How Much Deposit Do You Need to Buy Your First Home?
If you're a first home buyer in Australia, you’ve probably heard that you need a 20% deposit to get started. But is that really true?
The short answer? No.
While a 20% deposit can help avoid Lenders Mortgage Insurance (LMI), it’s not a requirement, and waiting to save that much could actually slow you down or cost you more.
This guide will help you:
Understand what deposit size you actually need
Explore government and family support options
Create a first home deposit strategy tailored to your income and timeline
Whether you're just starting your savings journey or getting close to your goal, this guide will help you move forward with more clarity and confidence.
Why You Don’t Always Need a 20% Deposit
Many people aim for a 20% deposit because it helps avoid Lenders Mortgage Insurance (LMI). But that’s not the only path.
So where does this idea come from?
Lender’s Mortgage Insurance (LMI)
If your deposit is under 20%, most lenders will charge you LMI, a one-off cost that protects them (not you) if the loan isn’t repaid. It’s usually added to your loan and can range from a few thousand to tens of thousands, depending on your deposit size and the loan amount.
Parental Advice
Our parents often bought homes in a very different market, with lower property prices and simpler lending rules. Saving a 20% deposit was more achievable back then, and that advice gets passed down with the best intentions, but the reality can be different now.
Media Headlines
The media often talks about needing a 20% deposit to avoid LMI, and that figure gets repeated in headlines, articles, and online calculators. It’s rarely explained that you can still buy with less than 20%, especially with the help of government schemes or family support. This focus on 20% can make it feel like that’s the only option, but it’s not.
Most first home buyers today purchase with less than 20%. The key is understanding your options.
Common Deposit Myths
“I need a 20% deposit to buy.”
Not true. With LMI or a government scheme like the First Home Guarantee, a 5–10% deposit may be enough.
“If I have a small deposit, I’ll get a bad loan.”
Not necessarily. Loan quality depends on your full financial profile, not just your deposit.
“I’ll just wait until I’ve saved more.”
Sometimes the opportunity cost of waiting can be more than LMI. If property prices rise faster than your savings, delaying could set you back further.
Understanding Your Deposit Options
Whether you’ve saved 5%, 10%, 15%, or somewhere in between, it’s important to know what paths are actually available to you. Your deposit size, income, and eligibility may open up strategic ways to buy sooner, without sacrificing your long-term goals.
Here are your main pathways under 20%
First Home Guarantee Scheme (FHGS)
A federal government scheme that allows eligible first home buyers to purchase with just a 5% deposit.
You don’t have to pay Lenders Mortgage Insurance (LMI).
You must meet eligibility criteria and purchase under the price cap in your area.
Limited spots available each financial year, so timing matters.
Family Guarantor Loan
A family member (often a parent) uses equity in their own home to help secure your loan.
This reduces your perceived risk to the bank, allowing you to avoid LMI.
Your guarantor takes on some financial risk if you can’t repay your loan, so they’ll need legal advice.
Standard 5–10% Deposit Loan
Some lenders allow you to buy with 5–10% without any government support or guarantor.
These loans usually come with high LMI costs and higher interest rates.
Fewer lenders offer these, and servicing can be stricter.
Usually not the best choice unless the other options aren’t accessible to you.
Standard 10–20% Deposit Loan
A deposit between 12–15% is often the “sweet spot.”
It brings your Loan to Value Ratio (LVR) under 90%, giving you access to better interest rates.
You’ll still pay some LMI, but the cost is significantly reduced.
More lenders will be available at this LVR level.
You may still be eligible for a guarantor loan or First Home Guarantee Scheme, depending on your situation.
💸 LMI Waivers (for selected professionals):
Some lenders will waive LMI if you work in specific industries and have at least a 10% deposit. Eligible professions often include:
Doctors and nurses
Pharmacists and physios
Accountants and lawyers
Vets and other allied health professionals
You’ll need to provide professional membership or registration details. Policies change often, so speak to your broker about current availability.
2% Deposit – Family Home Guarantee Scheme (for single parents and eligible carers):
Designed to help single parents or eligible carers buy with just a 2% deposit.
No LMI applies.
Income and property price caps apply.
Limited to 5,000 spots per financial year.
Must be purchasing a home to live in, not an investment.
Smart Savings Strategies
Automate your savings: Set up a transfer on payday so you save before you spend
Review your spending: Track your money to find hidden leaks
Set mini goals: Focus on milestones like $5K, $10K, $20K
Simulate your mortgage: Start setting aside your future loan repayment amount to test your budget and build confidence
How Much Deposit Do You Actually Need to Save?
This is where your broker can help you get clear. Ideally, speak to a broker 6–12 months before you think you’ll be ready. They can help you:
Understand how much you can borrow
Explore which deposit strategies suit you
Map out a savings plan that’s realistic for your income
Check your eligibility for things like the FHSS Scheme
Client Story
We recently worked with a buyer who thought they’d need to wait 12 months to save a 15% deposit. But once we reviewed their situation, we found they were eligible for the First Home Guarantee Scheme, meaning they could buy now with just 5% and avoid LMI altogether.
Every buyer’s path is different, and speaking to a broker early can uncover options you might not know exist.
Don’t Forget the Extra Costs
On top of the loan deposit, you’ll still need to budget for other expenses, including:
Stamp duty (varies by state and property price)
Lender fees
Conveyancing or legal costs
Building and pest inspections
Moving costs
Furniture and setup
A cash buffer — so you’re not left with nothing after settlement
We covered all of this in detail back in Episode 3, where we broke down the real costs of buying your first home.
So if you haven’t listened to that one yet, it’s definitely worth jumping in.
Final Thoughts
If you’ve ever felt stuck thinking you need a 20% deposit before you can even begin, we hope this guide has helped shift that perspective.
There are more options than most people realise, and with the right support, you can create a deposit strategy that actually works for you.
Want more support?
Listen to Episode 4 of First Home Unlocked for a full breakdown of what is available. Or if you're planning to buy your first home, book a Chat With Jack to talk through your options, help map out a savings strategy, and give you a clear next step based on your goals and timeframe.
