Is Waiting for a Bigger Home Deposit Worth It?

The Question You Should Ask Instead

Let's consider a hypothetical first-home buyer who has saved $60,000.

They want to purchase a property worth around $750,000.

Their initial question is: "Should I wait until I have a 20% deposit?"

It's a sensible question. But when I'm discussing a purchase plan, I would start by asking:

That comparison needs to consider more than the deposit alone.

I would want to know how much you can save each month, what you're currently paying in rent, whether you qualify for government assistance and how comfortably you could afford the repayments.

I would also want to understand whether buying now would leave you with enough money for emergencies.

Sometimes the right decision is to wait. Sometimes waiting for a particular deposit percentage doesn't improve the position as much as expected.

Do You Really Need a 20% Deposit to Buy a Home?

No. A 20% deposit is not a universal requirement for home loan approval in Australia. Some lenders consider borrowers with smaller deposits, subject to their lending criteria.

Government-supported schemes may also help eligible buyers purchase with a smaller deposit.

The reason 20% receives so much attention is that it commonly helps borrowers avoid lenders mortgage insurance, or LMI.

However, the actual deposit requirement depends on the lender, loan product, property, borrower circumstances and any applicable guarantee or waiver.

What different deposit levels mean

Illustrative figures only. They exclude stamp duty, conveyancing, inspections, other purchase costs and any capitalised LMI. Not every deposit level will be available to every borrower.

Notice the difference between a 5% and 20% deposit.

On a $750,000 property, the additional deposit required is $112,500.

For many households, saving that amount could take several years. That doesn't mean a smaller deposit is always preferable.

It means the benefits of waiting should be measured against the time and costs involved.

A Realistic Example: Buy Now or Save for Another Two Years?

Let's compare two hypothetical scenarios.

A couple is considering a $750,000 home. They currently have $75,000 saved and can put away another $2,000 each month.

They are considering waiting two years before purchasing.

That is the first important observation.

Even after two years of disciplined saving, the couple may not reach the 20% target.

And that's assuming the property price doesn't change.

What Happens if Property Prices Rise While You're Saving?

This is where the deposit decision can become frustrating.

You may be saving more money every month, but the amount required to purchase the property you want may also change.

Let's continue with the $750,000 example.

Assume the property increases in value by 5% over one year.

Its hypothetical price would become $787,500.

A 20% deposit would increase from $150,000 to $157,500.

That's an additional $7,500 required for the deposit alone.

These are scenarios, not forecasts.

Property prices do not rise by a fixed amount each year, and some markets experience extended periods of weak growth or falling values.

But the calculation demonstrates an important point:

When property prices increase, your deposit target can increase at the same time.

That's why I prefer to compare a purchase plan against realistic price scenarios rather than assume the target will stay unchanged.

What if Property Prices Fall Instead?

Waiting can also work in your favour.

Suppose the same $750,000 property falls in value by 5%.

Its hypothetical price becomes $712,500.

A 20% deposit would then be $142,500 rather than $150,000.

A lower purchase price may reduce the amount you need to borrow.

It may also reduce certain purchase costs, depending on the applicable rules.

However, predicting property prices is difficult.

I wouldn't suggest building a purchase plan around an assumption that prices will definitely rise or definitely fall.

A more useful approach is to understand whether you can comfortably afford the property at the price you're considering.

You should also consider how you would cope if its value declined after purchase.

Should You Include Rent in the Decision?

Yes, but I would be careful about how the comparison is presented.

Suppose you're currently paying $650 per week in rent.

Over one year, that's approximately:

$650 × 52 = $33,800

Over two years, assuming rent doesn't change, that's $67,600.

It can be tempting to say that this money is simply being wasted.

I don't think that's an accurate comparison.

Rent provides housing without the costs and risks of ownership.

Homeowners pay mortgage interest, council rates, insurance, maintenance and potentially strata fees.

They also face purchase and selling costs, and the possibility of property values falling.

Compare the cost of housing, not just rent against repayments

When comparing buying with renting, I would separate mortgage repayments into interest and principal.

The interest is a financing cost.

Principal repayments reduce the outstanding loan balance and build equity through debt repayment.

But principal repayments still require cash every month.

A fair comparison should consider the full household cash flow and the long-term financial position under both options.

Is Paying Lenders Mortgage Insurance Better Than Waiting?

This is another question that deserves a proper calculation. Lenders mortgage insurance protects the lender against certain losses if a borrower defaults and the security is insufficient.

It does not protect the borrower from their mortgage obligations.

LMI is commonly relevant where the LVR exceeds 80%, although requirements and exemptions vary. The premium can depend on factors including the loan amount, LVR and lender or insurer arrangements. For some borrowers, paying LMI may allow them to purchase sooner. For others, saving a larger deposit may be more suitable.

The comparison I would make

I would want to know:

• How much LMI would actually cost.
• Whether it would be paid upfront or added to the loan.
• How much extra interest may arise if the premium is financed.
• How long it would take to save enough to avoid it.
• What the household's cash position would look like under each option.
• Whether any LMI waiver or government guarantee applies.

Could Government First-Home Buyer Schemes Change the Decision?

Before deciding to save for another two years, I would check whether you're eligible for government assistance.

Depending on your circumstances, available assistance may include a low-deposit home buyer guarantee, a shared equity arrangement, stamp duty relief or a first-home owner grant.

These programs have different eligibility rules, property limits and conditions.

Importantly, not every scheme is available for every type of purchase.

For example, the Australian Government 5% Deposit Scheme may allow eligible buyers to purchase with a smaller deposit without paying LMI, subject to the scheme's requirements.

Some buyers may also qualify for state or territory stamp duty concessions or grants.

