Saving for your first home deposit in Australia used to mean putting away 20% of the purchase price, a goal that could take over a decade to achieve. With median house prices reaching new heights across the country, this traditional requirement has become increasingly unrealistic for many aspiring homeowners.
The good news? New government schemes and lender options have completely changed the deposit landscape. You can now enter the property market with deposits as low as 5% or even 2% in some cases, making homeownership achievable years sooner than traditional savings methods.
This shift represents the most significant change to first home deposit australia requirements in decades, opening doors that were previously locked for many Australians.
Current First Home Deposit Requirements in Australia
The traditional 20% deposit requirement remains the gold standard for avoiding Lenders Mortgage Insurance (LMI), but it’s no longer your only option. The expanded Home Guarantee Scheme, effective from October 1, 2025, allows all first home buyers to purchase with just 5% deposits without paying LMI.
This represents a massive shift from previous restrictions. Under the old system, only 35,000 places were available annually with income caps of $125,000 for individuals or $200,000 for couples. The new unlimited scheme removes these barriers entirely.
Let’s break down what this means in real numbers. With Sydney’s median house price at $1,521,611, a 5% deposit equals $76,081 compared to $304,322 for a 20% deposit. That’s a difference of over $228,000.
LMI typically costs between $6,000 to $30,000 depending on your loan amount and deposit size. The government guarantee eliminates this cost entirely for eligible buyers, representing substantial additional savings.
Example: On a $800,000 property, you’d need $40,000 (5%) versus $160,000 (20%), plus avoid approximately $15,000 in LMI fees.
The Game-Changing Home Guarantee Scheme
The Home Guarantee Scheme offers three distinct pathways to homeownership, each designed for different circumstances and needs.
First Home Guarantee
This scheme requires a minimum 5% deposit and supports buyers who haven’t owned property in Australia for the last 10 years. The government guarantees up to 15% of the property value, enabling you to borrow up to 95% of the purchase price.
Regional First Home Buyer Guarantee
This option specifically targets buyers in regional areas with the same 5% deposit requirement. It’s designed to encourage homeownership outside major capital cities where property prices are typically more affordable.
Family Home Guarantee
Single parents or legal guardians can access this scheme with deposits as low as 2% of the property value. The government guarantee covers up to 18% of the property value, making it the most generous option available.
Key Changes from October 2025:
- No income caps (previously $125,000 individual/$200,000 joint)
- Unlimited places (previously 35,000 annually)
- Higher property price caps
- Simplified regional access
The guarantee protects the lender, not you as the borrower. If you default and the property sale doesn’t cover the outstanding loan, Housing Australia pays the shortfall up to the guaranteed amount.
Real Deposit Amounts by Australian City
Understanding actual deposit requirements across different cities helps you set realistic savings targets and choose where to buy.
Major Capital Cities
Based on current median house prices, here’s what you’ll need for a 5% deposit:
- Sydney: $1,521,611 median = $76,081 deposit
- Melbourne: $956,305 median = $47,815 deposit
- Brisbane: $1,040,651 median = $52,033 deposit
- Perth: $839,300 median = $41,965 deposit
- Adelaide: $906,620 median = $45,331 deposit
- Darwin: $654,490 median = $32,725 deposit
Unit and Apartment Options
Units offer more affordable entry points. Sydney units have a median price of $873,838, requiring just $43,692 for a 5% deposit compared to $76,081 for houses.
The LMI savings are substantial. On a $1 million property with a 5% deposit, you’d typically pay $20,000-25,000 in LMI. The government scheme eliminates this entire cost.
20% Comparison
For perspective, 20% deposits would require $304,322 in Sydney, $191,261 in Melbourne, and $208,130 in Brisbane. The time savings are enormous.
Alternative Deposit Strategies and Support
Beyond the Home Guarantee Scheme, several other options can boost your deposit or reduce requirements.
First Home Super Saver Scheme (FHSSS)
You can withdraw up to $50,000 of voluntary super contributions (maximum $15,000 per financial year) to fund your first home deposit. This includes both contributions and earnings, potentially adding significant funds to your deposit.
