First Home Buyer Deposit Requirements Explained

Buying a $700,000 property does not necessarily mean you need a $140,000 deposit. While a 20% deposit remains a useful benchmark, first home buyer deposit requirements can look very different depending on your income, savings history, property location, lender policy and eligibility for government support.

The key is not simply reaching a number. It is building a deposit plan that leaves room for purchase costs, suits the loan you can comfortably repay and supports the life you want after settlement.

How much deposit do first home buyers need?

Traditionally, lenders have preferred borrowers to contribute a 20% deposit. On a $600,000 purchase, that is $120,000. Borrowing 80% or less of a property’s value can help you avoid Lenders Mortgage Insurance, commonly known as LMI, and may provide access to a wider range of loan products, depending on lender policy.

But 20% is not a universal requirement. Many lenders consider home loans with a 10% deposit, and some may lend with as little as 5% for eligible first home buyers. A smaller deposit may allow some buyers to enter the property market sooner, depending on their circumstances.

There is a trade-off. The less you contribute upfront, the more you borrow. That generally means higher repayments, more interest paid over the life of the loan and, in many cases, LMI or a loan guarantee scheme. Whether a lower deposit is appropriate depends on your financial circumstances, objectives and repayment capacity.

Deposit examples at different purchase prices

Your required deposit is usually calculated as a percentage of the property purchase price. For a $500,000 home, a 5% deposit is $25,000, a 10% deposit is $50,000 and a 20% deposit is $100,000.

For an $800,000 property, those figures become $40,000, $80,000 and $160,000. These examples show why the target percentage matters, but they are not the full amount you need to save. There are other costs to plan for before you receive the keys.

Your deposit is not the same as your total upfront costs

The deposit is your contribution towards the property price. You will also need funds for costs associated with buying and settling the property. Depending on where you buy and the support you qualify for, these may include stamp duty, conveyancing or legal fees, building and pest inspections, lender fees and government registration charges.

In Victoria, eligible first home buyers may receive stamp duty concessions or exemptions within relevant property value thresholds. Other states and territories have their own rules. These concessions can make a meaningful difference, but eligibility depends on factors such as the property price, whether you will live in the home and your personal circumstances.

Can you buy with a 5% deposit?

Yes, you may be eligible. A 5% deposit may be possible through selected low-deposit home loans or an Australian Government guarantee scheme, subject to eligibility, property price caps, lender participation and available places where applicable.

Under a guarantee arrangement, the government may guarantee part of the loan so an eligible buyer can purchase with a smaller deposit without paying LMI. It does not provide cash for your deposit and it does not remove your obligation to repay the loan. You still need to meet the lender’s credit assessment, demonstrate that they meet the lender's serviceability requirements.

For some buyers, a low-deposit loan may assist them to purchase sooner, depending on their circumstances. On the other hand, a larger deposit creates more equity from day one and may provide a buffer if property values soften. The appropriate approach depends on your budget, timeframe and repayment capacity.

What lenders look for beyond the deposit

First home buyer deposit requirements are only one part of a lender’s decision. A lender will also consider whether your financial position supports the loan over the long term.

Your income, employment type, living expenses, existing debts, dependants and credit history all matter. So does the property itself. For example, a lender may assess an apartment, rural property or newly built home differently from an established house in a metropolitan area.

Lenders also review your savings pattern. Many lenders refer to "genuine savings" as funds accumulated over time from sources such as regular savings, although definitions vary between lenders. Some lenders accept gifts from family, proceeds from investments or other sources towards a deposit, while others apply particular conditions. If family support is part of your plan, it is important to discuss it early so the source and timing of funds do not create delays.

A pre-approval can help you understand an indicative borrowing range before you attend inspections. It is not a guarantee of final approval, as the lender still needs to assess the property and confirm your circumstances, but it gives your search clearer boundaries.

Ways to build a stronger deposit position

Saving for a home can feel like a long road, especially when rent, childcare and everyday costs are competing for your income. The most effective approach is usually a consistent one: set a realistic savings target, automate transfers soon after payday and keep your deposit separate from spending money.

Depending on your circumstances, paying down high-interest debts, reducing unused credit limits or avoiding new credit applications before applying may affect a lender's assessment of your borrowing capacity.

If you receive a financial gift, keep clear records. Lenders may ask for evidence showing where the funds came from and whether they are a gift or a loan that needs to be repaid. Being organised from the beginning can make your application smoother.

Avoid draining every dollar from your account to meet the minimum deposit. A home comes with moving costs, rates, insurance, repairs and the occasional surprise. Many buyers choose to retain an emergency savings buffer to assist with unexpected expenses after settlement.

Choosing a deposit target that fits your life

A 5% deposit may suit a buyer with stable income, low debts and a strong reason to buy sooner. A 20% deposit may suit someone who wants lower repayments, wishes to avoid LMI or has the flexibility to save for longer. Neither option is automatically better.

The right deposit target should account for the property you want, your likely loan repayments at higher interest rates and your plans over the next few years. If you expect to start a family, change careers or reduce work hours, leave room in the budget for those possibilities.

A mortgage broker can explain lender policies, discuss low-deposit lending options and provide credit assistance after considering your objectives, financial situation and needs. Any recommendation will depend on your individual circumstances and lender assessment criteria.

Common questions about first home buyer deposits

Do I need a 20% deposit to avoid LMI?

Usually, borrowing 80% or less of the property value means LMI is not required. However, lender policy can vary, and other costs may still apply. Eligible buyers using a government guarantee scheme may be able to avoid LMI with a smaller deposit.

Can stamp duty be included in my home loan?

Whether this is available depends on lender policy and your overall loan-to-value ratio.

Is a family guarantee the same as a gifted deposit?

No. A gifted deposit is money provided to you, usually with no expectation of repayment. A family guarantee involves a relative offering equity in their property as additional security for your loan. Both can help, but they carry different responsibilities and should be understood carefully by everyone involved.

Buying your first home is a significant step, not a test of whether you have saved the biggest possible deposit. Start with clear numbers, understand the support available to you and choose a loan structure that aligns with your financial circumstances and longer-term goals.

Disclaimer

This article contains general information only and does not take into account your personal objectives, financial situation or needs. It does not constitute credit, legal, taxation or financial advice.

Lending is subject to lender assessment, eligibility criteria, verification of your financial circumstances, an acceptable property and valuation, and formal approval. Government schemes, concessions and eligibility requirements may change.

Inspiration Lending Pty Ltd Credit Representative 569537 is authorised under Australian Credit Licence Number 389328 | ABN 20687381737.