How Much Deposit Do You Need to Buy a House in Australia in 2026?
The number you see in first home buyer guides — 20% — is not the minimum you need to buy. In 2026, eligible first home buyers can purchase with as little as 2% or 5% deposit without paying Lenders Mortgage Insurance, thanks to federal government guarantees. But the total cash required to reach settlement is significantly more than just the deposit figure. Here is the true picture: what different deposit levels cost, what LMI adds to your loan, and the full cash required at settlement across different price points.
The 20% Rule and Why It Exists
The 20% deposit benchmark comes from lender risk management. When you borrow more than 80% of a property's value — that is, when your loan-to-value ratio (LVR) exceeds 80% — lenders face a materially higher risk of losing money if you default and they need to sell the property. To protect themselves, they require you to pay Lenders Mortgage Insurance (LMI).
LMI is an insurance policy that pays out to the lender if you default and the sale proceeds do not cover the outstanding loan balance. Despite the name, LMI protects the lender, not you. You pay the premium, often by having it capitalised (added) to your loan, and you receive no direct benefit from it. The premium is calculated as a percentage of the loan amount and varies by insurer, lender, and LVR.
At 80% LVR (20% deposit), LMI is zero. At 90% LVR (10% deposit), LMI on a $700,000 purchase is approximately $13,000–$18,000. At 95% LVR (5% deposit), LMI jumps to approximately $22,000–$28,000 on the same property. These amounts are added to your loan and attract interest over the life of the mortgage — so the actual cost over 30 years is considerably higher than the headline premium.
Minimum Deposits by Loan Type
The minimum deposit depends on which loan product and scheme you are using:
- Standard lender (no government scheme): Most lenders will approve a loan with a 5% deposit, but you will pay LMI. A small number require 10% minimum. Very few will lend at 95% LVR (5% deposit) for first home buyers without a government guarantee behind it.
- First Home Guarantee (federal): 5% deposit, no LMI. The federal government guarantees 15% of the property value, bringing the lender's effective LVR to 80%. 35,000 places per year. Income caps apply ($125K single, $200K couple).
- Regional First Home Buyer Guarantee: 5% deposit, no LMI — specifically for regional buyers who have lived or worked in the region for 12 months. 10,000 places per year.
- Family Home Guarantee: 2% deposit, no LMI. For single parents or single legal guardians with dependants. The government guarantees 18% of the property value. 5,000 places per year.
- Professional / No-LMI offers: Some lenders waive LMI for certain professions (medical doctors, dentists, lawyers, accountants, engineers) at up to 90% LVR — meaning a 10% deposit with no LMI. Eligibility criteria and lenders vary, so a mortgage broker who specialises in professional loans is worth consulting if you qualify.
- Guarantor loan (Bank of Mum and Dad): If a parent provides their property as additional security, you may be able to borrow up to 100% of the purchase price with no deposit and no LMI. The parent's property is at risk if you default, so this arrangement requires careful structuring and independent legal advice for both parties.
LMI Cost by Loan Amount and LVR
The table below shows approximate LMI premiums (capitalised into the loan) for different scenarios. Actual premiums vary by insurer (Helia and QBE are the two main LMI providers in Australia) and individual lender arrangements.
| Purchase Price | LVR 95% (5% deposit) | LVR 90% (10% deposit) | LVR 85% (15% deposit) | LVR 80% (20% deposit) |
|---|---|---|---|---|
| $500,000 | ~$15,000 | ~$9,500 | ~$5,000 | $0 |
| $600,000 | ~$18,500 | ~$11,500 | ~$6,000 | $0 |
| $700,000 | ~$22,000 | ~$13,500 | ~$7,000 | $0 |
| $800,000 | ~$26,000 | ~$16,000 | ~$8,200 | $0 |
| $900,000 | ~$30,000 | ~$18,000 | ~$9,500 | $0 |
Note: LMI is typically capitalised (added to your loan), meaning you pay interest on the premium over the life of the loan. A $22,000 LMI premium on a 30-year loan at 6.2% interest costs approximately $47,000 in total repayments.
The Genuine Savings Requirement
Most lenders require evidence that your deposit comes from genuine savings — money you have accumulated over at least 3–6 months through your own income and disciplined saving. The purpose is to demonstrate that you have the financial discipline to manage a mortgage repayment.
Gifted money (for example, a cash contribution from parents) does not typically count as genuine savings on its own. If your deposit is entirely gifted, some lenders will decline your application or require a larger genuine savings component. This is a significant consideration for first home buyers relying on family assistance. The workaround is to have the gift deposited into your account at least 3–6 months before your loan application, so it has time to become "seasoned" — treated as savings in your control.
Under guarantor loan arrangements, the lender does not require the same level of genuine savings, since the parent's equity substitutes for the deposit. However, lenders still assess your ability to service the loan independently.
Funds from the First Home Super Saver (FHSS) scheme are treated by most lenders as genuine savings, given they are money you contributed yourself and that has been sitting in super. Confirm this with your specific lender before relying on FHSS funds as your sole deposit evidence.
Stamp Duty on Top of Deposit — the Biggest Budget Mistake
The single most common financial mistake first home buyers make is treating the deposit as the only cash they need at settlement. Stamp duty is a state government tax on property purchases that can range from zero (with first home buyer concessions on lower-priced properties) to over $45,000 on properties near $1 million — and it must be paid at settlement, separate from your deposit.
