It’s one of the first questions almost every buyer asks. And the answer is more flexible than most people realise. You don’t always need 20%. Depending on your situation, you could buy with as little as 5% – and in some cases, even less.
The deposit question matters because it affects everything else: how long you need to save, whether you pay Lenders Mortgage Insurance, and which government schemes you might qualify for. Getting clear on the numbers early means you can plan with confidence rather than guessing.
Here’s how it actually works in 2026.
What Is the Minimum Deposit to Buy a Home in Australia?
The minimum deposit required by most lenders is 5% of the property’s purchase price. On a $600,000 property, that’s $30,000. However, borrowing with a deposit below 20% usually triggers Lenders Mortgage Insurance (LMI) – a one-off premium charged by the lender that protects them (not you) if you default on the loan.
According to APRA data, the average loan-to-value ratio for new owner-occupier loans in Australia sits around 75%, meaning most buyers are putting in roughly 25%. But that average masks a wide range – many first home buyers enter the market with considerably less, using government schemes and family support to bridge the gap.
The right deposit size for your situation depends on how quickly you want to buy, how much you’ve saved, and whether you qualify for any of the schemes that can reduce the deposit threshold.
The Three Main Deposit Scenarios
Scenario 1: 5% deposit (high LVR borrowing)
Buying with a 5% deposit is possible, but it comes with a cost. Your Loan-to-Value Ratio (LVR) – the percentage of the property’s value you’re borrowing – would be 95%. At that level, LMI applies, and it can be significant.
On a $600,000 property with a 5% deposit ($30,000), LMI could add anywhere from $15,000 to $25,000 to your loan costs, depending on the lender. That amount is typically added to your loan balance rather than paid upfront, which means you also pay interest on it over time.
A 5% deposit makes sense if getting into the market sooner outweighs the cost of LMI – for example, if property prices in your area are rising and waiting an extra year to save more would cost you more than the LMI premium itself.
Scenario 2: 10% deposit
A 10% deposit reduces your LVR to 90% and brings your LMI cost down meaningfully compared to a 95% LVR loan. On the same $600,000 property, LMI at 90% LVR might sit between $8,000 and $14,000 – still a real cost, but noticeably lower.
For many buyers, a 10% deposit represents a practical middle ground: enough to access a broader range of lenders and products, without needing to save for years to reach the 20% threshold.
Scenario 3: 20% deposit (the LMI-free threshold)
A 20% deposit brings your LVR to 80%, which is the threshold at which LMI no longer applies for most lenders. On a $600,000 property, that’s $120,000 saved before accounting for purchasing costs.
The advantages of a 20% deposit go beyond avoiding LMI. Lenders generally offer better rates to borrowers with lower LVRs, and you’ll have more lender options available to you. If you can reach 20%, it’s worth it. But for many buyers, particularly in higher-priced markets, waiting to save that amount means years of delay – and that delay has its own cost if property values are rising.
Deposit | LVR | LMI applies? | Approx. LMI cost (on $600k) |
5% ($30,000) | 95% | Yes | $15,000 – $25,000 |
10% ($60,000) | 90% | Yes | $8,000 – $14,000 |
20% ($120,000) | 80% | No | $0 |
Government Schemes That Can Reduce Your Deposit Requirement
Does Your Deposit Need to Cover Stamp Duty Too?
Before diving into schemes, one point that catches many buyers off guard: your deposit and your purchasing costs are separate. Stamp duty, conveyancing fees, building inspections, and loan establishment fees all come on top of your deposit. Use our stamp duty calculator and property buying cost calculator to get a realistic picture of the full amount you’ll need.
In some states, first home buyers receive stamp duty concessions or exemptions that reduce this burden significantly – worth checking before you finalise your savings target.
The First Home Guarantee
The First Home Guarantee (formerly the First Home Loan Deposit Scheme) allows eligible first home buyers to purchase with as little as a 5% deposit without paying LMI. The federal government guarantees the remaining portion of the deposit with the lender, removing the insurance requirement.
