Saving for your first home deposit in Australia can feel overwhelming when everyone seems to give different advice. The truth is, you don’t always need the full 20% that people talk about, but understanding your options—including loan-to-value ratios (LVR), lenders’ mortgage insurance (LMI), and government concessions—will help you make the right choice for your situation.
This guide breaks down exactly how much deposit for first-home Australian buyers actually need, with real calculations for $500,000, $750,000, and $1,000,000 properties, so you can see the numbers that matter most.
Quick answer — How much deposit do you really need right now?
The short answer: you can buy with as little as 5% deposit through some lenders, but 20% remains the sweet spot for avoiding extra costs. Most first-home buyers aim for somewhere between 10-20% depending on their circumstances and willingness to pay lenders’ mortgage insurance.
Here’s what you need to know upfront: a 5% deposit means higher monthly repayments and additional insurance costs, while a 20% deposit gives you the best loan terms and no LMI. The “right” amount depends on your income, savings rate, and local property prices.
Minimums vs recommended targets
Some lenders will accept deposits as low as 5% of the property value, particularly for first-home buyers with stable employment and good credit history. However, this triggers the lender’s mortgage insurance and typically means stricter serviceability requirements.
The recommended target remains 20% because it avoids LMI entirely, gives you access to better interest rates, and provides a buffer if property values dip. Most mortgage brokers suggest this as the ideal scenario.
Where this article will save you time
After reading this guide, you’ll be able to calculate your exact deposit needs for any property price, understand when LMI kicks in and what it costs, and identify which government concessions might reduce your upfront expenses.
You’ll also have worked examples for three common price points, a clear understanding of LVR thresholds, and practical next steps for getting pre-approval. No more guessing—just clear numbers and actionable advice.
What is LVR (loan-to-value ratio), and why does it decide how big your deposit must be
Your loan-to-value ratio is the percentage of the property’s value that you’re borrowing from the bank. It’s the key number that determines your deposit requirements, interest rates, and whether you’ll pay the lender’s mortgage insurance.
Understanding LVR is crucial for how much deposit first-home Australian buyers need because lenders use specific LVR thresholds to assess risk. A lower LVR (meaning a bigger deposit) signals to lenders that you’re a safer borrower, which translates to better loan terms and more lending options.
Most Australian lenders have clear cut-offs at 80%, 90%, and 95% LVR, with different requirements and costs at each level. The higher your LVR, the more restrictions you’ll face.
LVR formula and an easy example
The LVR formula is simple: LVR = (loan amount ÷ property price) × 100
For example, if you’re buying a $600,000 home with a $480,000 loan, your LVR is 80%. This means you’ve put down a 20% deposit ($120,000) and borrowed the remaining 80%.
Typical lender cut-offs and what they mean for you
- 80% LVR (20% deposit): No lender’s mortgage insurance, best interest rates, more lender options, and faster approval processes. This is considered the gold standard for home loans.
- 90% LVR (10% deposit): LMI required, slightly higher interest rates, and more stringent income verification. Still accessible for most borrowers with steady income.
- 95% LVR (5% deposit): Highest LMI costs, strictest serviceability requirements, and limited to select lenders. Usually reserved for first-home buyers with exceptional credit and stable employment.
What is LMI (lenders’ mortgage insurance), when you’ll pay i,t and how it affects your deposit decision
Lender’s mortgage insurance protects the bank if you default on your loan—not you. It’s typically required when your deposit is less than 20% of the property value, and the cost varies based on your LVR and loan amount.
LMI can be paid as a lump sum upfront or added to your loan amount (called capitalising). Most borrowers choose to capitalise it, which means you’ll pay interest on the LMI amount for the life of your loan.
The key trade-off is timing versus cost: paying LMI lets you buy sooner with a smaller deposit, but increases your total borrowing costs. For many first-home buyers, this trade-off is worth it to enter the market earlier.
How LMI changes monthly repayments and borrowing power
LMI costs typically range from $1,000 to $50,000+ depending on your loan size and LVR. If you capitalise a $15,000 LMI premium, it might add $80-100 to your monthly repayments over a 30-year loan.
Your borrowing power might also be slightly reduced because lenders factor the LMI cost into their serviceability calculations. Get quotes from multiple lenders to compare LMI costs and loan terms.
Alternatives to paying LMI
- Guarantor loans: A family member (usually parents) uses their property as additional security, letting you avoid LMI with a smaller deposit.
- Family pledge: Similar to guarantor loans but with different liability structures and exit strategies.
- Shared equity schemes: Government programs where you share ownership with a government entity, reducing your loan amount and LVR.
Each option has pros and cons around liability, exit costs, and eligibility requirements. Speak with a mortgage broker to explore which might suit your situation.
First-home concessions, grants and exemptions — could they reduce your deposit or other upfront costs?
Australian first-home buyers can access various government incentives that reduce upfront costs, though these vary significantly by state. The First Home Owner Grant (FHOG), stamp duty concessions, and shared equity schemes can all help with your property purchase.
These concessions don’t always directly reduce your deposit requirements, but they can free up cash that would otherwise go to stamp duty or other fees, effectively giving you more money for your deposit.
Each state has different eligibility criteria, property price caps, and grant amounts, so you’ll need to check your local authority’s current offerings.
