Saving a deposit is the single biggest barrier most Australians face when buying a first home. The good news is that the rules of the game have changed: you no longer need 20% to get a competitive home loan, and government schemes have made low-deposit lending mainstream. The bad news is that the wrong deposit strategy can cost you tens of thousands of dollars in unnecessary insurance, lost time, and missed market growth. This guide breaks down exactly how much deposit you need in 2026, what each deposit size means for your repayments and total cost, and how to choose the right path for your situation.
What lenders actually mean by 'deposit'
When a lender talks about your deposit, they generally mean the cash portion of the purchase price you are contributing from your own funds. It is the difference between the property price and the loan amount. If you buy a $700,000 home and borrow $630,000, your deposit is $70,000 (10%).
What lenders count as a deposit has tightened over the years. Most expect to see genuine savings, which is funds you have held or saved over at least three months. Bank statements showing a steady savings pattern carry more weight than a sudden lump sum. Some lenders will also accept the following as part or all of your deposit:
• Equity in another property you already own
• A First Home Owner Grant
• A gift from a parent or close family member (with a statutory declaration)
• Sale proceeds from a vehicle, shares or another asset
• A guarantor's equity in their own home
What is rarely accepted as a deposit is borrowed money, such as a personal loan or credit card cash advance. Lenders look at this carefully because it signals you may be financially overextended before you even settle.
The 20% deposit benchmark and why it still matters
A 20% deposit has been the traditional benchmark in Australia for one simple reason: it is the threshold at which lenders stop charging Lenders Mortgage Insurance (LMI). On a $700,000 purchase, a 20% deposit is $140,000 plus stamp duty and other purchase costs.
With 20% down, you typically access the lender's sharpest interest rates, avoid LMI entirely, and have more lenders willing to compete for your business. You also start with meaningful equity, which gives you a buffer if property prices dip and makes future refinancing easier.
However, in capital city markets where median house prices comfortably exceed $1 million, saving 20% can take a decade. During that time, property prices may grow faster than your savings, and rent paid is money you will not see again. For most first home buyers in Sydney, Melbourne, Brisbane and Canberra, a 20% deposit is no longer a realistic target before they are priced out of the suburbs they actually want to live in.
This is why the conversation has shifted from how to save 20% to how to safely buy with less.
Buying with a 5% deposit: the low-deposit path
A 5% deposit has become the de facto entry point for first home buyers. On a $650,000 home, that is $32,500 of cash, plus around $2,000 to $5,000 in additional purchase costs (legals, building and pest, application fees), and stamp duty if your state's first home buyer concession does not fully cover it.
The pros of going at 5% are obvious: you enter the market sooner, you stop paying rent earlier, and you ride any capital growth on the full property value rather than just your savings. If house prices in your area rise 5% in a year, that is $32,500 of paper gain on a $650,000 property, which on a 5% deposit is effectively a 100% return on the cash you put in.
The trade-offs are real, though. Without a government guarantee, you will pay LMI (often $15,000 to $30,000 capitalised onto your loan). Your monthly repayments are higher because you are borrowing more. You start with very little equity, so a property downturn could put you in negative equity briefly. And you have less of a cushion if interest rates rise or your circumstances change.
The First Home Guarantee removes the LMI cost for eligible buyers, which is why it has become the default starting point for most first home buyer conversations in 2026.
What about 10%, 15% or 'somewhere in between'?
Most buyers do not hit 5% or 20% exactly. They land somewhere in between, and the in-between numbers have meaningful financial implications.
At 10% deposit you still pay LMI, but the premium is significantly lower than at 5%. As a rough guide, LMI on a $600,000 loan at 90% LVR might be $12,000 to $16,000, compared with $25,000 to $30,000 at 95% LVR. Some lenders also offer slightly sharper interest rates above 10% deposit, recognising the lower risk.
At 15% deposit, LMI drops further, and a wider range of lenders compete for your business. Some professional waivers (for doctors, accountants, lawyers and a handful of other occupations) kick in at 90% LVR with no LMI, effectively letting eligible buyers reach 'no LMI' territory with just 10% down.
The practical question is rarely '5 or 20'. It is 'should I wait six more months to add another 2% to my deposit, or buy now?' The answer depends on the rate of property growth in your target market, your rent versus repayment gap, and whether your borrowing capacity is currently strong. Running the numbers with a broker before you decide can save you significant money either way.
Don't forget the upfront costs beyond the deposit
A common mistake is assuming the deposit is the only cash you need at settlement. It is not. Plan for the following on top of your deposit:
• Stamp duty (sometimes called transfer duty), which varies dramatically by state and property price. In NSW, stamp duty on a $700,000 purchase is around $26,800 for a non-first-home buyer. First home buyer concessions can reduce or eliminate this.
• Government registration and transfer fees ($200 to $500)
• Legal or conveyancing fees ($1,500 to $2,500)
• Building and pest inspections ($500 to $900)
• Loan application or settlement fees ($0 to $800 depending on the lender)
• LMI if applicable, although this is usually capitalised onto the loan rather than paid upfront
• Council and water rate adjustments at settlement
• Lenders typically also want to see a small genuine savings buffer after settlement, often equivalent to one month's repayments
As a rough rule, budget 4% to 6% of the purchase price for these costs if you are not eligible for stamp duty concessions, and 1% to 2% if you are.
How parents, guarantors and family equity change the maths
Family help is legitimately one of the most powerful deposit accelerators available, and it is structured very differently to a simple cash gift.
A family guarantor loan (sometimes called a security guarantee) lets a parent use the equity in their own home as additional security against your loan. This typically allows you to borrow 100% of the purchase price plus costs, with no LMI, and avoid needing a cash deposit at all. The parent does not give you any money. They simply put a portion of their equity behind your loan, and that portion is released once you have built up enough equity in your own property (often 20% LVR).
A cash gift from family is also acceptable to most lenders, although they will usually ask for a statutory declaration confirming the funds are a gift rather than a loan. Some lenders will require the gift to have been in your account for at least three months to count fully towards genuine savings.
Guarantor structures are not without risk, and the parent's borrowing capacity and retirement plans need to be considered carefully. A broker can model the structure and the exit point before anyone signs.
Worked examples: 5%, 10% and 20% on a $700,000 home
Here is how the same $700,000 purchase looks at three different deposit levels (using indicative LMI estimates; your actual figures will vary by lender and insurer):
5% deposit ($35,000)
• Loan amount: $665,000
• LMI (capitalised): around $26,000
• Total loan including LMI: around $691,000
• You enter the market with very little equity but quickly
10% deposit ($70,000)
• Loan amount: $630,000
• LMI (capitalised): around $11,000
• Total loan: around $641,000
• Lower repayments and a wider lender choice
20% deposit ($140,000)
• Loan amount: $560,000
• No LMI
• Sharpest interest rates available
• Significantly lower total interest paid over the life of the loan
If you qualify for the First Home Guarantee, the 5% scenario above becomes effectively LMI-free, which closes most of the cost gap between 5% and 20% in the early years. This is why the scheme has been so transformative for first home buyer affordability.
Get personalised help
There is no universally 'right' deposit size. The right one is the one that gets you into the market at the right time without overstretching your finances or paying for protection you do not need.
This guide is general information only and does not constitute personal credit advice. For advice tailored to your situation, including a deposit strategy that factors in your savings rate, target suburb and eligibility for government schemes, speak with a licensed mortgage broker.