Key Takeaways
• The traditional goal is a 20% deposit, which lets you avoid the lender's mortgage insurance, but it is far from the only option.
• Many buyers purchase with 5% to 10%, paying LMI, while government schemes allow as little as 5%, or 2% for single parents, with no LMI.
• Beyond the deposit, you also need to budget for upfront costs such as stamp duty, conveyancing, and inspections.
• A bigger deposit means a smaller loan and lower repayments; a smaller deposit gets you in sooner. The right balance depends on your situation.
How much deposit do I need is one of the very first questions every home buyer asks, and the answer is rarely the scary number people imagine. While 20% is the classic target, plenty of Australians buy with much less, and there are good options at every level.
The real answer depends on the property price, the type of loan, and whether you qualify for any schemes. In this guide, we will walk through how much you actually need, the costs people forget to budget for, and the trade-offs of a bigger or smaller deposit, all in plain English.
Every buyer's deposit picture is a little different. If you would like to know exactly how much you would need for the home you have in mind, the team at Loan Street Finance is always happy to help you plan your deposit, at no cost and with no pressure.
The 20% Deposit Benchmark
Let's start with the figure everyone has heard, and why it matters.
A 20% deposit is the traditional benchmark, and there is a good reason for it: at 20% or more, you avoid lenders' mortgage insurance (LMI), a one-off cost that protects the lender when you borrow with a smaller deposit. On a $600,000 home, a 20% deposit is $120,000. Reaching it means a smaller loan, lower repayments, and a healthy equity buffer from day one. It is a great goal if you can get there, but it is not the only way in, and for many buyers, waiting to save the full amount is not realistic.
How Little Can You Actually Put Down?
Here is the part that surprises people: the minimum deposit is often far lower than 20%. There are several levels, each with its own trade-offs.
A 10% Deposit
Many lenders are comfortable with a 10% deposit. You will usually pay LMI, but the cost is lower than at 5%, and it strikes a balance between getting in sooner and keeping the loan manageable. On a $600,000 home, that is $60,000.
A 5% Deposit
A 5% deposit, or $30,000 on a $600,000 home, is widely accepted, though LMI rises as the deposit shrinks. This is also the level at which the main government scheme steps in, allowing eligible first-home buyers to avoid LMI altogether through a government guarantee.
A 2% Deposit or Less
Under the single parent stream of the government scheme, eligible buyers can purchase with as little as 2%. And with a family guarantor, some buyers borrow with no deposit at all. These paths have their own rules, which are worth exploring separately.
Do Not Forget the Other Upfront Costs
The deposit is the biggest piece, but it is not the only cash you need at the start. These extras catch many first home buyers off guard. Beyond the deposit, budget for costs such as:
• Stamp duty, though first home buyers often pay a reduced amount or nothing, depending on the state and price.
• Conveyancing or legal fees, typically a few thousand dollars, to handle the paperwork.
• Building and pest inspections, usually several hundred dollars, before you commit.
• Loan and application fees, which vary by lender.
• Lender's mortgage insurance, if your deposit is under 20% and you are not using a scheme.
• Moving costs, and a small buffer for the first few months in your new home.
It pays to add these into your plan early, so the total figure does not come as a shock.
What Are Genuine Savings?
One more term is worth knowing, because it affects low-deposit buyers in particular.
Many lenders like to see what they call genuine savings: a portion of your deposit, often around 5%, that you have built up yourself over at least three months. It shows you can consistently save, which reassures them that you can manage repayments. Gifts and guarantees can still help, but if most of your deposit came in suddenly, some lenders will want to see a savings history, too. It is worth knowing early, so you can plan around it.
A Real-World Example: 20% vs 5%
Here is how the numbers compare for the same home, using rounded figures, so you can see the trade-off.
Take a $600,000 home. With a 20% deposit, you put in $120,000 and borrow $480,000, with no LMI. With a 5% deposit, you put in $30,000 and borrow $570,000. If you are not using a scheme, LMI applies and could add several thousand dollars, often more than $15,000, usually added to the loan.
The smaller deposit gets you in with far less cash up front, but you borrow more, your repayments are higher, and you may pay LMI. The larger deposit costs more to save but results in a smaller, cheaper loan. If you qualify for the government scheme at 5%, you get the best of both: a low deposit and no LMI.
On top of either deposit, remember the upfront costs. As a first home buyer, you may pay little or no stamp duty, but conveyancing, inspections, and fees still need to be budgeted for.
Tips for Planning Your Deposit
A few simple habits make the deposit goal clearer and more achievable.
• Decide your target first, since the deposit you aim for shapes your whole savings plan.
• Build genuine savings steadily, because lenders value a consistent history.
• Check your scheme eligibility early, as it can dramatically lower the deposit you need.
• Budget for the extra upfront costs, not just the deposit itself.
• Weigh the trade-off honestly between buying sooner and borrowing more.
There is no single right number, only the one that fits your goals and your budget.
Where to Read More
For an independent overview of deposits, the 20% benchmark, and how LMI works, the Australian Government's MoneySmart service has a clear guide to buying a house. It sits outside any lender, so it pairs well with personal advice.
Frequently Asked Questions (FAQs)
How much deposit do I really need to buy a home?
It depends on the price and your loan. The traditional goal is 20%, which avoids LMI, but many buyers purchase with 5% to 10%, and government schemes allow as little as 5% or 2% for single parents. So the real minimum is often far lower than people expect.
Can I buy with a 5% deposit?
Yes, very commonly. Most lenders accept a 5% deposit, though you would usually pay LMI. If you qualify for the main government scheme, you can put down 5% and avoid LMI through a government guarantee, which is why checking your eligibility is worthwhile.
What is a lender's mortgage insurance?
Lender's mortgage insurance is a one-off cost that protects the lender, not you, when you borrow with a deposit under 20%. It can run to several thousand dollars, more at smaller deposits, and is often added to the loan. Government schemes can remove the need for it.
How much should I budget beyond the deposit?
As a rule of thumb, set aside several thousand dollars beyond your deposit for conveyancing, inspections, and loan fees, plus moving costs. Stamp duty can be a larger sum, though first home buyers often pay a reduced amount or nothing, depending on the state and price.
What are genuine savings?
Genuine savings are funds you have built up yourself over time, usually at least three months, rather than a sudden lump sum. Many lenders want to see around 5% of the price saved this way, as proof that you can manage money consistently. Gifts and guarantees can supplement them.
Is it better to save a bigger deposit or buy sooner?
It is a genuine trade-off. A bigger deposit means a smaller loan, lower repayments, no LMI and more equity, but it takes longer to save. A smaller deposit gets you in sooner, with a larger loan and possibly LMI. The right choice depends on your goals, the market, and your budget.
The Bottom Line
The deposit you need is rarely the daunting figure people picture. While 20% remains the benchmark for avoiding LMI, plenty of Australians buy with 5% to 10%, and government schemes can allow eligible first home buyers to borrow as little as 5% or 2%, with no LMI at all. The key is to match the deposit to your situation and remember the upfront costs that accompany it.
Whether you aim for a full 20% or take advantage of a low-deposit path, the smartest move is to plan with the real numbers, deposit plus costs, in front of you. If you would like to know exactly how much you would need for the home you have in mind, we would be glad to work it through with you and help you set a clear, achievable target.