The short answer: most buyers aim for a 20% deposit to avoid Lenders Mortgage Insurance, but you can buy with far less — as little as 5%, and sometimes without a cash deposit at all using a guarantor. How much you actually need depends on the price, whether you want to avoid LMI, and the costs that sit on top of the deposit. Here is how it really works, and the myths that cost people months of extra saving.
The three deposit levels that matter
20% or more. At a 20% deposit you generally avoid Lenders Mortgage Insurance (LMI) — the one-off cost that protects the lender, not you, when you borrow with a smaller deposit. On a typical purchase LMI can run to many thousands of dollars added to the loan, so 20% is the level most people aim for if they can.
Around 5%–19%. You can absolutely buy here — most first home buyers do. You just pay LMI (or use a scheme that removes it, below). The smaller the deposit, the larger the LMI, so there is a real trade-off between buying sooner and paying more.
Under 5%, or no cash deposit. This is usually only possible with help — a family guarantee, where a parent’s property is used as extra security so you can borrow without the usual deposit. It is a serious commitment for the person guaranteeing, and worth understanding fully before anyone signs.
Deposit is not the only cash you need
The mistake that catches people out: budgeting the deposit and forgetting everything else. On top of the deposit you usually need stamp duty (unless a first-home concession applies in your state), plus conveyancing, building and pest inspections, and lender or government fees. These “upfront costs” can add several percent of the purchase price. First home buyers often get stamp duty relief that changes this picture a lot — it is worth checking your state’s current concession before assuming.
The 5% deposit scheme — no LMI on a small deposit
Eligible buyers can use the Australian Government 5% Deposit Scheme: instead of paying LMI, the government guarantees part of the loan, so you get in with a 5% deposit and no LMI. The rules changed recently — the income caps were removed and the price caps rose — so a lot of older articles describe a version that no longer exists. We cover the current scheme in detail here.
“Genuine savings” — the rule that surprises people
Many lenders want to see that part of your deposit is genuine savings: money you saved yourself over time, rather than a sudden gift or windfall, usually shown as savings held for a few months. A gift from family can still work, but how it is treated depends on the lender’s policy. If most of your deposit came as a gift, that alone can change which lenders will say yes — which is exactly the kind of thing worth sorting before you make an offer, not after.
Should you wait for 20%, or buy sooner with less?
There is no single right answer, and it is genuinely a numbers question, not a rule. Saving to 20% avoids LMI, but it takes longer, and in a rising market the price you are chasing can move faster than your savings. Buying sooner with a smaller deposit (or a scheme) gets you in earlier but adds LMI or uses a guarantee. The right call depends on your savings rate, the market you are buying in, and what help you have — which is worth working through with real numbers before you decide.
The practical next step
Before you lock onto a savings target, it is worth knowing three things: what you can borrow, what your upfront costs will really be, and whether a scheme or guarantee changes the maths for you. That turns “how much deposit” from a guess into a plan. If you would like a straight answer for your own situation, book a free consultation or email [email protected].
See what it means for repayments: our free home loan borrowing & repayment calculator shows how much you could borrow and the repayments at different deposit sizes — no sign-up.
General information only, not credit advice, and not an offer of finance or a promise of loan approval. Costs, schemes and stamp duty concessions change and vary by state — confirm the current rules for your situation. Ryan Vu is a Credit Representative (CRN 568863) of Beagle Finance Pty Ltd, Australian Credit Licence 383640.