As of 2025, the scheme has unlimited places and higher property price caps than in previous years, making it accessible to more buyers in more markets. You’ll need to meet income thresholds and purchase within the eligible price caps for your state. For a full breakdown, see our guide to the First Home Guarantee.
The Family Home Guarantee
The Family Home Guarantee is designed specifically for single parents with at least one dependent child. It allows eligible applicants to purchase a home with a deposit of as little as 2% without paying LMI, with the federal government guaranteeing the remaining portion. The scheme is open to both first home buyers and previous owners who no longer hold property. Income thresholds and property price caps apply – your broker can confirm whether you qualify based on your circumstances.
The Queensland First Home Owners Grant
If you’re buying or building a new home in Queensland, you may be eligible for the Queensland First Home Owners Grant (FHOG) – a cash payment that can contribute directly to your deposit or purchasing costs. Our Queensland First Home Owners Grant explainer covers the current eligibility criteria and payment amounts in detail.
Guarantor Home Loans
A guarantor loan allows a family member – typically a parent – to use the equity in their own property as additional security for your loan. This can allow you to borrow with a very small deposit, or sometimes no deposit at all, without triggering LMI.
It’s a significant commitment for the guarantor, and both parties need to understand the risks before proceeding. Your broker can walk through how it works and whether it’s appropriate for your situation.
What About the Rest of the Buying Costs?
Your deposit isn’t the only thing you need to save. A realistic budget for buying a home includes:
- Stamp duty – varies by state, property value, and buyer type (first home buyers often receive concessions)
- Conveyancing / legal fees – typically $1,500 to $3,000
- Building and pest inspection – typically $400 to $700
- Loan establishment fees – varies by lender, sometimes waived
- Moving costs – easy to underestimate
As a rough guide, budget an additional 3% to 5% of the purchase price on top of your deposit to cover these costs, though this varies depending on your state and circumstances.
Use our savings goal calculator to map out a realistic timeline for reaching your target.
How Do You Know When You're Ready to Buy?
Having your deposit saved is one part of the picture. Lenders also assess your borrowing capacity based on your income, expenses, existing debts, and credit history. Being deposit-ready and loan-ready aren’t always the same thing.
The best way to understand where you stand is to get pre-approved before you start seriously searching. Pre-approval gives you a clear borrowing limit, strengthens your position when making an offer, and lets you move quickly when the right property comes up.
For a full breakdown of what the buying process looks like from a lending perspective, our first home buyers service page is a good place to start.
Frequently Asked Questions
Yes, in most cases. The First Home Guarantee and the Queensland FHOG are separate schemes and can be used in combination, provided you meet the eligibility criteria for both. Your broker can confirm whether you qualify for one or both based on your specific situation.
Most lenders require at least part of your deposit to come from genuine savings – money you’ve accumulated yourself over time, typically over three to six months. Gifts from family, grants, and other sources may be accepted alongside genuine savings, but the specific requirements vary by lender. This is one area where a broker’s knowledge of individual lender policies makes a real difference.
A strong income can support a larger loan, but most lenders won’t waive the minimum deposit requirement based on income alone. However, government schemes and guarantor options may still allow you to enter the market sooner. It’s worth having a conversation with a broker to understand what’s actually available to you.
Not necessarily. LMI has a cost, but it’s also what allows buyers to enter the market years earlier than they otherwise could. In markets where property values are rising, buying sooner – even with LMI – can result in a better financial outcome than waiting to save a larger deposit. Your broker can help you model both scenarios for your situation.
Pre-approval can often be arranged within a few days once your documents are in order. The key documents lenders need include recent payslips, bank statements, tax returns (if self-employed), and identification. Our brokers can guide you through exactly what’s required for your situation.
This article is general information only and does not constitute financial advice. Your personal circumstances may differ. Talk to your broker about your specific situation.
Sources: APRA Quarterly ADI Property Exposures Statistics; Australian Government First Home Guarantee scheme information; Queensland Revenue Office.
