A first-home buyer does not always need a 20% deposit. Some lenders may consider a purchase with a deposit as low as 5%, and eligible buyers may have access to government-supported pathways. However, the deposit percentage is only one part of the calculation.
The real question is: how much money do you need to contribute towards the property, cover the purchase costs and still retain an appropriate buffer after settlement? The answer can also change according to the state or territory where the property is purchased because transfer-duty rates, exemptions, concessions and grants are jurisdiction-specific.
A smaller deposit may help you enter the market sooner, but it can produce a larger loan, higher repayments, fewer lender options and possible lenders mortgage insurance. A larger deposit can reduce those pressures, although waiting longer to save also has consequences.
Depending on the lender, scheme, property and applicant, a first-home buyer may purchase with approximately 5%, 10% or 20% of the property price—but the complete cash requirement will usually be higher than the deposit alone.
Your deposit is not the same as your total cash requirement
The deposit is the part of the property price you contribute. Your total cash requirement includes that contribution plus the costs of completing the purchase. Eligible grants or concessions may reduce some costs, but they should only be included after their value and timing have been confirmed.
For example, a 5% deposit on a $700,000 property is $35,000. That does not mean $35,000 is necessarily enough to complete the purchase. An eligible first-home buyer purchasing a qualifying $700,000 home may pay no transfer duty in NSW or Queensland under the applicable first-home buyer concession.
However, the buyer may still require funds for conveyancing, inspections, loan costs, settlement adjustments, moving expenses and a post-settlement buffer. Buyers in other jurisdictions—or buyers who do not satisfy the relevant eligibility conditions—must separately calculate any transfer duty payable.
Use the stamp duty calculator and loan repayment calculator , then confirm which costs must be paid from savings and which may be included in the loan.
How 5%, 10% and 20% deposits compare
| Deposit option | Potential advantage | Points to consider |
|---|---|---|
| 5% deposit | May allow an eligible buyer to purchase sooner with less money saved. | Larger loan, higher repayments, possible LMI outside an eligible guarantee, fewer lender options and greater sensitivity to valuation. |
| 10% deposit | Reduces the loan compared with a 5% contribution and may broaden available options. | LMI may still apply, costs remain additional, and lender policy can affect the acceptable contribution. |
| 20% deposit | Usually avoids LMI and creates a lower loan-to-value ratio. | Requires substantially more savings and may delay the purchase; keeping a buffer is still important. |
These percentages are starting points rather than guarantees. The acceptable deposit can depend on the property, location, loan purpose, product, lender policy, source of funds and the buyer’s overall financial position.
Stamp duty and first-home buyer exemptions or concessions depend on the state or territory where the property is purchased. LMI is not a state government charge: its availability and cost generally depend on the lender, mortgage insurer, loan amount, loan-to-value ratio, property and borrower profile. Confirm both before relying on a deposit figure.
What does buying with a 5% deposit mean?
A 5% deposit generally means borrowing approximately 95% of the property value before allowing for any capitalised costs. Because the loan is large relative to the property value, the lender’s policy and valuation become particularly important.
Some lenders may accept a deposit of this size. Outside a government guarantee or another waiver, lenders mortgage insurance may apply and the premium can be significant. An eligible buyer using the Australian Government 5% Deposit Scheme may be able to purchase with a minimum 5% deposit without paying LMI, subject to the scheme and participating-lender requirements.
A 5% pathway may suit a buyer who
- Has sufficient income to support the larger loan
- Has limited savings but can cover the required costs
- Meets the lender’s credit and genuine-savings requirements
- Is purchasing an acceptable property
- Qualifies for a relevant government scheme or accepts the applicable LMI cost
- Will retain an appropriate buffer after settlement
Read the dedicated Australian Government 5% Deposit Scheme guide for the scheme-specific requirements.
What changes with a 10% deposit?
A 10% deposit generally reduces the required loan to approximately 90% of the property value before costs. Compared with a 5% deposit, this may reduce repayments, improve the loan-to-value ratio and broaden the range of lenders or products available.
It does not automatically remove LMI. Many standard lending arrangements can still require LMI where the loan exceeds 80% of the lender-accepted property value, although premiums, policies and waivers differ.
A 10% deposit can represent a practical middle ground for a buyer who wants to reduce the loan but does not want to wait until a full 20% contribution has been accumulated.
Is a 20% deposit always the best option?
A 20% deposit is a widely used savings target because it generally produces an 80% loan-to-value ratio and avoids lenders mortgage insurance. It can also reduce the loan amount, repayments and interest paid over time.
