One of the biggest questions first home buyers ask is: "How much deposit do I actually need?" The answer isn't as straightforward as a single number—it depends on your situation, the lenders you approach, and whether you're willing to pay Lenders Mortgage Insurance. This guide breaks down the real deposit requirements for Australian first home buyers in 2026.
The Short Answer: Deposit Options
Here's the quick overview of deposit requirements:
| Deposit Amount | LMI Required? | Key Considerations | |---------------|---------------|-------------------| | 5% | No (with First Home Guarantee) | Limited places, income caps apply | | 5-10% | Yes | Higher LMI costs | | 10-15% | Yes | Moderate LMI costs | | 15-20% | Yes | Lower LMI costs | | 20%+ | No | Best rates, no LMI |
Let's explore each option in detail.
Understanding Loan-to-Value Ratio (LVR)
Before diving into deposit amounts, it's important to understand LVR—a key metric lenders use:
LVR = (Loan Amount / Property Value) x 100
For example:
- Property value: $600,000
- Deposit: $60,000 (10%)
- Loan amount: $540,000
- LVR: 90%
Why LVR matters:
- LVR above 80% typically requires LMI
- Higher LVR means higher risk for lenders
- Lower LVR can access better interest rates
- Some lenders have maximum LVR limits
The 20% Deposit: The Gold Standard
A 20% deposit has traditionally been the benchmark for home purchases.
Advantages of 20% deposit:
- No Lenders Mortgage Insurance
- Access to the best interest rates
- Stronger negotiating position
- Lower monthly repayments
- Greater equity buffer from day one
- More lender options
Example for a $700,000 property: | Component | Amount | |-----------|--------| | Deposit (20%) | $140,000 | | Loan amount | $560,000 | | LVR | 80% | | LMI | $0 |
The challenge: Saving $140,000 (plus additional costs) takes significant time for most first home buyers.
Buying with 10% Deposit
A 10% deposit is a more achievable target for many first home buyers.
What to expect with 10% deposit:
- LMI will be required (typically $10,000-$25,000)
- Still competitive interest rates available
- Good range of lenders to choose from
- Faster path to home ownership
Example for a $700,000 property: | Component | Amount | |-----------|--------| | Deposit (10%) | $70,000 | | Loan amount | $630,000 | | LVR | 90% | | Estimated LMI | $15,000-$20,000 |
The trade-off: You'll pay LMI, but you could enter the market years earlier than waiting for 20%.
Buying with 5% Deposit
A 5% deposit is possible through government schemes or some lenders.
First Home Guarantee (No LMI)
The federal government's First Home Guarantee allows eligible first home buyers to purchase with just 5% deposit without paying LMI:
Eligibility requirements:
- Australian citizen or permanent resident
- Age 18 or older
- Individual income up to $125,000 or couple income up to $200,000
- Never owned property (or not in last 10 years)
- Will live in the property as principal residence
Property price caps (as of 2026): | Location | Price Cap | |----------|-----------| | Sydney | $900,000 | | Melbourne | $800,000 | | Brisbane | $700,000 | | Perth | $600,000 | | Adelaide | $600,000 | | Rest of state | Varies ($500,000-$650,000) |
Limited places: Only 35,000 places are released each financial year.
5% Deposit Without Government Scheme
Some lenders offer 95% LVR loans without the First Home Guarantee:
Considerations:
- LMI costs are substantial (often $30,000+ for a $600,000 property)
- Higher interest rates may apply
- Stricter serviceability assessment
- Fewer lender options
Example for a $600,000 property: | Component | Amount | |-----------|--------| | Deposit (5%) | $30,000 | | Loan amount | $570,000 | | LVR | 95% | | Estimated LMI | $25,000-$35,000 |
What is Lenders Mortgage Insurance (LMI)?
LMI is insurance that protects the lender (not you) if you default on your loan. It's typically required when your deposit is less than 20%.
LMI Costs by LVR
| LVR | Estimated LMI (as % of loan) | On $500,000 loan | |-----|------------------------------|------------------| | 81-85% | 0.5-1.5% | $2,500-$7,500 | | 86-90% | 1.5-2.5% | $7,500-$12,500 | | 91-95% | 3-4% | $15,000-$20,000 |
Actual LMI costs vary by lender, loan amount, and LVR.
Can You Avoid LMI?
Several ways to avoid paying LMI:
- Save a 20% deposit: The traditional approach
- First Home Guarantee: Government guarantees up to 15% of your loan
- Family guarantee: Parents use their property as additional security
- Professional packages: Some lenders waive LMI for certain professions (doctors, lawyers, accountants)
- First home buyer LMI waivers: Some lenders offer LMI discounts for FHBs
Is Paying LMI Worth It?
Arguments for paying LMI:
- Enter the property market sooner
- Benefit from capital growth while saving
- Stop paying rent (which is "dead money")
- Property values may rise faster than you can save
Arguments against:
- LMI can cost $20,000-$40,000
- That money could go toward your deposit
- Higher loan amount means higher repayments
- Less equity buffer if prices fall
The key question: Will property prices in your area grow faster than your ability to save? If yes, paying LMI to buy sooner may make financial sense.
Genuine Savings: What Lenders Want to See
Beyond the deposit amount, lenders want evidence of "genuine savings."
What Qualifies as Genuine Savings
| Genuine Savings | Non-Genuine Savings | |----------------|-------------------| | Regular deposits over 3+ months | Windfall gains (lottery, inheritance) | | Existing savings held 3+ months | Recent gifts | | Term deposits | Tax refund | | Shares/investments held 3+ months | Borrowings from other sources | | Equity in existing property | Rental bond refunds |
Why Genuine Savings Matter
Lenders want to see you can:
- Manage money responsibly
- Maintain regular saving habits
- Handle mortgage repayments
- Budget effectively over time
Minimum Genuine Savings Requirements
Most lenders require genuine savings of:
- 5% of purchase price (minimum)
- Demonstrated over 3+ months
- Shown in bank statements
Example: Buying a $600,000 property typically requires $30,000 in genuine savings shown over at least 3 months.
