How Much Deposit Do You Need to Buy a Home in Australia?
While 20% is the standard, many Australians buy their first home with a much smaller deposit using government schemes or LMI.
While a 20% deposit is generally recommended to avoid extra costs, many lenders allow you to buy a home with a deposit as small as 5%, provided you pay Lenders Mortgage Insurance (LMI) or utilize a government guarantee scheme.
How deposit requirements work
Lenders use a Loan-to-Value Ratio (LVR) to assess risk. A 20% deposit equals an 80% LVR, which is considered standard risk. If you have less than 20%, the loan is considered higher risk. To approve the loan, the lender will require LMI to protect themselves, which is a one-off fee that can often be added to your loan balance.
Illustrative example
Illustrative example: You want to buy a $600,000 property. A 20% deposit is $120,000. If you only have a 5% deposit ($30,000), you can still purchase the property, but the lender will charge an LMI premium (e.g., $15,000). If you qualify for the Home Guarantee Scheme, the government acts as a guarantor for the missing 15%, allowing you to buy with 5% and pay no LMI.
What may change the outcome
Your required deposit can change based on the property type and location. For example, lenders often require larger deposits (sometimes 20% or 30%) for very small apartments, properties in specific high-density postcodes, or rural properties.
Common misunderstandings
A common misunderstanding is that your deposit covers all upfront costs. In reality, you must have your deposit plus enough cash to cover stamp duty, conveyancing, and government fees, unless you are eligible for stamp duty exemptions.
When a personal review may help
Deciding whether to buy now with a 5% deposit and pay LMI, or wait to save 20%, is a complex financial decision. A broker can model both scenarios to help you understand the long-term costs.
Next step
Use our Home Buying Costs Calculator to estimate your required deposit and upfront fees.
This article provides general information only and does not take into account your objectives, financial situation or needs. It does not constitute personal credit, financial, tax or legal advice. Lending outcomes depend on individual circumstances, lender policy and assessment.
Have questions about your situation?
Every home loan scenario is unique. Speak directly with Cameron or Matthew to get clear answers.