How Much Deposit Do You Really Need to Buy Your First Home in Australia?

Saving for a home deposit is one of the biggest financial goals Australians face — and one of the most misunderstood. The short answer: you don't always need 20%. Depending on your situation, you may be able to buy with as little as 5%. But the real answer is more nuanced — and getting it right could save you tens of thousands of dollars.

The 20% Myth — And Why It Persists

You've probably heard it from parents, colleagues, or a well-meaning financial pundit: "Save a 20% deposit before you buy." It's not bad advice. But it's not the full picture either.

The 20% figure comes from the threshold at which lenders waive Lenders Mortgage Insurance (LMI) — a one-off premium that protects the bank (not you) if you default on your loan. LMI applies to any deposit below 20%, and while a larger deposit (say, 10–15%) does reduce the LMI amount, it does not eliminate it. The only ways to avoid LMI entirely are to reach a 20% deposit, or to qualify for a government guarantee scheme.

But here's the thing: for many first home buyers — especially in Sydney, Melbourne, or Brisbane — waiting to save a 20% deposit could mean waiting 7–10+ years. In a rising market, that's often a race you can't win.

So What Deposit Do You Actually Need?

The minimum deposit accepted by most Australian lenders is 5% of the purchase price — though a small number of specialist lenders may go lower. However, the deposit you need in practice depends on several factors:

• Purchase price — higher property values mean a bigger absolute deposit even at the same percentage
• Your lender's policy — some lenders require at least 8–10% for certain property types (e.g. high-density apartments)
• Your income and borrowing capacity — a larger deposit can offset a lower income
• Whether you qualify for government schemes — which can allow you to buy with 5% and no LMI
• Genuine savings requirements — most lenders want to see at least 3–5% in genuine savings (held for 3+ months)
• Stamp duty and upfront costs — your deposit must sit on top of these costs unless you're exempt as a first home buyer

Government Schemes That Change the Game

Australian first home buyers have access to several powerful schemes that can dramatically reduce the deposit required — and eliminate LMI entirely. Here's a snapshot of what's available:

The Hidden Costs Most First Buyers Forget

Here's where many first home buyers get caught out: your deposit covers the property — but buying a home involves a range of upfront costs that can add 2–5% to your total outlay. These include:

• Stamp duty — varies by state and property value (first home buyers may be exempt or receive a concession)
• Conveyancing / legal fees — typically $1,500–$3,000
• Building & pest inspections — $500–$1,000
• Loan establishment fees — some lenders charge application or settlement fees
• Lenders Mortgage Insurance (if applicable) — can be capitalised into the loan in some cases
• Moving costs — often forgotten until it's too late
• Council rates and utility connections — due shortly after settlement

As a rule of thumb, budget an additional 3–5% of the purchase price on top of your deposit to cover these costs — unless you're eligible for stamp duty exemptions in your state.

Real-World Scenarios: What You'd Need to Buy Today

Here's how deposit requirements play out at different price points across Australia:

Should You Buy with a Smaller Deposit or Keep Saving?

This is one of the most important questions a first home buyer can ask — and the answer isn't always obvious. Here are the key trade-offs to consider:

Arguments for buying sooner with a smaller deposit:

• Property prices in most Australian capitals have historically grown faster than the average person can save
• Government schemes allow you to enter the market with 5% and no LMI — reducing the cost penalty significantly
• Renting while saving means paying someone else's mortgage instead of your own
• Getting into the market earlier means your property starts compounding in value for you

Arguments for saving a larger deposit first:

• Smaller loan means lower repayments and less interest paid over the life of the loan
• Avoids LMI entirely — but only once you reach 20% (or qualify for a government scheme)
• More buffer if interest rates rise or your income changes
• May access better interest rates with a lower Loan-to-Value Ratio (LVR)

The right deposit strategy isn't about reaching a magic number — it's about understanding the full picture of costs, schemes, and market conditions specific to your situation.

— KeepEasy Finance Lending Solutions

What Lenders Actually Look For

Beyond the deposit amount, lenders assess your overall financial profile. Understanding this can help you position yourself for the best possible outcome:

• Genuine savings — most lenders want 3–5% of the purchase price held in your own account for at least 3 months (gifts from parents may not always count)
• Stable income — PAYG employment is viewed most favourably; self-employed borrowers typically need 2 years of tax returns
• Clean credit history — check your credit score before applying; any defaults or missed payments can significantly affect your borrowing power
• Low existing debt — credit cards, car loans, and BNPL accounts all reduce your borrowing capacity
• Living expenses — lenders scrutinise your bank statements; high discretionary spending can work against you

The Bottom Line

There's no single "right" deposit amount for every buyer. The answer depends on your income, your goals, the property you want, and which government schemes you qualify for. What we can tell you is this:

• You don't need 20% to buy — in many cases, 5% is enough
• Government schemes like the First Home Guarantee can eliminate LMI entirely with as little as 5%
• A deposit below 20% without a government scheme will attract LMI — a 10–15% deposit reduces it, not removes it
• Upfront costs are often underestimated — always factor in 3–5% on top of your deposit
• The right time to buy is personal — but the right strategy makes a significant financial difference
• Working with a lending solutions specialist gives you access to lenders and schemes most buyers don't even know exist

At KeepEasy Finance, we work with first home buyers every day across Newcastle, Sydney, and Australia-wide — helping them understand exactly where they stand, what they qualify for, and how to build a strategy that works.

This article is intended as general information only and does not constitute financial, credit, or legal advice. Lending criteria, government scheme eligibility, and property price caps are subject to change. Please speak with a qualified lending professional before making any financial decisions.