Key Takeaways
- A 20% deposit avoids Lenders Mortgage Insurance, but it is not compulsory: 10% to 15% is common, and eligible first home buyers can buy with 2% and no LMI through a government guarantee.
- Budget for the deposit plus stamp duty, legal and inspection fees, lender costs and a buffer, not the deposit alone.
- Your loan-to-value ratio drives your insurance, rate and lender choice, so each deposit size carries a different real cost.
- A large deposit does not guarantee approval; serviceability sets how much you can actually borrow.
The deposit is the first hurdle most buyers focus on, and for good reason: it is usually the largest single sum you need before you can buy, and it shapes the rate, the structure, and even the approval of your loan. With property prices where they are, saving a full deposit can take years, which is why so much depends on understanding exactly how much you really need rather than defaulting to the figure you have always heard.
That figure is not as fixed as many people assume. The traditional benchmark is 20%, but it is not compulsory, and in 2026, more buyers than ever can enter the market with far less. The more useful question is not simply how little you can get away with, but how much cash you need all up, and what each deposit size costs you in insurance, rate, and risk.
This guide sets out how much deposit you need by purchase price, what sits on top of the deposit, how your deposit size affects your loan through the loan-to-value ratio, and how a deposit strategy is actually built. The aim is to separate the question of whether you can buy from the question of whether you should buy now, and to help you decide with the full picture in view.
The Quick Answer
Before the details, here is the plain version, because the headline numbers are straightforward even if the nuance is not.
A 20% deposit is the benchmark because at that level, you avoid Lenders Mortgage Insurance entirely. A deposit of 10% to 15% is common and very workable, with insurance applying. A 5% deposit is possible for eligible buyers, particularly first home buyers using a government guarantee, and some buyers purchase with as little as 2% or even nothing using a single-parent guarantee or a family guarantor. The important caveat is that the deposit is only part of the cash you need, and the right deposit for you is a strategy rather than a single number.
How Much Deposit by Purchase Price
It helps to see the actual dollar figures, because percentages can disguise how large the gap between deposit sizes really is. The table below shows the deposit required at each common level across a range of purchase prices. These are the deposits alone; the additional costs are covered in the next section.
| Purchase price | 5% deposit | 10% deposit | 15% deposit | 20% deposit |
| $500,000 | $25,000 | $50,000 | $75,000 | $100,000 |
| $700,000 | $35,000 | $70,000 | $105,000 | $140,000 |
| $900,000 | $45,000 | $90,000 | $135,000 | $180,000 |
| $1,000,000 | $50,000 | $100,000 | $150,000 | $200,000 |
The jump from a 5% to a 20% deposit on a $700,000 home is more than $100,000, which is exactly why so many buyers weigh a smaller deposit against the cost of insurance rather than waiting years to reach 20%.
Deposit Versus Total Cash Needed
One of the most common and costly miscalculations is treating the deposit as the whole bill. In reality, the deposit is one line in a longer list, and the surrounding costs can add several thousand dollars or more. Planning for the full amount early prevents an unwelcome shortfall close to settlement.
Beyond the deposit, a typical purchase involves the following. The figures are indicative ranges and vary by state, property, and lender.
- Stamp duty, also called transfer duty, is often reduced or nil for eligible first home buyers under the threshold
- Conveyancing or legal fees, around $1,500 to $2,500
- Building and pest inspection, around $400 to $800
- Government registration and transfer fees, which vary by state
- Lender application or establishment fees, from $0 to $800
- Lenders Mortgage Insurance, where the deposit is below 20%, and no guarantee applies
- Connection and moving costs, around $500 to $1,500
- A sensible cash buffer of $3,000 or more for the unexpected
For example, a buyer with a 10% deposit on a $600,000 home would put down $60,000, then budget separately for stamp duty (or a concession), legal and inspection costs, and a buffer. The practical lesson is to plan for the deposit plus several thousand dollars more, and to avoid draining your savings to zero on settlement day.
What Is a Loan-to-Value Ratio and Why Does It Matters
The single concept that ties deposit size to everything else is the loan-to-value ratio (LVR), and understanding it makes the rest of the picture click into place.
LVR is the size of your loan expressed as a percentage of the property value. If you borrow $400,000 against a $500,000 property, your LVR is 80%, because the loan is 80% of the value and your deposit covers the other 20%. The lower your LVR, the less risk the lender carries, which is why an LVR at or below 80% generally avoids Lenders Mortgage Insurance and tends to attract the widest choice of lenders and the sharpest pricing. As your LVR rises above 80%, the lender’s risk rises with it, and that is when insurance, and sometimes a higher rate, comes into play. Lenders may also cap the maximum LVR they will allow based on the property type, its location, and your overall financial position.
What Different Deposit Sizes Actually Mean
Because LVR drives so much, it is worth walking through what each deposit level means in practice, not just for whether you can buy, but for what it costs you. The differences are significant.
A 20% Deposit (80% LVR)
At 20%, you reach the threshold that avoids Lenders Mortgage Insurance, open up the widest range of lenders, and generally access the best pricing. It is the strongest position to buy from, but it also takes the longest to reach, and for many buyers, the years of saving carry their own cost in continued rent and rising prices.
