How Much Deposit Do You Need to Buy a Home in Australia?

How Much Deposit Do You Need to Buy a Home in Australia?

The Truth About Home Loan Deposits

One of the most common questions asked by aspiring homeowners is:

“How much deposit do I actually need to buy a home?”

Many Australians believe they need a 20% deposit before they can purchase a property. While a 20% deposit can provide advantages, it’s not always a requirement.

Depending on your financial circumstances, lender policies, and eligibility for government assistance schemes, you may be able to buy a home with a smaller deposit.

In this guide, we’ll explain how home loan deposits work, the benefits of different deposit sizes, additional buying costs to consider, and strategies to help you enter the property market sooner.

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What Is a Home Loan Deposit?

A deposit is the portion of the property’s purchase price that you contribute from your own funds.

The remainder is generally financed through a home loan.

Example

Property Purchase Price: $800,000

Deposit: $80,000

Home Loan: $720,000

In this example, the borrower contributes 10% of the purchase price and borrows the remaining 90%.

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How Much Deposit Do Most Lenders Prefer?

Many lenders prefer borrowers to have a deposit of at least 20% of the property’s value.

Why?

A larger deposit:

• Reduces lender risk
• Improves borrowing strength
• May help avoid Lenders Mortgage Insurance (LMI)
• Creates more equity from day one

Example

Property Value	5% Deposit	10% Deposit	20% Deposit
$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

While 20% is often considered ideal, many buyers successfully enter the market with less.

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Can You Buy a Home with a 5% Deposit?

In some cases, yes.

Many lenders offer home loans for eligible borrowers with deposits as low as 5%.

For example:

Property Value: $700,000

Deposit (5%): $35,000

Loan Amount: $665,000

However, borrowers with smaller deposits may need to pay Lenders Mortgage Insurance (LMI) unless they qualify for certain government programs.

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Understanding Loan-to-Value Ratio (LVR)

When assessing a home loan application, lenders often look at the Loan-to-Value Ratio (LVR).

LVR measures how much you’re borrowing compared to the property’s value.

Formula

Loan Amount ÷ Property Value × 100

Example

Loan Amount: $720,000

Property Value: $800,000

LVR = 90%

Generally:

• 80% LVR = Lower lender risk
• Above 80% LVR = Higher lender risk
• Higher LVR may require LMI

Understanding LVR is important because it can affect loan approval, interest rates, and costs.

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What Is Lenders Mortgage Insurance (LMI)?

Lenders Mortgage Insurance is an insurance premium that protects the lender when a borrower has a smaller deposit.

It’s important to understand that:

LMI protects the lender, not the borrower.

LMI may apply when:

• Your deposit is less than 20%
• Your LVR exceeds 80%

The cost varies depending on:

• Property value
• Deposit size
• Loan amount
• Lender policies

In some cases, LMI can add thousands of dollars to borrowing costs.

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Government Schemes That May Help

The Australian Government offers programs designed to help eligible first home buyers enter the property market sooner.

First Home Guarantee

Eligible buyers may be able to purchase a property with a smaller deposit without paying LMI.

This can significantly reduce upfront costs.

First Home Super Saver Scheme

Allows eligible individuals to save for a home deposit through voluntary superannuation contributions.

State-Based Assistance

Depending on your location, you may also qualify for:

• Stamp duty concessions
• First home buyer grants
• Regional incentives

Eligibility requirements vary, so it’s important to seek current advice.

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What Counts Towards Your Deposit?

A deposit can come from various sources, including:

Savings

The most common source of a home loan deposit.

Gifted Funds

Some lenders may accept financial gifts from immediate family members.

Equity in Another Property

Existing homeowners may use available equity to help finance another purchase.

Government Grants

Eligible grants may contribute toward purchasing costs.

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What Is Genuine Savings?

Some lenders require evidence of “genuine savings.”

Genuine savings generally refer to funds accumulated and held over time, demonstrating financial discipline.

Examples may include:

• Regular savings deposits
• Term deposits
• Shares
• Managed funds

Requirements vary between lenders.

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Don’t Forget the Additional Costs

Many buyers focus solely on the deposit and overlook other purchasing expenses.

These costs can add up quickly.

Stamp Duty

Depending on the state or territory, stamp duty can be one of the largest upfront costs.

Some first home buyers may qualify for concessions or exemptions.

Conveyancing Fees

A solicitor or conveyancer helps manage the legal aspects of the transaction.

Building and Pest Inspections

Recommended to identify potential property issues before purchase.

Registration Fees

Government fees associated with registering the property and mortgage.

Moving Costs

Removalists, utility connections, and other relocation expenses should also be considered.

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Example: Total Upfront Costs

Let’s assume:

Property Price: $800,000

Deposit (10%): $80,000

Additional Costs:

• Stamp Duty: Variable depending on location
• Conveyancing: Approximately $1,500–$3,000
• Building Inspection: Approximately $400–$800
• Registration Fees: Variable

The total funds required may exceed the deposit alone.

This is why planning ahead is important.

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Is It Better to Wait for a Larger Deposit?

Many buyers wonder whether they should:

1. Buy now with a smaller deposit, or
2. Continue saving for a larger deposit.

The answer depends on individual circumstances.

Reasons to Wait

• Avoid LMI
• Reduce monthly repayments
• Borrow less
• Build stronger financial buffers

Reasons to Buy Sooner

• Property values may increase while you’re saving
• Earlier entry into the property market
• Begin building equity sooner

There is no one-size-fits-all answer.

A personalised assessment can help determine the most appropriate strategy.

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How to Save for a Home Deposit Faster

Create a Dedicated Savings Account

Separate your home deposit savings from everyday spending.

Automate Savings

Set up automatic transfers each payday.

Reduce Unnecessary Expenses

Small spending reductions can add up significantly over time.

Track Your Budget

Understanding where your money goes can identify opportunities to save.

Review Existing Debts

Reducing personal loans and credit card balances may improve borrowing capacity.

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Common Deposit Mistakes to Avoid

Using Every Dollar for the Deposit

Always retain an emergency buffer for unexpected expenses.

Forgetting About Buying Costs

Additional expenses can quickly exceed expectations.

Taking on New Debt Before Applying

New liabilities can reduce borrowing capacity.

Not Checking Eligibility for Government Programs

Many buyers miss opportunities to access available assistance.

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Frequently Asked Questions

Do I Need a 20% Deposit to Buy a Home?

Not necessarily. Some borrowers may be eligible to purchase with a smaller deposit.

Can I Use Gifted Funds as a Deposit?

Some lenders may accept gifts from immediate family members, subject to their lending policies.

What Happens If My Deposit Is Less Than 20%?

You may need to pay Lenders Mortgage Insurance unless you qualify for an exemption or government scheme.

Is a Bigger Deposit Always Better?

A larger deposit can reduce borrowing costs and improve loan options, but every situation is different.

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The Bottom Line

While a 20% deposit remains a common benchmark, it’s not the only path to home ownership.

Many Australians successfully purchase property with smaller deposits through a combination of savings, government assistance programs, gifted funds, and carefully structured home loans.

The key is understanding your options, planning for all associated costs, and choosing a loan strategy that aligns with your financial goals.

With the right guidance, home ownership may be closer than you think.

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Ready to Explore Your Home Buying Options?

At Suncrest Finance, we help first home buyers understand deposit requirements, borrowing capacity, government assistance programs, and available loan options.

Whether you’re just starting to save or ready to apply for a home loan, we’re here to help you navigate the process with confidence.

Contact Suncrest Finance today for a complimentary consultation and take the next step toward owning your home.