How Much Deposit Do First Home Buyers Need for a Home Loan?

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

Working out your first home buyer deposit can be confusing because there is no single deposit amount that suits every borrower, lender or property. A 20% deposit is often used as a benchmark, but many first home buyers explore low deposit home loan options with 5% or 10% saved.

The deposit you may need depends on the property price, your loan-to-value ratio, lender criteria, whether lenders mortgage insurance applies, your ability to show genuine savings, and whether you are eligible for any government support. This article explains the main moving parts so you can understand what lenders may look at before you apply.

The short answer: how much deposit for a first home loan?

As a general guide, first home buyers commonly think about deposit size in three broad categories:

• 20% deposit: Often considered the traditional benchmark because it usually keeps the loan-to-value ratio at 80% or less. This may help some borrowers avoid lenders mortgage insurance, depending on lender policy and loan structure.
• 10% deposit: May be possible with some lenders, but it often means a higher loan-to-value ratio and may involve lenders mortgage insurance or stricter assessment.
• 5% deposit: May be available in limited circumstances through some lenders or government-supported pathways, subject to eligibility, property caps, lender approval and other conditions.

These percentages refer to the deposit compared with the purchase price. They do not always cover every upfront buying cost, such as conveyancing, inspections, moving costs, loan establishment costs or government charges. Depending on your state or territory, stamp duty concessions or exemptions may reduce some upfront costs for eligible first home buyers, but they should not be assumed until you check the rules that apply to your situation.

Deposit size is only part of the picture

When lenders assess a first home loan application, they generally look beyond the dollar amount in your savings account. They may consider:

• your income and employment history;
• your regular expenses and existing debts;
• your credit history;
• the property type and location;
• your loan amount compared with the property value;
• whether your savings meet the lender's genuine savings requirements;
• whether lenders mortgage insurance is required and approved;
• whether you are using a grant, gift, guarantor or government scheme.

If you are comparing first home loan options, it can help to think of your deposit as one part of your overall eligibility rather than the only factor that matters.

Understanding LVR for first home buyers

LVR stands for loan-to-value ratio. It compares the amount you borrow with the lender's valuation of the property. For example, if a property is valued at $600,000 and you borrow $540,000, the LVR is 90%.

For first home buyers, LVR matters because it can affect:

• whether a lender is willing to consider the application;
• whether lenders mortgage insurance may apply;
• how much deposit or equity is required;
• the loan products and interest rates available;
• the level of supporting evidence a lender may ask for.

It is important to understand that lenders generally use the lower of the purchase price or valuation when calculating LVR. If a lender's valuation is lower than the price you agreed to pay, you may need to contribute more funds or reconsider the purchase.

How LVR changes the deposit you may need

This table is a simplified guide only. Actual lender requirements can vary, and some lenders may also require funds for costs in addition to the deposit.

What is LMI and why does it matter?

LMI stands for lenders mortgage insurance. It protects the lender, not the borrower, if the borrower defaults and the property sale does not cover the outstanding loan. For many borrowers, LMI may apply when the deposit is less than 20% of the property value.

For a first home buyer, LMI can make a lower deposit home loan more accessible in some situations, because it may allow a lender to consider a higher LVR application. However, it can also add cost. Depending on the lender and loan structure, the LMI premium may be paid upfront or added to the loan amount. If it is added to the loan, it can increase repayments and the total interest paid over time.

LMI is not automatically approved just because a borrower has a deposit. The lender and mortgage insurer may assess the borrower, loan, property and overall risk. Some property types, locations or borrower profiles may be subject to tighter criteria.

Is a 20% deposit always better?

A larger deposit can have advantages, but it is not automatically the right path for every first home buyer. A 20% deposit may help reduce or avoid LMI, lower the amount borrowed and provide a stronger application position. It may also reduce repayment pressure because the loan size is smaller.

However, waiting to save 20% may take time. During that time, property prices, rents, interest rates and personal circumstances can change. Some buyers may decide that applying with a smaller deposit is worth considering if they can manage the repayments, costs and risks. Others may prefer to keep saving to reduce debt and avoid additional costs.

The right balance depends on your circumstances, risk tolerance and lender options. This is general information only and should not be treated as personal financial advice.

What are genuine savings?

Genuine savings are funds you have built up or held over time in a way that shows a lender you can save consistently and manage money responsibly. Lenders use genuine savings requirements to assess whether a borrower has demonstrated financial discipline, especially for higher LVR or low deposit applications.

What counts as genuine savings can vary by lender, but it may include money held in a savings account for a minimum period, regular savings patterns, term deposits or shares held for a period of time. Some lenders may also consider rental payment history or other evidence, depending on their policy.

Funds that may need extra explanation include:

• cash gifts from family;
• inheritance or one-off lump sums;
• tax refunds;
• proceeds from selling a car or other asset;
• borrowed funds;
• grants that are not yet received or not controlled by the borrower.

These funds may still help your overall contribution, but they may not always satisfy genuine savings requirements by themselves. Lender policies differ, so it is worth checking before relying on a particular source of funds.