Even with first home buyer concessions in most states, buyers above the full-waiver threshold pay a reduced (but still significant) amount. In NSW, a first home buyer purchasing an $850,000 home pays approximately $9,500 in stamp duty after the concession — this comes out of your cash savings at settlement, not from the bank. In VIC, a $700,000 purchase above the $600,000 full-waiver threshold incurs approximately $8,800 in duty after the concession.
For a thorough state-by-state breakdown of stamp duty costs and concessions, read our stamp duty Australia guide.
Total Cash Required at Settlement: Full Picture
The table below shows the total cash you need at settlement — deposit plus stamp duty plus other upfront costs — across different purchase prices and deposit levels in NSW (which has among the more generous FHB stamp duty concessions). Figures assume first home buyer concessions apply where eligible.
| Purchase Price | Deposit Level | Deposit ($) | LMI (if no scheme) | Stamp Duty (NSW FHB) | Legal + Other | Total Cash Needed |
|---|---|---|---|---|---|---|
| $600,000 | 5% | $30,000 | $14,000 (or $0 with FHBG) | $0 (waived) | $2,500 | $32,500 (scheme) / $46,500 (no scheme) |
| $600,000 | 10% | $60,000 | $8,500 (or $0 with FHBG) | $0 (waived) | $2,500 | $62,500 (scheme) / $71,000 (no scheme) |
| $600,000 | 20% | $120,000 | $0 | $0 (waived) | $2,500 | $122,500 |
| $700,000 | 5% | $35,000 | $16,500 (or $0 with FHBG) | $0 (waived) | $2,500 | $37,500 (scheme) / $54,000 (no scheme) |
| $700,000 | 10% | $70,000 | $10,000 (or $0 with FHBG) | $0 (waived) | $2,500 | $72,500 (scheme) / $82,500 (no scheme) |
| $700,000 | 20% | $140,000 | $0 | $0 (waived) | $2,500 | $142,500 |
| $800,000 | 5% | $40,000 | $19,500 (or $0 with FHBG) | $0 (waived ≤$800K NSW) | $2,500 | $42,500 (scheme) / $62,000 (no scheme) |
| $800,000 | 20% | $160,000 | $0 | $0 (waived) | $2,500 | $162,500 |
| $900,000 | 5% | $45,000 | $22,500 (or $0 with FHBG) | $9,500 (concession, NSW) | $2,500 | $57,000 (scheme) / $79,500 (no scheme) |
| $900,000 | 20% | $180,000 | $0 | $9,500 (concession, NSW) | $2,500 | $192,000 |
FHBG = First Home Guarantee. Other costs include conveyancing ($1,500), building inspection ($550), and a small buffer. Stamp duty figures are for NSW first home buyers — other states vary significantly. Use our stamp duty calculator for your specific state.
Is It Better to Save 20% or Buy With 5%?
This question does not have a universal answer — it depends on your market, timeline, and financial position. However, the key factors to weigh:
Arguments for buying with 5% (using FHBG): You get into the market sooner. If property prices rise 5–8% per year (as they have in some markets historically), waiting 5 years to save a 20% deposit means you are chasing a moving target. A $700,000 property growing at 6% per year is worth $935,000 in five years — your extra saving has been more than offset by price growth. You also start building equity and stop paying rent.
Arguments for saving 20%: Your loan repayments are lower (smaller loan). You avoid LMI entirely. Your borrowing capacity assessment is less strained. You have a larger buffer against property price falls (negative equity risk is lower). And in flat or falling markets, there is no penalty for waiting.
In highly competitive markets like Sydney and Melbourne, the balance often tilts toward buying sooner with a smaller deposit. In more stable regional markets, the slower price growth makes saving a larger deposit more viable.
Frequently Asked Questions
- Can I use a personal loan or credit card for part of my deposit?
- No. Lenders will identify borrowed funds (personal loans, credit cards, or loans from family members that require repayment) in your bank statements and will not accept them as genuine savings. Using borrowed funds as a deposit also adds to your liabilities, reducing your borrowing capacity. Some lenders even specifically ask whether any part of your deposit is borrowed.
- Do I need a 10% deposit to exchange contracts?
- Typically yes — when you exchange contracts on a private sale or win at auction, a 10% deposit is due immediately. If your actual deposit is only 5%, you will need to negotiate with the vendor for a reduced deposit at exchange, which some will agree to. Alternatively, a deposit bond (an insurance product) can cover the 10% at exchange while your actual savings remain in your account. Discuss this with your conveyancer and lender.
- Does stamp duty have to be paid from savings, or can the lender cover it?
- Stamp duty must be paid from your own funds at settlement — lenders do not include it in the mortgage. In some limited circumstances, a lender may provide a small additional "top-up" loan to cover stamp duty if the property valuation supports it, but this is uncommon and increases your LVR. Plan to have stamp duty in your cash savings alongside your deposit.
- How does lenders mortgage insurance actually work if I default?
- If you default on your mortgage and the lender sells the property at a loss, the LMI insurer (Helia or QBE) pays the difference to the lender. However, the insurer then has the right of subrogation — they can pursue you for the amount they paid out. LMI does not protect you from debt; it ensures the lender recovers its loss while the insurer recovers from you. This is why LMI costs you money while providing you no protection.
