. Vacant land, construction loans, and certain high-risk property types are not accepted. Postcode coverage spans metro and outer metro areas across all states and the ACT.
For detailed property rules, including off-the-plan requirements and the full unacceptable list, see what properties qualify for a 2% deposit loan. To check whether your postcode is covered, contact us for a postcode check.
Explore the 2% Deposit Home Loan Cluster
Last updated: 8 May 2026.