If you're a first-home buyer, I recommend reading our guide to first-home buyer government grants and concessions before setting your deposit target.

You can also check the official Housing Australia website for government home buyer schemes.

Eligibility, limits and program rules should always be verified at the time of application.

What About Police Officers, Nurses, Doctors and Other Professionals?

This is particularly relevant to the professionals we work with at Triple O Finance.

Some lenders offer specific LMI policies for eligible professional borrowers.

Depending on the lender and profession, a borrower may be eligible for an LMI waiver at a higher LVR than would otherwise be available.

The rules can depend on:

• Your profession and qualifications.
• Employment type.
• Income requirements.
• Loan purpose.
• Property type and location.
• Maximum LVR.
• Other lender eligibility criteria.

I wouldn't assume that working in a particular profession automatically qualifies you for a waiver.

But it is worth checking before deciding that you need a full 20% deposit.

For example, a nurse with a 10% deposit may have a different set of lender options from another borrower with the same deposit and income.

The outcome depends on the actual lender policy.

A Bigger Deposit Doesn't Automatically Mean You Can Borrow More

One of the most important things I explain to first-home buyers is the difference between having enough deposit and having enough borrowing capacity.

They are two separate tests.

Your deposit affects how much you need to borrow and your LVR.

Borrowing capacity depends on the lender's assessment of your ability to repay the loan.

Lenders may consider:

• Employment income.
• Regular overtime and allowances.
• Living expenses.
• Existing loans and credit card limits.
• Dependants.
• Interest rate assessment buffers.
• Other financial commitments.

Suppose you've saved a 20% deposit, but your income only supports a smaller mortgage under the lender's assessment.

The larger deposit doesn't remove that serviceability constraint.

Equally, someone with strong income and a smaller deposit may be able to service a loan but still need to satisfy deposit and LVR requirements.

Why lender policy matters for shift workers

If you're a police officer, nurse, paramedic or another professional receiving variable income, lender policy can make a difference.

Regular overtime, shift penalties and allowances may not be treated identically by every lender.

When I review borrowing capacity, I look at how relevant lenders assess the borrower's actual income structure.

That may be more useful than simply waiting to accumulate a larger deposit.

Don't Use Every Dollar of Your Savings as the Deposit

This is one of the biggest practical concerns I have when reviewing a first-home purchase.

A borrower may have worked hard to save $80,000 and want to use every dollar towards the property.

But purchasing a home involves more than the deposit.

You may need funds for:

• Stamp duty, where applicable.
• Conveyancing and legal expenses.
• Building and pest inspections.
• Moving costs.
• Insurance.
• Immediate repairs or maintenance.
• Unexpected household expenses.

If buying leaves you with almost no accessible savings, even a manageable mortgage repayment can become stressful.

A temporary income reduction, major repair or unexpected expense may create financial pressure.

That's why I would consider your remaining cash buffer alongside the deposit amount.

When Waiting for a Bigger Deposit May Make Sense

There are good reasons to wait, and they shouldn't be overlooked.

Waiting may be worth considering if:

• Your current mortgage repayment would place too much pressure on your household budget.
• You have insufficient savings for purchase costs and emergencies.
• Your employment or income is uncertain.
• You have expensive personal debts that need attention.
• A larger deposit would materially reduce borrowing costs or improve available loan options.
• You're unsure where you want to live or expect to move soon.

In those circumstances, waiting may improve your financial resilience. The objective isn't to purchase at the earliest possible moment. It's to enter home ownership with a loan you can manage comfortably.

When Exploring a Purchase Sooner May Make Sense

There are also circumstances where it may be worthwhile to explore buying before reaching 20%.

For example:

• You have a stable income and manageable living expenses.
• Your borrowing capacity supports the proposed loan.
• You have enough funds for the deposit, purchase costs and an appropriate cash reserve.
• You qualify for a government guarantee or professional LMI policy.
• You intend to remain in the property for a reasonable period.
• You understand the risks and costs of buying with a smaller deposit.

That doesn't mean you should buy immediately. It means the option may deserve a proper assessment rather than being dismissed simply because your deposit is below 20%.

Seven Questions to Ask Before Deciding to Wait

1. 1. How much can I realistically save each month? Calculate the time required to reach your target.
2. 2. What would my deposit percentage be today? Include available savings and purchase costs.
3. 3. Do I qualify for any government assistance? Check deposit schemes, grants and stamp duty concessions.
4. 4. Would LMI apply, and how much would it cost? Obtain an actual estimate rather than assuming the amount.
5. 5. Can I comfortably afford the repayments? Allow for potential interest rate increases and unexpected expenses.
6. 6. How would waiting change my position? Consider additional savings, rent, possible property price changes and future borrowing capacity.
7. 7. Would I have enough money left after settlement? Don't overlook the importance of a cash buffer.

How Triple O Finance Can Help

When a first-home buyer asks whether they should wait for a larger deposit, I don't think the answer should be based on a percentage alone.

I would rather compare what is possible today with what may change if they wait.

At Triple O Finance, we can help you understand:

• Your current borrowing capacity.
• Potential deposit requirements.
• Relevant lender LVR policies.
• Possible LMI costs and exemptions.
• Eligibility considerations for government schemes.
• Repayment comparisons.
• How variable income may be assessed.
• The funds needed for purchase costs and settlement.

We can explain the lending options available under your circumstances, so you can make a more informed decision about your timing.

Written by Nishant Ramavat

Founder, Director & Senior Finance Specialist
Triple O Finance

Nishant is the Founder and Director of Triple O Finance and a former NSW Police Officer. He helps Australian borrowers navigate home loan options, lender policies and borrowing requirements, with particular experience assisting emergency services professionals and first-home buyers.