However, it is not automatically the best strategy for every first-home buyer. Saving the additional amount may take years, and property prices or personal circumstances may change during that time. A buyer who uses every dollar to reach 20% may also be left without an adequate emergency buffer.
Compare the benefit of the larger deposit with the need to cover purchase costs, retain emergency funds and manage repairs or ownership expenses after settlement.
How lenders mortgage insurance affects the deposit decision
Lenders mortgage insurance, commonly called LMI, protects the lender rather than the borrower if the loan cannot be repaid and the property sale does not cover the outstanding debt.
LMI commonly becomes relevant when the loan exceeds 80% of the property value, but the requirement and premium depend on the lender, insurer, loan amount, loan-to-value ratio, property, profession and application.
LMI is not calculated as a state or territory tax. However, the buyer’s complete cash requirement will still vary by location because transfer duty, exemptions, concessions and grants are state or territory based. Some professional policies or government guarantees may provide an alternative pathway.
The premium may need to be paid from available funds or may sometimes be added to the loan, subject to maximum loan-to-value limits. Adding it to the loan increases the amount borrowed and the interest payable.
LMI is a cost, but delaying a suitable purchase also has potential costs. The decision should compare loan repayments, the premium, savings timeframe, available property range and the buyer’s risk tolerance - not LMI in isolation.
What do lenders mean by genuine savings?
Some lenders require part of a low-deposit buyer’s contribution to be demonstrated as genuine savings. This generally means funds accumulated or held over a period of time, showing that the applicant has been able to save or maintain the money.
What qualifies, how much is required and the period that must be demonstrated vary by lender. Depending on policy, acceptable evidence may include regular savings, term deposits, shares held for an acceptable period or other funds with an established history.
Rent history may help under some policies, while borrowed funds, very recent gifts or unexplained deposits may not satisfy a genuine-savings requirement on their own.
How to make your savings easier to verify
- Keep deposit savings in clearly identifiable accounts.
- Avoid unnecessary movement of funds between multiple accounts.
- Retain statements showing the savings history.
- Keep evidence explaining large deposits or asset-sale proceeds.
- Separate funds reserved for purchase costs and emergencies.
- Confirm the proposed lender’s requirements before committing to a property.
Can family provide part or all of the deposit?
A genuine gift from family may be accepted by some lenders, but the requirements vary. The lender may request a signed gift declaration confirming that the funds are not repayable, evidence of the transfer and information showing where the money originated.
If the contribution must be repaid, it may be treated as a debt rather than a gift and could affect borrowing capacity. A family guarantee is different again: instead of providing cash, an eligible family member may offer limited security from their property, subject to lender policy and independent legal advice.
Everyone involved should understand whether the money is a gift, loan or ownership contribution. Obtain legal and tax advice where the arrangement creates repayment, ownership or estate-planning implications.
Government assistance can change the amount you need to save
Different programs address different parts of the purchase. A guarantee may reduce the deposit hurdle or LMI requirement. A grant may contribute funds for an eligible purchase. A stamp-duty concession may reduce a separate transaction cost. The First Home Super Saver Scheme may support eligible deposit saving through voluntary super contributions.
Australian Government 5% Deposit Scheme
May allow an eligible buyer to purchase with a minimum 5% deposit without paying LMI, subject to the scheme and lender requirements.
Help to Buy
A shared-equity pathway that may reduce the mortgage required for an eligible buyer.
First Home Super Saver Scheme
The ATO currently allows eligible voluntary contributions of up to $15,000 from any one financial year to count towards a maximum of $50,000 across all years, subject to the release rules.
Grants and stamp-duty concessions
Eligibility and value depend on the relevant state or territory, property, price, ownership history and contract date.
Use the first-home buyer scheme eligibility checker to identify pathways worth investigating before relying on a benefit.
Purchase costs first-home buyers commonly overlook
Deposit targets are often expressed as a percentage of the property price, while many other costs are not. These costs can substantially change the amount required at settlement.
| Cost | What affects it | When to confirm it |
|---|---|---|
| Stamp duty | State or territory where the property is purchased, purchase price, property type and exemption or concession eligibility | Before setting the final property range |
| Conveyancing and searches | Provider, property and transaction complexity | Before making an offer |
| Building, pest or strata reports | Property type and required investigations | Before becoming unconditionally committed where possible |
| LMI and loan costs | LMI depends on the loan amount, LVR, lender, insurer, property and borrower profile; it is separate from state-based stamp duty | During loan-option assessment |
| Settlement adjustments | Rates, strata and other property outgoings | Before settlement |
| Moving and immediate repairs | Property condition and personal requirements | Before using the remaining cash as deposit |
How much cash should remain after settlement?