The tax benefits are attractive. Voluntary super contributions are taxed at 15% rather than your marginal tax rate, and withdrawals are taxed at your marginal rate minus 30%.
First Home Owner Grants
State and territory governments offer grants typically ranging from $10,000 to $45,000, depending on your location and whether you’re buying established or new properties. These grants vary significantly between states.
Guarantor Loans
Family members can use their property equity to guarantee part of your loan, potentially eliminating deposit requirements entirely. This option requires careful consideration of risks for all parties involved.
Genuine Savings Requirements
Most lenders require genuine savings equivalent to at least 5% of the property value, demonstrated through regular saving patterns over several months. Acceptable sources include salary savings, term deposits, and shares.
Gift money from family members is generally accepted but requires proper documentation and declarations that the funds don’t need to be repaid.
Hidden Costs Beyond Your Deposit
Your deposit is just one component of upfront homebuying costs. Additional expenses can add $15,000-50,000 to your requirements.
Stamp Duty
This state-based tax varies dramatically across Australia. First home buyers often receive concessions or exemptions, but costs can still be substantial. NSW charges up to 5.5% of the property value, while Queensland ranges from 1% to 6.75%.
Conveyancing and Legal Fees
Professional legal services for property transfer typically cost $1,200-2,500, depending on property complexity and location.
Building and Pest Inspections
These essential checks cost $300-600 each but can save thousands by identifying structural issues or pest problems before purchase.
Settlement and Administrative Costs
Bank fees, title searches, and settlement agent fees add another $1,000-3,000 to your upfront costs.
Tip: Budget an additional 2-4% of the property value for these combined costs when calculating your total funds needed.
Setting Realistic Savings Goals
Research shows it takes an average of 10.6 years to save a 20% deposit for the median Australian home. The 5% deposit option dramatically reduces this timeline.
Practical Savings Timelines
For a 5% deposit on a $800,000 property ($40,000 needed):
- Saving $500 weekly = 80 weeks (1.5 years)
- Saving $300 weekly = 133 weeks (2.5 years)
- Saving $200 weekly = 200 weeks (3.8 years)
Accelerating Your Savings
High-interest savings accounts currently offer rates up to 5.5% annually. On a growing balance, this compounds significantly over time.
Consider separate accounts for your deposit and additional costs. Automatic transfers ensure consistent saving without relying on willpower.
Budgeting Strategy: Track expenses for one month, identify areas to reduce spending, and redirect those amounts to your deposit fund immediately.
The key is consistency rather than massive amounts. Small, regular contributions build substantial deposits over time.
Income and Affordability Considerations
Lenders typically allow borrowing up to 6 times your annual income, but serviceability testing at higher interest rates affects your maximum loan amount.
Timing Your Purchase Strategy
Current market conditions significantly impact your deposit requirements and purchase strategy.
Property prices are expected to rise 3.3% in 2025 and 6% in 2026, meaning delays increase your deposit requirements. A $40,000 deposit today becomes $42,400 next year on the same property.
Interest Rate Impact
Recent RBA rate cuts have improved borrowing capacity and market confidence. The August 2025 rate cut added momentum to housing markets, with prices rising 0.9% quarterly.
Lower rates mean you can borrow more with the same income, but they also tend to drive property prices higher as competition increases.
Market Entry Timing
Spring traditionally brings increased market activity. Prices may rise faster during peak selling seasons, but more properties become available, giving you greater choice.
Strategy Tip: Get pre-approval before house hunting. This locks in your borrowing capacity and demonstrates serious intent to sellers.
The expanded government scheme creates urgency among first home buyers. Acting decisively when you find suitable properties becomes increasingly important as competition intensifies.
Your Path to Homeownership Starts Now
Your first home deposit in Australia doesn’t have to be the 20% barrier it once was. Government schemes now make 5% deposits accessible to all first home buyers from October 2025, eliminating previous income caps and place limitations.
Start by calculating your realistic deposit target using current property prices in your preferred area. Research available government support schemes, from the Home Guarantee Scheme to state-based first home owner grants.
Consider speaking with participating lenders to understand your borrowing capacity and explore your options. The sooner you begin, the sooner you can start building equity in your own home rather than paying someone else’s mortgage.
