In short: Most lenders want a 20% deposit to avoid Lenders Mortgage Insurance (LMI), but first home buyers can often buy with 5% — or even less under the First Home Guarantee, which removes the LMI cost. A smaller deposit means a bigger loan and usually LMI, so it’s a trade-off between getting in sooner and paying more.
“How much deposit do I need?” is usually the first question a first home buyer asks. Here’s the honest answer.
The 20% benchmark — and why it matters
Twenty percent of the purchase price is the figure lenders treat as the comfortable deposit. Hit it and you avoid Lenders Mortgage Insurance, the one-off cost lenders charge when your deposit is smaller. On a higher-priced property that 20% is a lot of cash, which is exactly why the schemes below exist.
Can you buy with a 5% deposit?
Yes — many lenders accept a 5% deposit, you’ll just usually pay LMI. First home buyers can often avoid that through the First Home Guarantee, a federal scheme that lets eligible buyers purchase with a smaller deposit and no LMI. We cover it in our guide to first home buyer grants and schemes, and you can check current places and rules at Housing Australia.
What is LMI, and what does it cost?
Lenders Mortgage Insurance protects the lender (not you) if you can’t repay. It’s a one-off cost that rises as your deposit shrinks, and it can run into thousands. The independent Moneysmart LMI explainer shows how it works. Avoiding it is the main reason buyers push for 20% or use the First Home Guarantee.
Lenders also want to see ‘genuine savings’
Many lenders want part of your deposit to be ‘genuine savings’ — money you’ve saved over time, not just a lump-sum gift — as evidence you can manage repayments. How much, and whether gifts count, varies by lender, which is one place a broker saves you guesswork.
One thing we see again and again with Melbourne first home buyers is that they often come to us thinking they are still years away from buying. In reality, many already have a decent deposit saved — often around $70,000–$90,000, or roughly 10–15% of the property price — but they are unsure how the banks will view their income, savings, expenses, LMI, and first home buyer benefits. That gap between “I think I’m not ready” and “here are your real options” is where good broker advice makes a big difference.
How big your deposit is also shapes how much you can borrow, and it’s only one part of the total upfront cost of buying. For the full journey, start with our first home buyer guide.
Talk to a broker before you commit
Every first home is different. A licensed mortgage broker can compare 50+ lenders, check which grants and schemes you qualify for, and tell you what you can realistically borrow — free, and with no obligation.
Frequently asked questions
How much deposit do I need to buy a first home in Australia?
Commonly 5–20% of the price. Twenty percent avoids LMI; 5% is widely accepted with LMI; the First Home Guarantee can allow a smaller deposit with no LMI for eligible buyers.
Can I buy a house with a 5% deposit?
Often yes, usually with LMI — unless you qualify for a scheme like the First Home Guarantee that waives it. A broker can confirm your options.
What is LMI?
Lenders Mortgage Insurance — a one-off cost charged when your deposit is under 20%. It protects the lender, not you, and gets larger as the deposit gets smaller.
General information only — this article is not financial or credit advice and doesn’t account for your personal situation. Best Brokers Melbourne is a referral service, not a licensed credit provider; we connect you with a licensed mortgage broker. Grant amounts, thresholds and scheme rules change and vary by state — always confirm current details with the official source linked, or a licensed broker, before acting.