Additional Costs Beyond the Deposit
Your deposit isn't the only upfront cost. Budget for:
Buying Costs
| Cost | Estimate | |------|----------| | Stamp duty | $0-$35,000 (varies by state, concessions apply) | | Conveyancing/legal | $1,500-$3,000 | | Building/pest inspection | $400-$800 | | Loan application fees | $0-$600 | | Title transfer | $200-$500 | | Mortgage registration | $100-$200 |
Moving and Setup Costs
| Cost | Estimate | |------|----------| | Moving costs | $500-$2,000 | | Connection fees (utilities) | $200-$500 | | Contents insurance | $300-$600 per year | | Immediate repairs/maintenance | $1,000-$5,000 | | Furniture/appliances | Varies |
Emergency Buffer
Financial advisors recommend keeping:
- 3-6 months of mortgage repayments in reserve
- Additional funds for unexpected repairs
- Buffer for interest rate rises
Deposit Building Strategies
1. High-Interest Savings Account
Set up automatic transfers to a dedicated savings account:
- Aim to save at least 20% of income
- Choose an account with competitive interest
- Set up automatic deductions on pay day
- Track progress with a savings goal
2. First Home Super Saver Scheme (FHSSS)
Use your superannuation to save tax-efficiently:
- Contribute up to $15,000 per year (voluntary contributions)
- Maximum withdrawal of $50,000 (plus deemed earnings)
- Contributions taxed at 15% instead of your marginal rate
- Can save thousands in tax
Example tax savings: | Income Bracket | Marginal Rate | Tax Saved (on $15,000) | |---------------|---------------|----------------------| | $45,001-$135,000 | 30% | $2,250 | | $135,001-$190,000 | 37% | $3,300 | | $190,001+ | 45% | $4,500 |
3. Guarantor Loan
Family members can help by using their property as security:
How it works:
- Parents (or other family) provide their property as additional security
- You can buy with little to no deposit
- No LMI required
- Guarantee can be released once you reach 80% LVR
Risks to consider:
- Guarantor's property is at risk if you default
- Family relationships can be affected
- Guarantor's borrowing capacity is reduced
4. Gift from Family
Receiving a gifted deposit from family:
- Most lenders accept genuine gifts
- Gift letter required (stating non-repayable)
- Some lenders require you also have genuine savings
- Gift should be in your account before applying
5. Reduce Expenses and Increase Income
Practical ways to boost your savings rate:
- Move to cheaper accommodation temporarily
- Cut discretionary spending
- Take on additional work or side hustles
- Sell unused items
- Salary sacrifice into super (for FHSSS)
How Long Will Saving Take?
Savings Timeline Calculator
Assuming a $700,000 property purchase:
| Deposit Target | Amount Needed | Monthly Savings | Time to Save | |---------------|---------------|-----------------|--------------| | 5% | $35,000 | $1,500 | 2 years | | 10% | $70,000 | $1,500 | 4 years | | 20% | $140,000 | $1,500 | 8 years |
| Deposit Target | Amount Needed | Monthly Savings | Time to Save | |---------------|---------------|-----------------|--------------| | 5% | $35,000 | $2,500 | 14 months | | 10% | $70,000 | $2,500 | 28 months | | 20% | $140,000 | $2,500 | 4.5 years |
The trade-off: Waiting for 20% means potentially 4-6 years longer renting, while property prices may continue rising.
Frequently Asked Questions
Is 5% deposit enough for a first home?
Yes, through the First Home Guarantee scheme or by paying Lenders Mortgage Insurance. However, 5% deposits mean higher LVR, which can result in higher interest rates and less equity buffer.
Can I use a gift from my parents as a deposit?
Yes, most lenders accept gifted deposits. You'll need a signed gift letter confirming the money doesn't need to be repaid. Some lenders also require you to have some genuine savings in addition to the gift.
What if I don't have 3 months of genuine savings?
Some lenders have more flexible policies. Alternative evidence might include:
- Strong rental payment history
- Consistent income over time
- Gift funds plus shorter savings history
- Equity from an existing property
A mortgage broker can help identify suitable lenders for your situation.
Should I wait to save 20% or buy now with less?
This depends on:
- Local property market trends
- Your current rent costs
- Your ability to save vs. property growth
- Your financial security and emergency funds
In many Australian markets, property prices have grown faster than most people can save, making earlier entry potentially advantageous despite LMI costs.
Does my deposit need to be in cash?
The deposit must be accessible funds. This includes:
- Cash in bank accounts
- Term deposits
- Share portfolios (though these may be sold)
- Equity in another property
FHSSS withdrawals and government grants also contribute to your deposit.
What's the minimum deposit to avoid LMI?
You need a 20% deposit (80% LVR) to avoid LMI without using a government scheme or guarantor. With the First Home Guarantee, you can avoid LMI with just 5% deposit.
Take the Next Step
Understanding your deposit options is the first step toward home ownership. Whether you can buy with 5% under the First Home Guarantee or need to save longer for 20%, there's likely a path that suits your situation.
At NJS Financial, we help first home buyers understand their options and choose the right approach for their circumstances. We can assess your deposit, identify suitable lenders, and help you access government schemes you may be eligible for.
Ready to understand your borrowing options?
Use our borrowing capacity calculator to see how much you could borrow with your current deposit, or complete our free health check for personalised advice on your home buying journey.
