Saving a deposit is one of the biggest hurdles for many Australians looking to buy their first home.
While you’ve probably heard that you need a 20% deposit, that’s not always the case.
The amount you’ll need depends on your financial circumstances, the type of property you’re buying, the lender you choose, and whether you’re eligible for government support or other lending options.
Do You Need a 20% Deposit?
A 20% deposit is often considered the benchmark because it may allow you to avoid paying Lenders Mortgage Insurance (LMI).
For example:
| Property Price | 20% Deposit |
|---|---|
| $600,000 | $120,000 |
| $800,000 | $160,000 |
| $1,000,000 | $200,000 |
However, many Australians purchase their first home with a smaller deposit.
Depending on the lender and your circumstances, it may be possible to buy with as little as 5% saved.
Can I buy a home with a 5% deposit?
Yes.
Eligible first home buyers may be able to purchase a property with a deposit of as little as 5% under the Australian Government’s 5% Deposit Scheme.
The scheme allows eligible buyers to avoid paying Lenders Mortgage Insurance because Housing Australia guarantees part of the loan to participating lenders.
Eligibility criteria, property price caps and lender participation all apply.
Learn more about the scheme here.
What other costs should you budget for?
Your deposit is only one part of buying a home.
You may also need to budget for:
- Stamp duty (where applicable)
- Conveyancing and legal fees
- Building and pest inspections
- Loan application fees
- Moving costs
- Utility connections
- Home and contents insurance
Some first home buyers may also be eligible for grants or stamp duty concessions depending on their state or territory.
How can I save a home deposit faster?
Saving a deposit takes planning, discipline and realistic goals.
Some strategies that may help include:
Create a budget
Understanding where your money is going is often the first step.
The Australian Government’s Moneysmart Budget Planner is a useful tool to help track your income and expenses.
Reduce unnecessary debt
Paying down high-interest debt, particularly credit cards and personal loans, can improve your savings capacity and may also improve your borrowing position.
Automate your savings
Treat your savings like a regular bill by transferring money into a dedicated savings account each payday.
Consider living at home for longer
If it’s an option, reducing rent for a period can significantly accelerate your savings.
Review your spending
Small changes made consistently often have a bigger impact than occasional large savings.
Is a bigger deposit always better?
A larger deposit can:
- Reduce the amount you need to borrow
- Lower your repayments
- Reduce interest costs over time
- Improve your borrowing options
- Potentially avoid Lenders Mortgage Insurance (LMI)
But waiting years to save a larger deposit isn’t always the best financial decision.
Property prices, interest rates and your own circumstances may change during that time.
Sometimes buying sooner with a smaller deposit can make more sense than waiting for the “perfect” deposit.
It’s about more than the deposit
One of the biggest misconceptions is that buying a home is simply about reaching a savings target.
In reality, your deposit is only one part of the picture.
Your income, borrowing capacity, existing debts, future plans and overall financial strategy all play an important role in determining when you’re ready to buy.
At You First, we help people look beyond the deposit and understand how buying a home fits into their broader financial plan.
If you’re wondering how much deposit you need, or whether you’re closer to buying than you think, we’re always happy to have a conversation.
The information in this article was accurate at the time of publication and is intended as general information only. It does not take into account your personal objectives, financial situation or needs. Laws, regulations and lending policies may change over time, so you should seek professional advice before making financial decisions.