A 15% Deposit (85% LVR)
At 15% insurance usually applies, but the premium is smaller than at higher LVRs because the lender’s exposure is lower. This is a comfortable middle ground for many borrowers, and some lenders waive insurance at this level for certain professions considered lower risk, such as some medical practitioners.
A 10% Deposit (90% LVR)
A 10% deposit is widely accepted and remains a popular entry point. Insurance is more significant here than at 85%, and the premium can be capitalised, meaning added to the loan rather than paid upfront. It keeps the purchase within reach while still leaving you with a meaningful equity stake from day one.
A 5% Deposit (95% LVR)
At 5% the lender’s risk is highest, so insurance is substantial unless you avoid it through a government guarantee or a guarantor. Lenders also apply stricter conditions at this level, including closer scrutiny of genuine savings and your overall profile. It is the fastest way into the market, but it carries the least equity buffer, which matters if property values dip in the short term.
When Does LMI Apply, and Is It Always Bad?
Lenders Mortgage Insurance (LMI) is widely misunderstood, and treating it as simply a cost to avoid can lead to poor decisions. Understanding what it is and when it makes sense is part of choosing your deposit.
LMI is an insurance premium that protects the lender, not you, if you cannot repay the loan. It generally applies when your LVR is above 80%, and the premium rises with both the loan size and how far above 80% you sit. It can often be capitalised, added to the loan rather than paid in cash, which preserves your upfront funds but increases your repayments and the total interest you pay over time. That trade-off is the heart of the decision. If property prices are rising, buying sooner with LMI can leave you better off than spending another year or two saving to 20% while prices climb and you keep paying rent. If the market is flat, waiting may cost you little. There is no universal answer, only the one that fits your market, your timeline, and your risk tolerance.
What Counts as Genuine Savings?
Many low-deposit loans require what lenders call genuine savings, and this requirement catches buyers out more often than the headline deposit figure does. Knowing the rule early can save you months.
Genuine savings generally means evidence that you accumulated at least 5% of the price yourself over time, usually demonstrated over around three months, rather than the funds appearing suddenly. Regular deposits into a savings account and certain investments held in your name typically qualify. A sudden lump sum, such as a gift or a windfall, may not count as genuine savings on its own, even though it can still form part of your deposit. Some lenders accept a consistent rental payment history as an alternative. Crucially, the definition varies between lenders, so a deposit that one lender treats as insufficient may be perfectly acceptable to another.
Can Gifts, Grants, the FHOG, or a Guarantor Help?
Few buyers reach their deposit through savings alone, and several common forms of help can bridge the gap. Each works differently, and each has conditions worth understanding before you rely on it.
- A gifted deposit from family can be used, usually with a gift letter confirming it is not a loan, though, as noted, it may not count toward the genuine savings requirement with every lender.
- The First Home Owner Grant (FHOG) can contribute to your overall funds, but it is typically paid around settlement and generally applies only to new builds, so it is not a substitute for the deposit you need at application.
- The Australian Government 5% Deposit Scheme lets eligible first home buyers purchase with a 5% deposit (2% for single parents) and no LMI, by having the government guarantee the shortfall below 20%.
- A guarantor arrangement, where a family member uses equity in their property as additional security, can reduce or remove both the deposit and LMI, but it places the guarantor’s property at risk and should only be entered into after independent legal advice.
Real Borrower Scenarios
How much deposit you need depends on your whole position, not just your savings, and the scenarios below show why. They are illustrative, with rounded figures, and are designed to show the reasoning rather than promise an outcome.
The Strong Deposit, Tight Serviceability Buyer
Dan has saved a full 20% deposit and assumes that settles the question. When his borrowing capacity is assessed, it turns out his income, after the Australian Prudential Regulation Authority (APRA) serviceability buffer of around 3% points is applied, limits him to a smaller loan than the deposit alone would suggest. His deposit is not the constraint; his serviceability is. The lesson is that a large deposit does not guarantee approval for the property you want, because affordability is assessed separately.
The Small Deposit, Strong Income First Home Buyer
Mia has only a 5% deposit but a stable income and minimal debts. Rather than pay substantial LMI, she uses the Australian Government 5% Deposit Scheme to buy with 5% and no insurance. Her strong serviceability means the smaller deposit is not a barrier, and she enters the market years earlier than if she had waited for 20%.
The Buyer With a Gifted Deposit
Tom receives a $40,000 gift from his parents. One lender will not count it as genuine savings, which would stall his application. A broker either matches him to a lender whose policy accepts gifted funds in his circumstances or advises him to demonstrate a savings pattern for a few months first. The deposit amount was never the issue; the source of it was.
The Investor Needs a Larger Deposit
Alex is buying an investment property. Lenders often apply lower maximum LVRs and different pricing to investment lending, so Alex may need a larger deposit than a comparable owner-occupier, and LMI on investment loans can be costed differently. Planning for a bigger deposit from the outset keeps the purchase realistic.
How a Broker Works Out Your Deposit Strategy
Because the right deposit is a strategy rather than a fixed figure, working it out involves testing options against your goals and the policies of different lenders. This is where comparing across lenders adds the most value.
