Minimum Deposit Requirements
Most lenders require a minimum 5% deposit, but borrowers who save 20% avoid paying Lenders Mortgage Insurance entirely. The amount you need to save depends on the property price, and the deposit size directly affects how much LMI you will pay. Below is a breakdown of deposit amounts at the three most common thresholds.
| Property Price | 5% Deposit | 10% Deposit | 20% Deposit |
|---|---|---|---|
| $500,000 | $25,000 | $50,000 | $100,000 |
| $600,000 | $30,000 | $60,000 | $120,000 |
| $750,000 | $37,500 | $75,000 | $150,000 |
| $1,000,000 | $50,000 | $100,000 | $200,000 |
These figures represent the deposit only. You will also need to budget for purchasing costs including stamp duty (or transfer duty), conveyancing fees, building and pest inspections, and loan application fees. As a general rule, allow an additional 3% to 5% of the property price for these costs on top of your deposit.
In some states, first home buyers receive stamp duty concessions or exemptions that can save thousands. Check your state revenue office website for current thresholds and eligibility.
What Is LMI and Why Does It Matter?
LMI is a one-off insurance premium that protects the lender when your deposit is less than 20%, and it can add thousands to the cost of buying a home. Lenders Mortgage Insurance is charged when your loan-to-value ratio (LVR) exceeds 80%, meaning you are borrowing more than 80% of the property value. The premium is typically added to your loan, so you pay interest on it for the life of the mortgage.
On a $600,000 property with a 10% deposit, LMI can range from $12,000 to $18,000. When capitalised over a 30-year loan at 6%, the true cost of that premium can exceed $30,000. This is why many buyers aim for 20% or explore the government schemes and guarantor options outlined below.
For a detailed breakdown of LMI costs and five strategies to avoid it, read our complete guide: What Is LMI (Lenders Mortgage Insurance) and How Do You Avoid It?
Government Schemes That Reduce Your Deposit
Two federal government programs can significantly reduce the deposit you need, with the First Home Guarantee allowing eligible buyers to purchase with just 5% and no LMI.
First Home Guarantee (5% Deposit, No LMI)
The First Home Guarantee is a federal government scheme where Housing Australia guarantees the difference between your deposit and 20% to the lender. This means you can purchase with a 5% deposit and pay no LMI. From October 2025, places are uncapped and income caps have been removed, though property price caps still apply by location. The scheme is available for owner-occupied purchases only and you must live in the property as your primary residence.
First Home Super Saver Scheme (FHSS)
The First Home Super Saver Scheme allows you to make voluntary contributions to your superannuation fund and then withdraw those contributions (plus deemed earnings) to put towards a home deposit. You can withdraw up to $50,000 in total contributions. Because super contributions are taxed at 15% rather than your marginal tax rate, this can be an effective way to save your deposit faster, particularly for higher income earners.
For more on grants and schemes available to first home buyers, see our guide: First Home Owner Grant Australia: Every State and Territory (2026)
Guarantor Loans
A guarantor loan allows a family member to use equity in their property as additional security, letting you buy with a smaller deposit and no LMI. This is one of the most common ways first home buyers in Australia enter the property market without a 20% deposit. The guarantor (typically a parent) does not give you money or make repayments. Instead, a portion of their property equity is used as additional security for your loan.
How It Works
The lender takes a limited guarantee over the guarantor's property, usually enough to bring the overall security position to 80% LVR or better. For example, if you are buying a $600,000 property with a $30,000 deposit (5%), the lender may require a guarantee of $90,000 from your parent's property to bring the effective LVR to 80%, eliminating LMI.
Risks to Understand
The guarantor's property is at risk if you default on the loan and the sale of your property does not cover the outstanding balance. The guarantee creates a registered security (mortgage) over the guarantor's property, which limits their ability to sell or refinance until the guarantee is released. Both parties should obtain independent legal and financial advice before proceeding.
Exit Strategy
Most lenders will release the guarantee once your loan balance falls below 80% of the property value. This can happen through a combination of regular repayments, extra contributions, and property value growth. Many borrowers can release the guarantee within two to five years. You should discuss the expected timeline with your broker at the outset.
What Counts as a Deposit?
Lenders accept genuine savings, gifts with a statutory declaration, inheritance, FHSS withdrawals and equity from an existing property as valid deposit sources. However, not all funds are treated equally. Lenders assess the source of your deposit as part of their responsible lending obligations.
Accepted Deposit Sources
Genuine savings are funds you have saved over a period of at least three months, held in a bank account in your name. This includes regular salary credits, term deposits and managed fund balances. Most lenders require at least 5% of the purchase price to come from genuine savings, though some are more flexible.
