A 20% deposit is the common benchmark, but it isn’t a requirement. Depending on the lender and any government support you qualify for, you may be able to buy with as little as 5%.
Your deposit is only part of the cash you’ll need, though. Buying costs like transfer duty and conveyancing sit on top, and the size of your deposit sets your loan-to-value ratio (LVR) and whether lenders mortgage insurance (LMI) applies. This guide shows what different deposits look like in dollars, what else to save for and how to work out your own target.
How much deposit do you need for a first home?
The answer depends on the property price, lender policy, your borrowing capacity and any government support. This table shows how deposit percentages translate into dollars, along with the LVR each one produces.
| Property price | 5% deposit (95% LVR) | 10% deposit (90% LVR) | 20% deposit (80% LVR) |
|---|---|---|---|
| $600,000 | $30,000 | $60,000 | $120,000 |
| $800,000 | $40,000 | $80,000 | $160,000 |
| $1,000,000 | $50,000 | $100,000 | $200,000 |
These figures are the deposit only. They don’t include transfer duty, conveyancing, inspections or other fees that may apply.
What is LVR, and how does your deposit affect it?
Your loan-to-value ratio measures how much you’re borrowing compared with the value of the property. The basic formula is:
Loan amount ÷ property value × 100 = LVR
If you buy a $600,000 property and borrow $540,000, your LVR is 90%. With a larger deposit and a $480,000 loan, it falls to 80%.
Lenders use LVR as one measure of lending risk. It can affect whether LMI applies and which products or lender policies are available to you, although LVR alone doesn’t determine whether a loan is approved.
Why does a 20% deposit matter, and is it worth waiting for?
A 20% deposit reduces what you need to borrow and usually brings your LVR to 80% or below. Borrowers above 80% LVR may need to pay lenders mortgage insurance, depending on the lender and loan. Borrowing less against the property can also strengthen your position, and a consistent savings history can show a lender you’ve built a deposit over time.
But 20% isn’t the right target for every first home buyer. Saving it takes longer, and you may keep paying rent while your circumstances change. There’s also value in keeping some cash aside rather than putting every dollar into the deposit and buying costs. And if you qualify for a scheme that lets you buy with a smaller deposit without LMI, waiting for 20% may not be necessary.
The right balance depends on your purchase price, borrowing capacity, buying costs, available support and how comfortable you are with the loan size and timing.
What is lenders mortgage insurance, and when might you pay it?
LMI protects the lender, not you, if you can’t repay your loan and the lender suffers a loss after selling the property.
It may apply when your LVR is above 80%, so buyers with deposits below 20% are more likely to encounter it. Whether it applies depends on the lender, the loan and any support scheme you use. LMI is generally a one-off cost, paid upfront at settlement or added to the loan amount depending on the loan. Some government schemes let eligible buyers purchase with a smaller deposit without paying it (see below).
Can you buy your first home with a 5% deposit?
Yes, in some circumstances. Some lenders accept a deposit of around 5%, although loan options, lender criteria and overall cost can differ from buying with a larger deposit. At 5% your LVR is higher, so LMI may apply unless a government scheme covers you.
A 5% deposit doesn’t mean you automatically qualify. The lender still looks at your income, expenses, debts, credit profile, borrowing capacity and the property, and you’ll need to allow for buying costs outside the deposit.
What government support could reduce the deposit you need?
Several programs may help eligible first home buyers reduce how much they need to save upfront or make a smaller deposit more workable.
- Australian Government 5% Deposit Scheme. Eligible first home buyers can purchase with a deposit as low as 5% without paying LMI. The Single Parent Stream supports eligible single parents or guardians with a deposit as low as 2%. Eligibility and participating-lender requirements apply, and the lender must still approve the loan.
- First Home Super Saver Scheme. Eligible buyers can build part of their deposit through voluntary super contributions and later release eligible amounts, subject to scheme rules and contribution limits.
- State and territory support. First-home-buyer grants, transfer-duty concessions and shared-equity programs may be available. The Australian Government’s Help to Buy scheme is another shared-equity option for eligible buyers.
Because these programs can change, check the current eligibility rules before relying on them in your deposit plan.