In practice, a deposit strategy weighs up several moving parts at once:
- Modelling 5%, 10%, 12%, 15%, and 20% deposit options to see how LVR, insurance, and rate change at each level
- Comparing the cost of paying LMI now against the likely cost of waiting to save more
- Checking maximum LVR limits for the specific property type and postcode, since some apartments, high-density units, and regional properties are treated as higher risk
- Confirming which lenders will accept your deposit source under their genuine savings policy
- Checking if you work in a certain occupation and qualify whereby where a 90% or 95% LVR without paying LMI is available
- Matching all of this to your serviceability, so the deposit plan and the borrowing capacity line up
The outcome is a deposit figure chosen for your situation, rather than a generic 20% target that may have you waiting longer than you need to, or a bare minimum that costs more than it should.
If you are unsure whether a 5%, 10%, or 20% deposit is the right move, it can help to compare your options before you apply. A Loanworx broker can assess your deposit, borrowing capacity, LMI position, and lender eligibility together, so you can see whether buying sooner, waiting longer, or using a different loan structure makes more sense. You can explore home loan options to better understand which pathways may suit your circumstances.
Mistakes to Avoid
Most deposit-related setbacks come from a handful of predictable errors. Knowing them in advance is the cheapest protection available.
- Forgetting stamp duty and the surrounding costs, and budgeting only for the deposit.
- Assuming the First Home Owner Grant replaces the deposit, which is usually paid around settlement, and applies to new builds.
- Capitalising LMI without understanding how it increases your repayments and total interest.
- Applying before tidying your finances, since recent spending conduct, undisclosed debts, and unusual transactions are all visible on your statements.
- Choosing a property type that a lender treats as higher risk, such as a small studio apartment or a remote-area property, without checking the maximum LVR first.
- Assuming a large deposit guarantees approval, when serviceability is often the real limit.
- Emptying your savings, leaving no buffer for the costs that arrive around settlement and beyond.
Frequently Asked Questions (FAQs)
1. Do I really need a 20% deposit?
No. A 20% deposit is the benchmark because it lets you avoid Lenders Mortgage Insurance and access the widest range of lenders, but it is not compulsory. Many buyers purchase with 10% to 15%, and eligible first home buyers can buy with 5% and no insurance through a government guarantee or if they are employed in certain occupations. The right level depends on your income, your costs, and how soon you want to buy.
2. Can I buy with a 5% deposit in Australia?
Yes, particularly as a first home buyer. You can buy with a 5% deposit by paying LMI, or with 5% and no insurance through the Australian Government 5% Deposit Scheme if you are eligible. A guarantor arrangement can sometimes reduce the deposit further. With any low-deposit purchase, lenders apply closer scrutiny to your savings and overall profile.
3. Is a 10% deposit enough?
For most lenders, yes. A 10% deposit gives you a 90% loan-to-value ratio, which is widely accepted. Insurance usually applies and can be added to the loan, but a 10% deposit keeps the purchase within reach while leaving you with a real equity stake from the start.
4. Does LMI come out of my deposit, or can it be added to the loan?
It does not have to come out of your deposit. Lenders Mortgage Insurance can often be capitalised, meaning added to the loan amount rather than paid in cash upfront, which preserves your savings but increases your repayments and the total interest you pay over the life of the loan. Whether to capitalise it or pay it upfront is part of the deposit decision.
5. What counts as genuine savings?
Genuine savings generally means funds you have accumulated yourself over time, often shown over around three months, rather than a sudden lump sum. Regular savings and certain investments in your name usually qualify, while a gift may not count toward the requirement even though it can still form part of your deposit. The definition varies between lenders, so a deposit one lender questions may be acceptable to another.
6. Can my parents gift me the deposit?
Yes. A gifted deposit is common and is typically accompanied by a gift letter confirming the money is a gift rather than a loan. The point to check is that not every lender will count a gift as genuine savings, so if your deposit relies on a gift, it is worth confirming the lender’s policy or demonstrating a separate savings pattern before applying.
7. Should I wait until I have 20%, or buy sooner with LMI?
It depends on your market and timeline. If you qualify for a government guarantee, you may avoid LMI altogether. If not, weigh the cost of insurance against the risk that prices rise faster than you can save while you keep paying rent. In a rising market, buying sooner can leave you ahead; in a flat market, waiting may cost little. There is no single right answer, only the one that fits your circumstances.
The Bottom Line
There is a difference between the minimum deposit that lets you buy and the deposit that makes sense for your situation. The real figure is your deposit plus stamp duty, costs, and a buffer, shaped by your loan-to-value ratio, whether insurance applies, your genuine savings, the property type, and, crucially, your serviceability, which determines how much you can borrow regardless of how much you have saved.
Rather than fixing on 20% or chasing the bare minimum, work out the deposit that gets you into a suitable property on terms you can comfortably manage. Confirm your costs, understand what each deposit level means for your rate and insurance, and make sure your deposit plan and your borrowing capacity line up. Done that way, the deposit stops being a vague barrier and becomes a decision you can make with confidence.
