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

The idea that you need a 20% deposit to buy a home is one of the most persistent myths in Australian property. It’s true that a 20% deposit avoids certain costs, but it isn’t a requirement, and plenty of buyers purchase with considerably less.

Here’s what deposit size actually affects, what your realistic options are, and how government support like the Australian Government 5% Deposit Scheme changes the picture for eligible buyers. If you’re ready to talk it through, our first home buyer loan service is a good place to start.

The Short Answer

Most lenders will accept a deposit as low as 5% of the property price, provided you meet their lending criteria. What changes with a smaller deposit isn’t whether you can borrow, it’s what it costs you to do so, mainly through Lenders Mortgage Insurance (LMI).

Why 20% Became the “Standard” Number

A 20% deposit means you’re borrowing 80% of the property’s value, a loan-to-value ratio (LVR) of 80%. Below that threshold, most lenders require LMI, which protects the lender (not you) if you default on the loan. It’s typically a one-off cost, either paid upfront or added to your loan.

The smaller your deposit, the higher your LVR, and generally the higher the LMI cost. This is where the “20% deposit” idea comes from: not because lenders require it, but because it’s the point where LMI usually disappears.

What a Smaller Deposit Actually Means for You

Buying with less than 20% deposit is entirely possible. The trade-offs to understand are:

• LMI cost: This can run into the tens of thousands of dollars depending on your loan size and LVR, and it’s a genuine cost to factor into your budget, not just a formality.
• Loan size: A smaller deposit means a larger loan, which means higher repayments (and more interest paid over the life of the loan) for the same purchase price.
• Lender assessment: Some lenders apply stricter serviceability checks at higher LVRs, since the loan represents more risk to them.

None of this rules out buying with a smaller deposit. It just means the full cost picture needs to be understood upfront, not discovered at settlement.

The Australian Government 5% Deposit Scheme

For eligible first home buyers, the Australian Government 5% Deposit Scheme (administered by Housing Australia, and previously known as the Home Guarantee Scheme) is one of the most significant tools available to reduce the deposit barrier.

Under the scheme:

• Eligible buyers can purchase with as little as a 5% deposit.
• Housing Australia guarantees a portion of the loan to the lender, which means eligible buyers can avoid paying LMI entirely, even though their deposit is below 20%.
• Following changes effective from October 2025, the scheme no longer applies income caps or a limited number of annual places for eligible first home buyers, though property price caps still apply and vary by state and region.

A related pathway, the Family Home Guarantee, allows eligible single parents or legal guardians with a dependent child to purchase with as little as a 2% deposit, also without LMI.

A separate scheme, Help to Buy, is a shared equity arrangement where the government can co-purchase part of the property. This comes with its own income caps and annual place limits, and works quite differently from the deposit guarantee schemes.

Because eligibility criteria, price caps and scheme details are reviewed periodically, it’s worth confirming your specific eligibility and the current price cap for your area, at firsthomebuyers.gov.au or with a broker, rather than relying on older information, including anything in this article by the time you read it.

So, How Much Deposit Do You Actually Need?

It depends on your situation:

• If you’re not using a government scheme: You can generally buy with as little as a 5–10% deposit, but you’ll likely pay LMI, and your loan (and repayments) will be larger relative to the purchase price.
• If you’re an eligible first home buyer using the 5% Deposit Scheme: You may be able to purchase with a 5% deposit and avoid LMI altogether, subject to price caps and lender participation.
• If you’re a single parent or guardian: The Family Home Guarantee may allow a deposit as low as 2%, again without LMI, subject to eligibility.
• If you want to avoid LMI without a government scheme: You’d generally need a 20% deposit, or use a guarantor arrangement if a family member is able and willing to support your application.

What Else Do You Need Beyond the Deposit?

Deposit size is only one part of your upfront costs. Buyers also need to budget for:

• Stamp duty (varies significantly by state and property value; some first home buyers qualify for concessions or exemptions)
• Conveyancing and legal fees
• Building and pest inspections
• Loan application or valuation fees, where applicable
• Moving costs

A common mistake is saving exactly the deposit amount and being caught short on these additional costs. A broker or a good calculator can help you budget for the full cost of buying, not just your deposit, before you start house hunting seriously.

How a Mortgage Broker Can Help

Working out how much deposit you genuinely need, and which scheme, if any, you’re eligible for, depends on your income, your property choice, your state, and your personal circumstances. A broker can:

• Check your eligibility for the 5% Deposit Scheme, Family Home Guarantee or other state-based grants
• Compare lenders who participate in these schemes, since not all lenders do
• Model the real cost difference between a 5%, 10% and 20% deposit scenario for your situation
• Help you understand pre-approval, so you know what you can realistically offer on a property

Ready to take the next step? You can apply for pre-approval online.

Frequently Asked Questions

Not Sure How Much Deposit You Actually Need?

Book a free conversation with Money Tree Mortgage Brokers and we’ll check your eligibility for government deposit schemes and map out your options.

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