What other costs do first home buyers need to save for?
Your deposit is only part of the money you’ll need. Other upfront costs vary with the property, lender and state or territory.
- Transfer duty (stamp duty): often one of the biggest costs, though first home buyer concessions or exemptions may reduce it in some jurisdictions.
- Legal and inspection costs: conveyancing or legal fees, and building and pest inspections where relevant.
- Lender costs: any lender, valuation or settlement fees that apply.
- Moving and setting up: moving, setting up the property and any immediate repairs or purchases.
Keep a cash buffer rather than using every available dollar at settlement. It gives you room to handle unexpected expenses once you’re a homeowner.
How do lenders assess a first home buyer beyond the deposit?
Having enough deposit is only one part of getting a loan approved. Lenders also look at whether you can repay the loan and whether your finances fit their criteria: typically your income and employment, living expenses, existing debts, savings history and credit report. Together, these determine your borrowing capacity, the amount a lender may be prepared to lend.
Lenders assess these factors differently, so the same deposit doesn’t necessarily lead to the same result with every lender. Having the deposit isn’t the same as having the loan approved.
How much should you save before you start looking?
There’s no single figure that suits every first home buyer. Rather than asking only “What’s the minimum deposit?”, work backwards from the property you’re realistically looking to buy:
- Pick a target property price.
- Estimate the deposit you’d need at that price.
- Add the buying costs that may apply.
- Allow for a cash buffer.
- Check whether your borrowing capacity is likely to support that price.
- Check any government support you may be eligible for, as it can change both your savings target and whether LMI applies.
For illustration: on an $800,000 purchase, a 10% deposit is $80,000. Your savings target is that amount plus your estimated buying costs and a buffer. Costs depend on your state, so get estimates early.
First home deposit FAQs
Is a 10% deposit enough to buy a first home?
It can be with some lenders, depending on your borrowing capacity, the property and lender policy. A 10% deposit usually means an LVR of around 90%, so LMI may apply unless a scheme or lending arrangement changes this. Allow for buying costs outside the deposit too.
Can I buy a house with a 5% deposit?
Yes, in some circumstances. Some lenders accept around 5%, and eligible buyers may be able to use the Australian Government 5% Deposit Scheme without paying LMI. It doesn’t guarantee approval: the lender still assesses your finances and the property.
Do first home buyers have to pay lenders mortgage insurance?
Not always. LMI may apply when your LVR is above 80%, which is more common with deposits below 20%. It depends on the lender, the loan and any government support you use.
Does stamp duty come out of the deposit?
Usually no. Transfer duty (stamp duty) is generally a separate purchase cost, not part of the deposit you contribute. Concessions or exemptions for first home buyers may reduce it in some states and territories, so your savings target should cover both.
Can family help with my first home deposit?
Yes. Family support can be a cash gift or a guarantor arrangement. A gift increases the funds available, while a guarantor may use part of their own property as security. Guarantors take on real financial risk and should understand the arrangement and get independent legal advice.
Can I use my super for a deposit?
Eligible buyers may be able to use the First Home Super Saver Scheme, which lets you make voluntary super contributions and later release eligible amounts towards a deposit, subject to scheme rules and contribution limits. Check the current rules before relying on it.
How long will it take to save a deposit?
It depends on your target and how much you can set aside. Work out the total you need (deposit, buying costs and buffer), subtract what you’ve saved and divide by your monthly savings. A smaller deposit or government support may shorten the timeline.
How early should I speak to a mortgage broker before buying my first home?
Well before you’re ready to make an offer. Starting months in advance helps you understand your borrowing capacity, realistic price range, deposit target, buying costs and any support you may be eligible for, and gives you time to address issues before you find a property.
Your first home plan
Your deposit matters, but it’s one part of a bigger picture. The aim isn’t to reach a particular percentage. It’s to understand what a realistic purchase looks like for your circumstances and how to prepare for it.
At The Finance Architect, planning starts before the loan application. We look at your full purchase position, not just a deposit percentage.
Planning to buy your first home? Book a Discovery Call with Dale to understand your borrowing position, deposit target and the steps you can take to get ready.
