The Short Answer — and Why It's More Complicated
The minimum deposit for a home loan in Australia is technically 5% — but that's the floor, not the ideal. How much deposit you actually need depends on whether you want to avoid Lenders Mortgage Insurance, whether you qualify for government schemes, and what kind of buyer you are. This guide breaks it all down clearly.
⚡ Quick Reference: Deposit Tiers in 2026
- 5% deposit: Minimum for most lenders. LMI applies unless using FHG or professional waiver
- 10% deposit: Reduced LMI compared to 5% — still applies unless exempt
- 20% deposit: No LMI. Access to most lenders and best rates
- 5% via First Home Guarantee: No LMI — government guarantees the gap (NSW cap: $1.5M)
- 0% with guarantor: Possible, but limited lenders and strict criteria apply
Understanding LVR: The Key Number
Your deposit determines your Loan to Value Ratio (LVR) — the percentage of the property value you're borrowing. If you have a $100,000 deposit on a $700,000 property, your LVR is 85.7% (you're borrowing 85.7% of the property's value). LVR is the single most important number lenders use to assess risk, and it determines whether you pay LMI, what interest rate you receive, and which lenders will accept your application.
| Deposit Amount | LVR | LMI Payable? | Implications |
|---|---|---|---|
| 5% ($40k on $800k) | 95% | Yes — approximately $25,000–$35,000 | Narrower lender choice, higher rate risk |
| 10% ($80k on $800k) | 90% | Yes — approximately $13,000–$18,000 | More lenders available, lower LMI |
| 15% ($120k on $800k) | 85% | Yes — approximately $5,000–$9,000 | Better rates, more lenders |
| 20% ($160k on $800k) | 80% | No — LMI not required | Full lender access, best rates |
| 5% via First Home Guarantee | 95% | No — government guarantees the gap | NSW cap: $1.5M purchase price |
What Is LMI and How Much Does It Cost?
Lenders Mortgage Insurance (LMI) is an insurance policy that protects the lender (not you) if you default on your loan. It is charged when your LVR exceeds 80%. Despite its name, LMI is your cost — typically added to your loan balance (capitalised) rather than paid upfront. The ASIC MoneySmart website has an independent overview of how LMI works.
| Loan Amount | LVR 90% | LVR 85% | LVR 95% |
|---|---|---|---|
| $500,000 | ~$8,700 | ~$4,500 | ~$16,500 |
| $700,000 | ~$12,200 | ~$6,300 | ~$23,100 |
| $900,000 | ~$15,700 | ~$8,100 | ~$29,700 |
| $1,200,000 | ~$20,800 | ~$10,800 | ~$39,600 |
LMI premiums are indicative. Actual amounts vary by lender and insurer. Use our Smart Home Loan Check for a specific estimate for your situation.
6 Ways to Buy With Less Than 20% Without Paying LMI
You don't necessarily need a 20% deposit to avoid LMI. There are several pathways:
First Home Guarantee (FHG)
The federal government guarantees the gap between your 5% deposit and 20%, so lenders don't require LMI. NSW property price cap is $1.5 million. Income limits apply: $125,000 for singles and $200,000 for couples. See Housing Australia for current caps.
Professional LMI Waivers
Doctors, nurses, lawyers, accountants, engineers and other professionals can access LMI waivers up to 90–95% LVR with select lenders — with no government involvement and no income cap. See our no-LMI professional guide.
Guarantor Loan
A parent or immediate family member can use the equity in their property to guarantee your loan, allowing you to borrow up to 100% of the purchase price without LMI. Read our full guarantor loan guide.
Family Home Guarantee
Single parents and single legal guardians can purchase with a 2% deposit — the government guarantees 18%. See Housing Australia for current eligibility.
Regional Home Guarantee
First home buyers in regional areas can access a 5% deposit scheme with government guarantee. NSW regional areas qualify — check current postcodes on the Housing Australia website.
Save to 20%
The most straightforward path — though in Sydney's market, waiting to save a full 20% deposit has historically cost buyers more in capital growth than they saved in LMI. Your broker can model both scenarios for your specific situation.
What Counts as Genuine Savings?
Most lenders require your deposit to include "genuine savings" — funds you have accumulated yourself over time. This protects lenders against inflated deposits assembled at the last moment. Genuine savings typically include:
- Regular contributions to a savings account held for at least 3 months
- Term deposits
- Shares and managed funds held for 3+ months
- Equity in an existing property
- Rental payment history (some lenders accept this as evidence of saving capacity)
The following are generally not accepted as genuine savings: lump-sum tax returns, sale of personal assets, gambling winnings, or inheritance received very recently. Gifted funds have specific requirements — a gift letter is needed, and some lenders require genuine savings on top.
💡 The Deposit Timing Question
In Sydney's property market, the cost of waiting to save a larger deposit can outweigh the LMI saving. Consider: if a property you can buy today for $800,000 increases by 5% over the year it takes to save an extra $40,000, the property is now worth $840,000. The $40,000 saved is $40,000 of capital growth you missed. Your broker can model the genuine cost of waiting vs buying with LMI for your specific situation.
Deposit Is Not the Only Upfront Cost
Your deposit needs to be separate from your purchase costs. These must be funded from additional savings — you cannot use your deposit funds to pay for stamp duty, legal fees and inspections. Budget for:
- Stamp duty: $0 for eligible first home buyers in NSW on properties under $800k. Use the Revenue NSW calculator for your specific purchase price
- Legal/conveyancing: $1,500–$3,000
- Building and pest inspection: $400–$800
- Loan application fee: $0–$600 (many lenders waive this, especially via a broker)
- Moving costs: $500–$3,000
Frequently Asked Questions
Technically, you can purchase with as little as a 5% deposit through the First Home Guarantee scheme or with a guarantor loan. Without these schemes, most standard lenders require a minimum of 5% genuine savings, though you'll need to pay Lenders Mortgage Insurance (LMI) if your deposit is under 20%.
For investment properties, LMI may be tax deductible over a period of years (typically 5 years or the loan term, whichever is shorter). For owner-occupied properties, LMI is generally not tax deductible. You should seek advice from a registered tax agent for your specific circumstances — the Australian Taxation Office (ATO) website has further guidance.
Yes, lenders can accept gifted funds as part of a deposit, but most require a specific 'gift letter' from the donor confirming the money is a genuine gift with no repayment expected. Some lenders also require genuine savings on top of the gifted amount. A broker can identify lenders with the most flexible gifting policies for your situation.
Genuine savings are funds you have accumulated yourself over a period of at least 3 months. They can include regular savings deposits, term deposits, shares, or equity in an existing property. First Home Owner Grant funds are not usually counted as genuine savings. Tax returns deposited as a lump sum may or may not qualify depending on the lender.
Yes, you can buy with 10%, but you will likely pay LMI unless you qualify for the First Home Guarantee or a professional LMI waiver. The LMI premium on a $800,000 loan at 90% LVR is approximately $13,000–$16,000, which is often added to your loan balance. Whether this makes sense depends on your individual circumstances — a broker can run the numbers.
✅ Find Out Exactly What You Need
Use our Smart Home Loan Check to calculate your exact LMI cost, check whether you qualify for the First Home Guarantee, and compare lender options for your deposit amount — in under 2 minutes, with no credit check and no login required.