Key takeaways
- A 20% deposit avoids Lenders Mortgage Insurance (LMI) — but it’s not the minimum to buy.
- Many buyers get in with 5–10%, paying LMI to enter the market sooner.
- First-home buyers may use government schemes to buy with as little as 5% and no LMI.
- Don’t forget the “hidden” upfront costs — stamp duty, legals and more — on top of the deposit.
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Ask most people how much deposit they need and they’ll say “20%.” It’s the most repeated number in Australian property — and for a lot of buyers, it’s the wrong one. The truth is more flexible, and understanding it could bring your purchase years closer.
Do you need a 20% deposit?
A 20% deposit is the threshold at which lenders no longer charge Lenders Mortgage Insurance. On a $600,000 home, that’s $120,000. It’s a great target if you can reach it — a bigger deposit means a smaller loan, less interest, and no LMI. But it is a target, not a gate.
At a glance
| Deposit | What it usually means | Lender choice |
|---|---|---|
| 20%+ | Standard lending, no LMI | Widest lender choice |
| 10–19% | LMI usually applies | Most lenders available |
| 5–9% | LMI, or a government scheme / guarantor | Fewer lenders, stricter checks |
| Under 5% | Guarantor or scheme generally needed | Specialist territory |
Can you buy with a 5–10% deposit?
Most lenders will lend up to 90% — and many up to 95% — of a property’s value. That means a deposit of 5–10% can be enough to buy, provided you can comfortably service the loan. The trade-off is LMI.
What is LMI?
Lenders Mortgage Insurance protects the lender (not you) if a borrower can’t repay and the property sells for less than the loan. It’s a one-off cost, typically added to your loan, charged when you borrow more than 80% of the value. It can run from a few thousand to well over $10,000 depending on the loan size and deposit.
LMI isn’t automatically “bad.” In a rising market, paying LMI to buy a year earlier can cost less than the price growth you’d miss while saving the extra deposit. It’s a maths question worth running properly — we’re happy to run it with you.
How can you buy with a smaller deposit or avoid LMI?
1. First-home buyer schemes
Government schemes can let eligible first-home buyers purchase with as little as 5% deposit and no LMI, with the government effectively guaranteeing the gap. Places, price caps and eligibility change over time, so it’s worth checking what’s currently available for your situation.
2. A guarantor
A family guarantor (usually a parent) can use equity in their own home as additional security, helping you avoid LMI and buy sooner. It’s a significant commitment for the guarantor, so it needs careful, honest discussion — which we’ll always facilitate.
3. Using existing equity
If you already own property, the equity you’ve built can serve as your deposit on the next one, often without needing fresh cash savings.
What upfront costs do you need on top of the deposit?
Your deposit isn’t the only cash you’ll need at purchase. Budget for:
- Stamp duty (though first-home buyers often get concessions or exemptions)
- Conveyancing and legal fees
- Building and pest inspections
- Loan and government registration fees
- Moving costs and a small buffer for the unexpected
Broker Insight. The “you need 20%” belief keeps more people out of the market than it needs to. A smaller deposit, a family guarantee or a government scheme can help many buyers get in sooner.
Find out exactly what you need — free
Book a free Game Plan Call and we’ll work out your real deposit target for the home you want, including every upfront cost and any schemes you may qualify for.
Book your free game plan callGeorge Karpathakis, Co-Founder & DirectorYour enquiry comes straight to our team. We usually reply within one business day.
Frequently asked questions
Can I buy a home with a 5% deposit?
Yes, many lenders allow it, and eligible first-home buyers may do so without LMI through government schemes. You’ll need to show you can comfortably service the loan.
Is it better to wait and save 20%, or buy now with LMI?
It depends on your market and circumstances. In a rising market, buying sooner with LMI can work out cheaper than waiting; in a flat market, saving more may make sense. We’ll run the numbers honestly so you can decide.
Can my parents help me buy?
Yes — commonly through a guarantor arrangement using equity in their home, or via a gifted deposit. Each has implications we’ll walk your family through before anyone commits.
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This guide is general information only and does not take your personal circumstances into account. It is not financial, credit, tax or legal advice. Examples are illustrative only. Government schemes, lender policies and rates change over time and eligibility criteria apply. Speak with us for advice tailored to your situation. LendQuest Pty Ltd is a credit representative (555514) of BLSSA Pty Ltd, Australian Credit Licence 391237.