There is no universal buffer that suits every household. The appropriate amount depends on income stability, dependants, insurance, expected property work, other debts and the household’s comfort with financial risk.
Consider how you would manage an urgent repair, a temporary reduction in income, an insurance excess or several months of higher-than-expected expenses. If using the full savings balance leaves no practical answer, the property budget or deposit strategy may need adjustment.
Sometimes retaining funds in an offset account or accessible reserve after settlement may provide more resilience than contributing every dollar to the deposit. The appropriate structure depends on the loan and personal circumstances.
Worked deposit examples on a $700,000 property
These examples show the property contribution only. Transfer duty must be assessed according to the buyer’s state or territory and eligibility. At a $700,000 purchase price, an eligible first-home buyer may receive a full transfer-duty exemption in NSW or a concession reducing duty to nil in Queensland.
Legal costs, inspections, LMI, lender costs, settlement adjustments and the desired cash buffer must still be calculated separately.
Example 1: 5% property contribution
Purchase price: $700,000
5% contribution: $35,000
Indicative base loan: $665,000 before any capitalised costs
Transfer duty: potentially nil for an eligible first-home buyer in NSW or Queensland, subject to the applicable concession conditions
This buyer still needs to confirm scheme eligibility or LMI, lender policy, genuine savings, conveyancing and inspection costs, settlement adjustments, the required cash buffer and whether the larger repayments are affordable.
Example 2: 10% property contribution
Purchase price: $700,000
10% contribution: $70,000
Indicative base loan: $630,000 before any capitalised costs
The smaller loan may reduce repayments and LMI compared with a 5% contribution, but LMI may still apply outside a suitable waiver or guarantee.
Example 3: 20% property contribution
Purchase price: $700,000
20% contribution: $140,000
Indicative base loan: $560,000
This contribution will generally avoid LMI, but the buyer still needs additional funds for applicable costs and an appropriate post-settlement buffer.
Should you buy sooner or keep saving?
The answer depends on more than reaching a particular deposit percentage. A buyer considering an earlier purchase should compare the larger loan and possible LMI against the time required to save more, the properties available within budget and the strength of their ongoing cash flow.
Questions worth considering include:
- Can the household comfortably support repayments at the proposed loan amount?
- How much will remain after settlement?
- Would waiting materially improve the loan options or merely increase the deposit?
- Is the intended property suitable for the next several years?
- What is the cost and benefit of any LMI or guarantee pathway?
- Would a lower purchase price create a safer outcome?
There is no universal point at which buying becomes better than saving. The decision should be based on the complete financial position and intended property—not pressure to enter the market.
First-home buyer deposit preparation checklist
- Choose a realistic target property range.
- Calculate 5%, 10% and 20% contributions for that range.
- Estimate stamp duty after any potential state or territory exemption or concession.
- Allow for conveyancing, inspections, finance and moving costs.
- Check whether LMI, a government guarantee or another waiver may apply.
- Confirm the lender’s genuine-savings requirement.
- Document gifted funds or family assistance.
- Check the timing and conditions of any grant or FHSS release.
- Estimate repayments for each deposit option.
- Set the minimum buffer you want to retain after settlement.
- Have the figures assessed before making an unconditional commitment.
Continue planning your first-home purchase
Written and reviewed by Ashish Shrestha
Co-Founder, Director & Senior Mortgage and Finance Broker | Triple O Finance
Before moving into finance, Ashish spent 12 years in policing. In 2018, he co-founded Oz Credit and Finance Pty Ltd, now trading as Triple O Finance. His approach is built around understanding each client’s circumstances, examining the details and comparing how lender policies may treat different income and employment situations.
Last reviewed: 28 September 2026
Important information: This article provides general information only and does not constitute personal financial, tax or legal advice. Stamp duty, first-home buyer exemptions, concessions and grants depend on the state or territory where the property is purchased and can change. LMI requirements and premiums depend on the lender, mortgage insurer, loan amount, LVR, property and borrower profile. Deposit and genuine-savings requirements and lending criteria also vary. Loan approval remains subject to lender assessment, verification and acceptable security. Obtain advice appropriate to your circumstances before applying for finance, making an offer or entering a property contract.