Which costs can be cut (deposit vs stamp duty vs fees)
Most first-home buyer grants target stamp duty rather than deposits directly. For example, NSW offers stamp duty exemptions on properties under $650,000 for eligible first-home buyers.
Some states offer cash grants (like Queensland’s $15,000 FHOG for new homes), which can be used toward your deposit or other upfront costs. The key is understanding what each incentive covers.
- NSW: Check Revenue NSW for First Home Buyer Assistance Scheme details and current property price thresholds.
- Victoria: Visit the State Revenue Office Victoria for stamp duty concessions and first-home buyer duty exemption eligibility.
Other states have similar programs through their revenue offices. Also check if you’re eligible for the federal First Home Super Saver Scheme to boost your savings.
Clear worked calculations for $500,000 / $750,000 / $1,000,000 homes
Here are the exact deposit amounts and LVR calculations for three common property price points. Use these as templates to calculate requirements for properties in your area.
$500,000 example
5% deposit = $25,000 → Loan $475,000 → LVR 95% 10% deposit = $50,000 → Loan $450,000 → LVR 90% 20% deposit = $100,000 → Loan $400,000 → LVR 80%
At 95% LVR, you’ll pay significant LMI (potentially $15,000-20,000) and face stricter lending criteria. The 90% LVR option balances accessibility with lower LMI costs, while 80% LVR avoids LMI entirely and provides the best loan terms.
$750,000 example
5% deposit = $37,500 → Loan $712,500 → LVR 95% 10% deposit = $75,000 → Loan $675,000 → LVR 90% 20% deposit = $150,000 → Loan $600,000 → LVR 80%
At this price point, LMI costs become more significant—potentially $25,000+ for 95% LVR. Many buyers find the 10% deposit option attractive as a compromise between saving time and managing LMI costs.
$1,000,000 example
5% deposit = $50,000 → Loan $950,000 → LVR 95% 10% deposit = $100,000 → Loan $900,000 → LVR 90% 20% deposit = $200,000 → Loan $800,000 → LVR 80%
Higher property values mean larger loans and potentially higher LMI premiums. At this level, serviceability becomes crucial—lenders will scrutinise your income and expenses more carefully. The difference between a $950,000 and $800,000 loan is substantial in monthly repayments.
Practical ways to reach your deposit faster (and safe shortcuts)
Building your deposit faster requires a combination of budgeting discipline and smart savings strategies. High-interest savings accounts, offset accounts linked to family loans, and the First Home Super Saver Scheme can all accelerate your progress.
Consider selling assets you don’t need, picking up additional work, or temporarily moving back with family to reduce living costs. Government co-contribution schemes and employer salary sacrifice arrangements can also boost your savings.
Avoid risky shortcuts like borrowing on credit cards, taking personal loans for deposits, or using all your emergency funds. These strategies often backfire and can harm your loan application.
How to choose the right approach for your situation
Start with these questions: Can you comfortably save an extra $200-500 per month? Do you have family willing to act as guarantors? Is paying LMI worth entering the market 1-2 years earlier?
If you can save aggressively, aim for 20%. If property prices are rising faster than your savings rate, consider 10% with LMI. If you have guarantor options, explore those first.
Quick checklist: what lenders will want to see
Prepare three months of bank statements, recent payslips, tax returns, proof of any gifts or grants, identification documents, and evidence of your savings history. Lenders want to see regular savings patterns, not just a lump sum deposit.
Also, gather proof of any first-home buyer concessions you’re eligible for, as these can strengthen your application and reduce upfront costs.
Next steps — checklist before you apply and what to ask lenders
Before applying for pre-approval, set your target deposit amount based on your calculations above, research suburbs within your budget, and gather all required documentation. Get quotes from multiple lenders to compare interest rates, fees, and LMI costs.
Ask lenders about LMI capitalisation options, fixed versus variable rate benefits, offset account availability, and any first-home buyer-specific products. Don’t forget to factor in legal fees, building inspections, and moving costs when calculating your total upfront expenses.
Consider downloading a deposit calculator and creating a savings timeline with monthly targets. Getting 1-2 lender quotes this week will give you clarity on borrowing capacity and realistic property budgets.
Conclusion
Your deposit requirements depend on the property price, your chosen LVR, and your willingness to pay lenders’ mortgage insurance. While 20% remains ideal for avoiding LMI, deposits of 5-10% can work with the right lender and circumstances.
Use the worked examples above to calculate requirements for your target suburbs, then get pre-approval quotes to understand your borrowing capacity. The key is finding the balance between saving time and managing costs that works for your situation.
Ready to take action? Use the deposit checklist from this guide and get 1-2 lender quotes this week to turn your how much deposit for first home Australia research into a concrete savings plan.
FAQs
Do I need a 20% deposit to buy a house in Australia?
No, many lenders accept deposits as low as 5-10%, but you’ll pay lenders’ mortgage insurance and may face stricter lending criteria.
What is LMI, and when do I pay it?
Lender’s mortgage insurance is required when your deposit is less than 20%. It can be paid upfront or added to your loan amount.
Can my parents be guarantors for my mortgage in Australia?
Yes, most major lenders offer guarantor loans where family members use their property as additional security for your loan.