How government schemes and grants can affect your deposit

Government support can make a meaningful difference for some first home buyers, but it is important to understand what each scheme does and does not do. In Australia, support may include grants, stamp duty concessions or guarantee-style schemes, depending on your location, property type and eligibility.

Some programs may help reduce upfront costs. Others may allow eligible buyers to purchase with a smaller deposit without paying LMI, subject to scheme places, property price caps, income thresholds, lender participation and other conditions. The rules can change, and state and territory settings are different.

A grant or concession does not automatically mean you can borrow. You still need to meet lender serviceability, credit, deposit, property and documentation requirements. If you want more detail on available incentives, see our guide to government grants for first home buyers.

Can a grant count towards your deposit?

Sometimes a grant or concession can reduce the amount of money you need to contribute, but the treatment depends on the scheme, timing and lender policy. For example, a grant may only be available for certain property types or may be paid at settlement rather than being available when you first make an offer.

Lenders may also distinguish between funds that form part of your contribution and funds that qualify as genuine savings. A grant may help with purchase costs, but it may not remove the need to show savings history if the lender requires it.

Other upfront costs first home buyers should budget for

Your deposit is not the only cash you may need. Depending on your purchase, location and loan structure, upfront costs may include:

• stamp duty or transfer duty, unless reduced by a concession or exemption;
• conveyancing or legal fees;
• building and pest inspections for houses;
• strata reports for units or townhouses;
• loan application, valuation or settlement-related fees;
• government registration charges;
• LMI, if it is paid upfront rather than capitalised into the loan;
• moving costs and basic setup costs;
• a buffer for unexpected expenses after settlement.

It is sensible to avoid using every dollar of savings on the purchase if that leaves no emergency buffer. Home ownership can involve repairs, insurance, council rates, strata levies and other costs that renters may not be used to paying directly.

Example: how deposit size changes the loan

Imagine a first home buyer is considering a property with a purchase price of $650,000. A 20% deposit would be $130,000 before allowing for other costs. A 10% deposit would be $65,000, and a 5% deposit would be $32,500.

The smaller deposit may look more achievable, but it generally means borrowing more. A larger loan can mean higher repayments and more interest over the life of the loan. If LMI is added to the loan, the total debt may increase further.

Before deciding whether to keep saving or apply sooner, it can be useful to estimate repayments and borrowing capacity using the site's home loan calculators. Calculators are only a guide, and actual loan approval, rates, repayments and fees depend on lender assessment and the loan product selected.

Low deposit home loans: benefits and trade-offs

A low deposit home loan may suit some first home buyers, but it is not risk-free. The potential benefit is that you may be able to enter the market sooner, especially if saving a larger deposit would take several more years. A lower deposit pathway may also be relevant where government support reduces upfront barriers.

The trade-offs can include:

• a larger loan amount;
• higher repayments;
• possible LMI costs;
• less equity from the start;
• greater exposure if property values fall;
• fewer lender and product options;
• stricter assessment of income, expenses and credit history.

If you are considering a low deposit loan, it is worth stress-testing repayments at higher interest rates and allowing for ongoing ownership costs. A loan that is approved on paper still needs to be manageable in real life.

Questions to ask before applying with a smaller deposit

Before applying for a first home loan with less than a 20% deposit, consider asking:

• Will LMI apply, and how will it be paid?
• Does the lender require genuine savings?
• Will a family gift or grant count towards my contribution?
• Do I have enough for purchase costs as well as the deposit?
• Am I eligible for any first home buyer grants, concessions or guarantees?
• What happens if the lender valuation is lower than the purchase price?
• Can I afford repayments if interest rates rise?
• Will I still have an emergency buffer after settlement?

Different lenders may treat deposits, LMI, grants and genuine savings differently. Speaking with a qualified mortgage broker can help you understand how lender policies may apply to your situation, without assuming that any specific outcome is available. You can learn more about broker support through the site's mortgage broker information.

How to strengthen your deposit position

If your deposit is not quite where it needs to be, there are practical steps that may help improve your position over time:

• Build a clear savings history: Regular deposits into a savings account may support a genuine savings assessment.
• Reduce short-term debts: Credit cards, personal loans and buy now pay later commitments may affect borrowing capacity.
• Keep records of lump sums: If you receive a gift, inheritance or asset sale proceeds, keep documentation showing where the money came from.
• Check grant and concession eligibility early: Eligibility can depend on location, property type, price and timing.
• Avoid overcommitting on the purchase price: A slightly lower purchase price may reduce deposit pressure and repayment strain.
• Maintain a buffer: Keeping funds aside can help with settlement surprises and early home ownership costs.

Final thoughts

Many first home buyers aim for a 20% deposit, but some may be able to apply with 10% or even 5% depending on lender criteria, LMI, genuine savings, government schemes and their overall financial position. The key is to understand the full cost of buying, not just the headline deposit percentage.

Before applying, compare the impact of different deposit sizes, check whether you may qualify for support, and consider how repayments would fit into your budget. Deposit requirements vary, so getting tailored guidance from a licensed professional or lender can help you understand your options before making a commitment.

Published: Monday, 7th Sep 2026
Author: Paige Estritori