How much deposit do you actually need to buy a home in Australia?
Short answer: not as much as you think — and certainly not 20%
Most first home buyers in Australia can get in to the property market with a 5% deposit, and some buy with even less using a government scheme or a guarantor. The "you need 20%" thing isn't a thing anymore… and thinking it is has kept a lot of people renting for years longer than they ever needed to.
So here is what’s actually happening…
Where did the "20% deposit" idea come from?
20% is the point where you avoid paying Lenders Mortgage Insurance (more on that below). So it's not the minimum to buy — it's the amount that makes the loan cheapest. Somewhere along the way "ideal" turned into "required" in everyone's heads, and now people think they're locked out when they're not.
What's the smallest deposit I can buy with?
For most first home buyers, the realistic answer is 5%. A few situations let you go lower:
5% with most lenders — you cover the gap with Lenders Mortgage Insurance.
5% with no LMI — if you qualify for a government scheme that guarantees part of your loan.
Little to no deposit — if a parent or family member goes guarantor using the equity in their own home.
Which of these fits you depends on your individual situation, but the point is, there are more doors open than most people realise.
What is LMI, and is it really that bad?
Lenders Mortgage Insurance (LMI) is a one-off cost that protects the lender (not you) if you borrow with less than a 20% deposit. You can usually add it onto your loan rather than paying it upfront.
People treat LMI like the enemy. Sometimes it is worth avoiding, but sometimes paying it is what gets you into the market two or three years sooner, before prices move up again. For investors, LMI is generally tax-deductible over five years too (worth a chat with your accountant). The right call just depends on your individual numbers.
Are there government schemes that can help?
Yes! and they're the reason a 5% deposit can mean no LMI at all. There are schemes aimed at first home buyers, single parents, and people saving through their super. They're genuinely useful, but the eligibility rules, income limits and place numbers change regularly, so always check what's current before you count on one.
This is exactly the kind of thing I'll work through with you, because the right scheme can save you thousands.
Don't forget the other upfront costs
Your deposit isn't the only money you need on the day. Depending on your state and whether you're a first home buyer, you may also need to budget for stamp duty (often reduced or waived for first home buyers), conveyancing, building and pest inspections, and a few smaller fees. The good news: first home buyer concessions can take a big chunk out of these.
So how much do you really need?
Honestly? It really depends — on the price of the place, where it is, whether you qualify for a scheme, and what you can comfortably borrow and repay. There's no single magic number, which is exactly why the "20%" deposit myth does so much damage.
The real first step isn't saving blindly toward some scary figure. It's finding out your number — what you can actually borrow, what schemes you're eligible for, and how close you really are. Most people are way closer than they think.
Want to know more? Book a free, no-pressure call and I'll walk you through exactly what you need to buy your first place.