Do You Really Need a 20% Deposit?
For decades, Australians have been told they need a 20% deposit before buying a home.
While having a larger deposit certainly has advantages, it isn’t the only path to home ownership.
Today, many buyers enter the market with significantly smaller deposits by using government support schemes, specialist lender policies and carefully structured home loans.
Understanding your options can help you make informed decisions and potentially buy sooner than you expected.
Why the 20% Deposit Became the Benchmark
The 20% figure has traditionally been associated with avoiding Lenders Mortgage Insurance (LMI).
When borrowers contribute at least 20% of the property’s value, lenders generally consider the loan lower risk.
Borrowers with smaller deposits may still be approved but may need to pay LMI unless they qualify for an exemption or specialist lending policy.
This is why many people believe they must save a 20% deposit before purchasing.
The reality is more flexible.
What Most Deposit Advice Misses
A comparison of Google, Bing and major Australian lender websites reveals a common message: most content explains what deposit percentages are required but rarely explores the range of options available.
Government websites focus on eligibility for assistance schemes.
Banks often explain LMI but generally promote their own lending products.
Many comparison sites discuss minimum deposits without considering profession-specific lending policies or individual borrowing strategies.
The missing piece is that the required deposit depends on several factors, including:
- Your financial position
- Your profession
- The lender you choose
- Government assistance programs
- Whether you’re purchasing your first home or refinancing
Working with a mortgage broker allows borrowers to compare these options rather than relying on one lender’s policy.
Deposit Options Explained
20% Deposit
A 20% deposit remains the traditional benchmark.
Benefits include:
- Avoiding Lenders Mortgage Insurance in most cases
- Lower loan-to-value ratio (LVR)
- Potentially lower repayments
- Greater equity from day one
However, saving 20% can take many years, particularly in Australia’s larger cities.
10% Deposit
Many lenders offer home loans with a 10% deposit.
This may involve:
- Paying Lenders Mortgage Insurance
- Meeting lender eligibility requirements
- Demonstrating genuine savings
For many buyers, entering the market earlier may outweigh the cost of waiting several more years to save a larger deposit.
5% Deposit
Some borrowers may be able to purchase with as little as a 5% deposit.
This may be possible through:
- Government support programs
- Selected lender policies
- First home buyer initiatives
Eligibility varies depending on your circumstances.
What Is Lenders Mortgage Insurance?
Lenders Mortgage Insurance protects the lender if a borrower defaults on their loan.
It does not protect the borrower.
The cost varies depending on:
- Property value
- Loan amount
- Deposit size
- Lender
For higher-value properties, LMI can cost tens of thousands of dollars.
Can You Avoid LMI?
Yes. There are several ways borrowers may avoid paying LMI.
Saving a 20% Deposit
The traditional approach.
Government Support Schemes
Eligible first home buyers may access schemes that reduce or eliminate the need for LMI. Eligibility requirements apply.
Doctor Home Loans
Many eligible medical professionals can borrow up to 95% of a property’s value without paying Lenders Mortgage Insurance.
Depending on the purchase price, this could represent savings exceeding $80,000.
How Much Deposit Do First Home Buyers Need?
Every buyer is different. Some first home buyers purchase with:
- 5%
- 10%
- 15%
- 20%
The right approach depends on:
- Income
- Borrowing capacity
- Savings
- Government scheme eligibility
- Future financial goals
The focus shouldn’t simply be on reaching a specific percentage. It should be on entering the market sustainably.
What About Doctors?
Doctors often have access to lending policies unavailable to most borrowers.
Depending on the lender, eligible medical professionals may receive:
- The ability to borrow up to 95%
- No Lenders Mortgage Insurance
- Recognition of overtime and locum income
- Higher borrowing capacity
These policies may allow doctors to purchase property sooner while preserving savings for renovations, investments or emergency funds.
Should You Wait Until You Save More?
This is one of the biggest questions buyers face.
Waiting longer may mean:
- A larger deposit
- Lower repayments
- Less borrowing
However, waiting also carries potential risks. Property prices may continue to rise. Interest rates may change. Your financial circumstances may evolve.
The right decision depends on your personal goals rather than a fixed deposit percentage.
Peter’s Perspective
“One of the biggest myths I hear is that everyone needs a 20% deposit before they can buy a home. In reality, there are many pathways into the market. The right strategy depends on your circumstances, your profession and your long-term goals. I’ve helped first home buyers purchase with smaller deposits through government schemes, and I’ve helped doctors avoid LMI altogether through specialist lending policies. The key is understanding your options before assuming you need to wait.”
Why a Mortgage Broker Can Help
A mortgage broker in Australia compares multiple lenders to identify options that suit your circumstances.
Rather than focusing solely on deposit size, a broker considers:
- Borrowing capacity
- Lender policy
- Government schemes
- Loan structure
- Future financial goals
This helps borrowers make informed decisions and avoid unnecessary costs.
Frequently Asked Questions
Do I really need a 20% deposit?
No. Many borrowers purchase with less than 20%, although additional costs or eligibility requirements may apply.
Can I buy with a 5% deposit?
Yes. Some lenders and government schemes allow eligible borrowers to purchase with a 5% deposit.
What is genuine savings?
Many lenders require evidence that you’ve consistently saved money over time. Requirements vary between lenders.
Can doctors avoid paying LMI?
Many eligible medical professionals may qualify for specialist lending policies that waive LMI, depending on the lender and loan.
Is it better to wait and save a bigger deposit?
It depends on your financial goals, market conditions and personal circumstances.
How can a mortgage broker help?
A broker compares lenders, explains available schemes and recommends a lending strategy suited to your goals.
Final Thoughts
Buying a home isn’t about reaching one magic deposit figure. It’s about understanding the options available and choosing a strategy that supports your financial future.
Whether you’re purchasing your first home, upgrading, investing or exploring Doctor Home Loans, there may be more pathways available than you realise.
Speaking with a mortgage broker early can help you understand what’s possible and avoid delaying your plans unnecessarily.
Speak With Money Tree Mortgage Brokers
At Money Tree Mortgage Brokers, we help Australians navigate the home buying process with confidence.
We’ll explain your borrowing options, compare lenders, assess your eligibility for government schemes and determine whether specialist lending policies, including Doctor Home Loans, may apply to your situation.
Book a free, no-obligation consultation today.
