How Much Deposit Do You Really Need to Buy a House in Australia?

The short answer

Most lenders want a 20% deposit to avoid Lenders Mortgage Insurance (LMI) — but many will lend with less. Here's how the deposit options typically stack up on a $700,000 Australian home.

Deposit options compared

The table below is an illustrative example, not a quote. Whether LMI applies, and what it costs, varies by lender, loan size and your circumstances.

On the 10% and 5% rows, the LMI cost itself is not shown because it varies by lender, loan size and deposit — ask for a quote for your situation.

Don't forget the upfront costs

Your deposit isn't the only cash you need. Budget for:

• Stamp duty — varies by state and territory, and by whether you receive a first home buyer concession
• Conveyancing / legal fees
• Building & pest inspection
• Loan application / valuation fees — varies by lender
• Moving and initial repairs

These typical costs vary by state, the property and the provider, so the figures here are examples only — we confirm the actual costs that apply to your purchase.

Genuine savings

Many lenders want to see genuine savings — money you have built up and held yourself over time (often three months or more) — as evidence you can manage money. A sudden lump sum, such as a gift, may not count toward genuine savings with some lenders, while others accept alternatives. The rules differ, so it is worth confirming what your chosen lender requires before you apply.

Guarantors

If saving a full deposit is the barrier, a guarantor loan can sometimes help. A guarantor — often a parent — offers equity in their own property as extra security, which may let you buy with little or no deposit and avoid LMI. It carries real risk for the guarantor if the loan is not repaid, so we make sure everyone understands the arrangement and recommends independent advice before proceeding.

First home buyer schemes vary by state

Each state and territory runs its own first home owner grant and stamp duty concessions, with different amounts, property value caps and eligibility rules. Separately, the national 5% Deposit Scheme lets eligible first home buyers buy with as little as a 5% deposit without paying LMI. Eligibility, price caps and places are set by the Australian Government and can change — at the time of writing places are unlimited and income caps no longer apply, but check the current rules at Housing Australia (the National Housing Finance and Investment Corporation) before relying on this.

What is LMI and can I avoid it?

Lenders Mortgage Insurance protects the lender (not you) if you default, and is generally charged when you borrow more than 80% of the property value. Ways that may reduce or avoid it include:

• Saving a full 20% deposit
• Using a guarantor (see above)
• Qualifying for the Australian Government 5% Deposit Scheme
• Some lenders waive LMI for specific professions

Whether any of these apply depends on the lender and your circumstances.

The right strategy depends on you

A bigger deposit is not always the best financial decision — for some buyers, purchasing sooner with LMI can make sense; for others, waiting is wiser. We can model the trade-offs for your situation.

Not sure which deposit strategy fits you? Talk to Finance Wealth — we'll look at your actual situation and the lenders that suit it.