How much deposit do you actually need to buy your first home?

The textbook answer is 20% of the purchase price. The real answer is that you can often buy with much less, sometimes as little as 5%, or even 2% through certain government schemes. The size of your deposit changes what your loan costs and whether you pay lenders mortgage insurance, so it's worth understanding the trade-offs before you assume you're years away.

Here's the fast version, then the detail.

The quick answer

A 20% deposit is the level where you avoid lenders mortgage insurance and get the widest choice of loans. But plenty of first home buyers get in with 5% to 10%, and government schemes can lower the bar further. Less deposit means you can buy sooner, but it usually means a bigger loan and often an extra insurance cost. Both paths can be the right one, depending on your situation.

Why is 20% the number everyone mentions?

Because 20% is the deposit level at which lenders stop charging lenders mortgage insurance. On a $600,000 purchase, 20% is $120,000. That's a big number, and it's the wall most first home buyers run into.

Hitting 20% gets you the cleanest deal: no insurance cost and access to the broadest range of lenders and rates. But it is absolutely not the minimum you need to buy.

What is lenders mortgage insurance (LMI)?

Lenders mortgage insurance is a one-off insurance that protects the lender, not you, if you can't repay the loan. Lenders generally require it when your deposit is under 20%, because they're taking on more risk.

The cost varies with your loan size and deposit, and it can run into the thousands or tens of thousands. It can sometimes be added onto the loan rather than paid upfront, but either way it's a real cost of buying with a smaller deposit. The good news is there are legitimate ways to avoid it even without a full 20%.

Can I buy with less than 20%?

Yes, and lots of first home buyers do. There are a few routes:

• A smaller deposit plus LMI. Many lenders will lend with a 10% or even 5% deposit if you pay lenders mortgage insurance. You buy sooner and pay for the privilege.
• The First Home Guarantee. Under this government scheme, eligible first home buyers can purchase with as little as a 5% deposit and the government guarantees the rest, so you skip lenders mortgage insurance entirely. As of late 2025 the income caps and place limits were removed and the price caps lifted, so it's more accessible than it used to be.
• Shared equity (Help to Buy). This scheme lets eligible buyers get in with a 2% deposit while the government takes an ownership share, shrinking the loan you need.
• A guarantor. A family member can use equity in their own property as security so you can borrow with a smaller deposit and avoid LMI. It's a serious commitment for the guarantor and worth careful thought.

So what deposit should I aim for?

It depends on the trade-off you want. A bigger deposit means a smaller loan, lower repayments, no insurance cost, and more lender choice. A smaller deposit means you're in the market sooner, which in a rising market can matter, but with a larger loan and possibly an insurance cost.

There's no single right answer, and that's not us dodging the question. The best deposit for you depends on your income, how fast prices are moving, whether you qualify for a scheme, and how comfortable you are with a larger loan.

Don't forget the costs beyond the deposit

The deposit isn't the only cash you need on day one. Depending on the property and your eligibility, you may also need to cover stamp duty (though first home buyers in Victoria often pay little or none up to certain thresholds), conveyancing and legal fees, building and pest inspections, loan fees, and moving costs. We factor all of these in so nothing ambushes you at settlement.

Let's work out your real number

The deposit question has more answers than most people realise, and the right one for you might be a lot smaller than 20%. We'll look at your savings, check which schemes you qualify for, and map out the fastest sensible path into your first home.

Don't get FOMO. Get FOMO. Know the numbers, or find someone who does.

This is general information only and doesn't take your personal circumstances into account. Scheme rules, thresholds and LMI costs change and depend on your situation and lender, so let's have a proper chat about yours.

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