How much deposit do you really need to buy your first home?

If you ask most people how much deposit you need for a house, they will say 20%. On today's median house prices in most Australian cities, that is a sum that stops many buyers before they start. The good news: 20% is the textbook answer, not the practical one. Plenty of first home buyers around Australia purchase with far less — you just need to understand the trade-offs.

The short answer

You can buy with a deposit of 5% of the purchase price — sometimes less with a guarantor — provided your income comfortably supports the repayments. The real question is not "can I buy with a small deposit?" but "what does a small deposit cost me, and is it worth paying to get in sooner?"

What a 20% deposit actually buys you

With 20% down, you avoid Lenders Mortgage Insurance (LMI) — a one-off premium that protects the lender, not you, if you default. LMI can run to five figures, and it is usually added to your loan so you pay interest on it too. A larger deposit also unlocks sharper interest rates with some lenders and gives you a buffer if prices dip.

Buying with 5–10%: what changes

• LMI applies, scaled to how far under 20% you are and the size of the loan.
• Some lenders price low-deposit loans slightly higher.
• Your loan approval is assessed more carefully — clean statements and stable income matter more.

For many buyers, paying LMI is a rational choice. If prices in your target suburb are rising faster than you can save, waiting for a full 20% can cost more than the insurance ever would. That is a calculation worth doing properly — it is one of the first things we model in an assessment.

The Home Guarantee Scheme

The federal Home Guarantee Scheme allows eligible first home buyers to purchase with as little as 5% deposit and pay no LMI, because the government guarantees part of the loan. Places are limited and price caps apply in each city, so eligibility needs to be checked against the current rules — this is exactly the kind of legwork a broker does for you at no cost.

Guarantor loans

If a parent can offer part of the equity in their own home as additional security, some lenders will finance up to 100% of the purchase price with no LMI. The guarantee is usually limited to a slice of the loan and can be released once you have built enough equity. It is a serious commitment for the guarantor, and we always recommend they take independent advice — but structured well, it is the fastest route into the market for buyers with strong incomes and slow-growing savings.

Don't forget the other costs

Your deposit is not the only cash you need on the day. Budget for transfer (stamp) duty — though first home buyer concessions in your state or territory can reduce it substantially — plus conveyancing, building and pest inspections, and lender fees. As a rule of thumb, allow an extra 2–4% of the purchase price on top of your deposit, less if concessions apply.

Where a broker fits in

Every lender treats deposits, LMI and government schemes differently. The same buyer can be declined by one lender and approved by another on the same day. Our job is to map your deposit, income and timeline against 50+ lenders' actual policies and bring back the options that fit — then handle the application end to end.

If you are saving for your first home and want to know exactly where you stand, book a free loan assessment. Thirty minutes, no obligation, and you will leave with a number you can plan around.