How Much Deposit Do You Need?
Many Australians believe they need a 20% deposit before buying a home, but that's not always the case. Depending on your circumstances, you may be able to purchase with a smaller deposit. Understanding your options can help you buy sooner while making a confident financial decision.
What Counts as a Home Deposit?
A home deposit is the amount of money you contribute towards the purchase price of a property. The larger your deposit, the less you'll usually need to borrow, which can reduce your repayments and overall interest costs.
Many buyers believe they need to save a full 20% deposit before they can purchase a home. While a 20% deposit can help you avoid Lenders Mortgage Insurance (LMI), it's not a requirement for everyone. Many lenders offer loans with smaller deposits, and eligible buyers may be able to purchase with as little as 5% under government support schemes.
Your deposit doesn't always need to come entirely from savings. Depending on the lender, it may include genuine savings, gifted funds from family, equity in another property or, in some cases, proceeds from the sale of an existing home.
How Much Deposit Do You Actually Need?
The amount you'll need depends on the purchase price of the property, the lender's requirements and whether you're eligible for any government assistance. While a 20% deposit is often considered the benchmark, it's certainly not the only option.
Many lenders are happy to consider applications with deposits of 10% or even 5%. However, borrowing more than 80% of the property's value will usually mean you'll need to pay Lenders Mortgage Insurance (LMI), unless you're eligible for a government scheme that waives this requirement.
Saving a larger deposit can reduce your borrowing costs, but waiting years to reach 20% isn't always the best financial decision. For many buyers, entering the market sooner can outweigh the cost of LMI, particularly in a rising property market.
The right deposit isn't simply the biggest one you can save—it's the amount that allows you to purchase comfortably while keeping enough savings aside for moving costs, emergencies and other upfront expenses.
What If You Have Less Than a 20% Deposit?
Having less than a 20% deposit doesn't necessarily mean you need to keep saving. Many Australians successfully purchase a home with a smaller deposit, particularly first home buyers.
If you're borrowing more than 80% of the property's value, most lenders will require you to pay Lenders Mortgage Insurance (LMI). LMI protects the lender—not the borrower—but it allows many buyers to enter the property market sooner rather than waiting years to save a larger deposit.
Depending on your circumstances, you may also qualify for government assistance, such as the Home Guarantee Scheme, which can allow eligible buyers to purchase with as little as a 5% deposit without paying LMI. Eligibility criteria and places are limited, so it's important to understand what's available before you begin your property search.
Every lender assesses applications differently, so the best option will depend on your income, savings, purchase price and overall financial position. Speaking with a mortgage broker can help you understand which lenders and government initiatives may be available to you.
Ways to Build Your Deposit Faster
Saving a home deposit can feel like a big challenge, but having a clear plan can make the process more achievable. Even small changes to your savings habits can add up over time and bring you closer to purchasing your home.
Setting up a dedicated savings account and automating regular transfers is one of the simplest ways to stay on track. Treating your savings like a regular bill can help you build your deposit consistently without having to think about it each month.
If you're a first home buyer, it's also worth exploring government initiatives that may help you purchase sooner. Depending on your circumstances, schemes such as the Home Guarantee Scheme or the First Home Super Saver Scheme may reduce the amount of savings you need or help you build your deposit more efficiently.
Remember, your deposit is only one part of the picture. Understanding your borrowing capacity, upfront costs and loan options early can help you create a realistic plan and avoid unnecessary delays when you're ready to buy.
Choosing the Right Deposit for You
There isn't a one-size-fits-all answer when it comes to saving a home deposit. While a larger deposit can reduce your loan amount and may help you avoid Lenders Mortgage Insurance (LMI), it isn't always necessary to wait until you've saved 20% before buying a home.
The right deposit will depend on your financial circumstances, the type of property you're purchasing and whether you're eligible for any government assistance. For some buyers, purchasing sooner with a smaller deposit may be the right decision, while others may prefer to continue saving to reduce their borrowing costs.
Taking the time to understand your borrowing capacity, upfront costs and available lending options will help you make a confident and informed decision. The earlier you understand your options, the better prepared you'll be when it's time to buy your home.
Ready to Start Saving for Your Home?
Whether you're buying your first home, planning your next move or simply want to understand how much deposit you'll need, knowing your options is the first step. I'll help you understand your borrowing capacity, deposit requirements and the loan options available, so you can move forward with confidence.
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