Gifts from family members are accepted by most lenders, provided the donor signs a statutory declaration confirming the funds are a gift and do not need to be repaid. Some lenders still require a portion of the deposit to be genuine savings even if a gift covers the rest.
Inheritance proceeds, FHSS withdrawals from super, and equity from an existing property (for those upgrading or buying an investment property) are all accepted deposit sources.
What Does NOT Count
Borrowed funds such as personal loans, credit card advances, or cash advances from a line of credit are not accepted as deposit sources. Lenders view borrowed deposits as a sign of financial stress and will decline the application. Buy now pay later balances and payday loans are also disqualifying in most cases. The deposit must represent your own accumulated wealth or a genuine gift.
How to Save Your Deposit Faster
With a structured plan, most buyers can accelerate their deposit savings by 12 to 18 months compared to saving without a strategy. Here are five practical approaches that make a measurable difference.
1. Use the First Home Super Saver Scheme
By salary-sacrificing $10,000 per year into super, a borrower on a $90,000 salary saves approximately $2,500 per year in tax compared to saving the same amount in a regular bank account. Over three years, that is $7,500 in additional savings purely from the tax benefit, plus your contributions earn a deemed rate of return inside super.
2. Open a High-Interest Savings Account
Dedicated savings accounts with bonus interest rates of 5% to 5.5% can earn $2,500 to $2,750 per year on a $50,000 balance. Keep your deposit fund separate from your everyday spending account and set up automatic transfers on payday to ensure consistent saving.
3. Reduce Discretionary Spending for a Fixed Period
Cutting $200 per week from dining out, subscriptions and non-essential purchases adds $10,400 per year to your deposit fund. This does not need to be permanent. Many buyers adopt a strict budget for 12 to 24 months with a clear end date, which makes the sacrifice easier to sustain.
4. Direct Windfalls to Your Deposit
Tax refunds, work bonuses, cash gifts and any unexpected income should go directly to your deposit savings. A $3,000 tax refund and a $2,000 work bonus each year adds $10,000 over two years with no change to your day-to-day spending habits.
5. Consider a Side Income
Freelancing, overtime, weekend work or selling unused items can add $5,000 to $15,000 per year to your deposit savings. Even a modest side income of $200 per week produces $10,400 per year, which could be the difference between a 5% and 10% deposit on a $600,000 property.
Deposit Requirements by Property Type
Deposit requirements vary depending on the type of property and whether it is owner-occupied or an investment, with some loan types requiring larger deposits.
| Property Type | Typical Min Deposit | Notes |
|---|---|---|
| Owner-Occupier | 5% | Can be as low as 2% with a guarantor. LMI applies below 20%. |
| Investment Property | 10% | Some lenders require 10% minimum for investors. Higher LMI premiums than owner-occupier. |
| Construction Loan | 5% - 10% | Deposit based on total project cost (land + build). Progress draw structure applies. |
| Off-the-Plan | 10% | Typically 10% paid at exchange, balance at settlement. LMI assessed on final valuation. |
Investment property loans generally attract higher interest rates and LMI premiums compared to owner-occupier loans. Construction loans are structured differently, with funds drawn down in stages as the build progresses, so your deposit needs to cover the initial land purchase or the first progress payment.
Common Mistakes When Saving a Deposit
Many buyers delay their purchase or face declined applications because of avoidable deposit-related mistakes.
1. Not Accounting for Purchasing Costs
Your deposit is not the only cash you need. Stamp duty, conveyancing, inspections and moving costs can add 3% to 5% of the property price. Buyers who save exactly 20% for a deposit often find they do not have enough to cover these additional costs and end up borrowing at a higher LVR than planned.
2. Moving Money Between Accounts Before Applying
Lenders review three to six months of bank statements. Large unexplained deposits, frequent transfers between accounts, or funds appearing from unknown sources create compliance concerns and can delay or derail your application. Keep your savings in one account and avoid unnecessary transfers in the months before applying.
3. Using Borrowed Funds as a Deposit
Taking a personal loan or using credit card advances to top up your deposit is a red flag for lenders. The borrowed funds create an additional liability that reduces your borrowing capacity, and lenders will identify the source during their assessment. This approach almost always backfires.
4. Waiting Too Long to Reach 20%
In markets where property prices are rising 5% to 8% per year, waiting an extra two to three years to save from 10% to 20% can mean the property you were targeting has increased in price by $60,000 to $120,000. The LMI you would have paid at 10% may be significantly less than the price increase. Model both scenarios with your broker before deciding to wait.
5. Ignoring Government Schemes
Many eligible first home buyers do not apply for the First Home Guarantee or use the First Home Super Saver Scheme, leaving thousands of dollars in potential savings on the table. Check your eligibility for all available schemes before committing to a savings target.
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