How Much Deposit Do You Really Need to Buy a Home in Australia?
One of the biggest questions for first-home buyers in Australia is: How much deposit do I really need? You may have heard that a 20% deposit is required, but that’s not always the case. Thanks to low-deposit home loans, government schemes, and lender policies, buying a home might be possible with just 5% or even no deposit at all.
In this blog, we’ll break down deposit requirements, benefits of larger deposits & what first-home buyer incentives can help you get into the market sooner.
The amount of deposit you need depends on several factors, including the lender’s policy, the property price, and whether you qualify for government assistance. Here’s a general breakdown:
Option 1: 20% Deposit (Traditional Standard)
Most lenders prefer a 20% deposit, as it reduces their risk. If you have a 20% deposit, you’ll get benefits like:
No Lenders Mortgage Insurance (LMI) – This can save you thousands of dollars.
Lower interest rates – Lenders offer better rates to borrowers with larger deposits.
Higher loan approval chances – Less risk means a smoother approval process.
However, saving 20% can take years, and for many first-home buyers, waiting that long isn’t practical.
Option 2. 10% Deposit (A Common Alternative)
Many lenders accept a 10% deposit, but you may still need to pay Lenders Mortgage Insurance (LMI). LMI protects the lender (not you) in case you default on your loan. The cost varies based on your loan amount but can range from $5,000 to $15,000+.
💡 Tip: Some lenders allow borrowers to add LMI costs to their loan, reducing upfront costs.
Option 3. 5% Deposit (First-Home Guarantee Schemes Apply)
First-home buyers can access government support that allows them to buy with just a 5% deposit without paying LMI.
First Home Guarantee (FHG): Backed by the government, this allows eligible first-home buyers to purchase with only a 5% deposit and no LMI.
First Home Owner Grant (FHOG): In some states, first-home buyers receive a cash grant to boost their deposit.
Example: Buying a $600,000 property with the First Home Guarantee means you only need a $30,000 deposit instead of $120,000 (20%).
4. No Deposit Home Loans (Guarantor Loans)
If you don’t have savings, some lenders offer no deposit loans if you have a guarantor (e.g., a parent or family member).
A guarantor uses their property as security for your loan.
You borrow 100% of the property price (or more to cover costs).
Once you build enough equity, the guarantor can be removed from the loan.
💡 Warning: If you default on repayments, your guarantor’s home could be at risk.
Understanding Lenders Mortgage Insurance (LMI)
If your deposit is less than 20%, most lenders will require LMI, which protects them if you can’t repay the loan. LMI costs depend on the loan amount and deposit size. Here’s an estimate:
$500,000 loan with a 10% deposit: LMI ≈ $8,000 - $12,000
$500,000 loan with a 5% deposit: LMI ≈ $15,000 - $20,000
How to avoid LMI?
Save a 20% deposit
Use the First Home Guarantee (FHG) to buy with 5% deposit and no LMI
Find lenders that offer LMI waivers for certain professionals (e.g., doctors, accountants)
Government Grants & Schemes to Help First-Home Buyers
First-home buyers in Australia may be eligible for government support, reducing the deposit needed.
📌First Home Guarantee (FHG) – Allows eligible buyers to purchase with just 5% deposit and no LMI.
📌 Stamp Duty Exemptions & Discounts – Some states offer reduced or waived stamp duty for first-home buyers.
📌 First Home Owner Grant (FHOG) – A cash grant (up to $10,000 - $30,000) for first-home buyers purchasing a new property.
💡 Tip: Each state has different eligibility rules. Check what’s available in NSW, VIC, QLD, SA, WA, TAS, NT, and ACT.
Final Thoughts: How Much Should YOU Save?
While a 20% deposit is ideal, many Australians successfully buy homes with 5-10% deposits. Thanks to government support and lender flexibility, waiting until you have 20% saved isn’t necessary.
Key Takeaways:
✔ 5% deposit is possible with the First Home Guarantee.
✔ A 10% deposit reduces LMI costs while still getting you into the market.
✔ 20% deposit means no LMI and lower repayments.
✔ Guarantor loans allow 0% deposit but come with risks.
Next Steps: How We Can Help
Want a personalised deposit plan? Contact us today to find out how much you really need to buy a home!
✅ Book a free consultation – We’ll assess your borrowing power & deposit options.
✅ Compare lenders – Find the best home loan with the lowest LMI.
✅ Maximise government incentives – Ensure you get all eligible first-home buyer benefits.
📞 Ready to get started? Contact us today and take the first step toward homeownership!
