When you’re planning to buy a property, one of the most important early questions is:
How much deposit do I need?
While there isn’t a one-size-fits-all answer, the key factors are fairly consistent across lenders. Below is a guide to help you understand deposit requirements, how to avoid extra costs, and practical strategies to save.
1. Typical Deposit Amounts: 20% vs. Lower Deposits
- Lenders generally prefer a 20% deposit of the property’s purchase price. This is considered ideal because it reduces risk for the lender and gives the borrower more equity from the start.
- If your deposit is less than 20%, you’ll usually need to pay Lenders Mortgage Insurance (LMI). LMI protects the lender (not you) in case of default.
- There are some alternatives (e.g. government schemes or guarantor arrangements) that may allow you to pay a lower deposit while avoiding or reducing LMI.
Deposit Examples
Here are some illustrative numbers (based on the NAB article) to show how deposit amounts change with property price:
| Property Price | 20% Deposit (No LMI) | 5% Deposit (With LMI) |
|---|---|---|
| $700,000 | $140,000 | $35,000 + LMI |
| $580,000 | $116,000 | $29,000 + LMI |
| $350,000 | $70,000 | $17,500 + LMI |
These examples show how a smaller deposit increases your additional costs via LMI.
2. How to Avoid or Reduce LMI
If your deposit is less than 20%, LMI often becomes unavoidable — unless certain special conditions apply. Some strategies to reduce or avoid LMI include:
- Government deposit support schemes: For example, the Australian Government 5% Deposit Scheme (formerly Home Guarantee Scheme) allows eligible buyers to purchase with a lower deposit.
- Guarantor / parent guarantee: A family member (often a parent) provides security on part of the loan, which can reduce the lender’s risk and possibly reduce or remove LMI.
- LMI waiver for certain buyers or professions: Some lenders may offer waiver or reduced LMI for eligible first home buyers or certain professional groups.
However, these options depend heavily on your financial situation, the lender, and state/territory rules.
3. Upfront & Ongoing Costs to Include in Your Deposit Planning
When planning your deposit, don’t forget to account for other upfront costs and ongoing costs beyond just the deposit itself:
- Upfront costs: Stamp duty, legal/conveyancing fees, mortgage registration, title transfer, inspection fees, etc.
- Ongoing costs: Mortgage repayments, home insurance, council rates, maintenance, utilities, body corporate fees (if applicable).
Thus, when you calculate how much you need to save, your target should include both your deposit and all associated fees and charges.
4. How to Save Faster for Your Deposit
Here are practical steps you can take to accelerate your deposit savings:
- Track your finances & budget — Use tools or apps to monitor your spending, and identify areas to cut back.
- Set up a dedicated savings account — Label a “home deposit fund” and automate transfers regularly (e.g. direct debits).
- Reduce existing debt — Paying off high-interest loans or credit cards frees up more money to save.
- Use cashback / rewards on everyday spending — Over time, small returns add up and give your savings a boost.
These strategies, when combined with discipline and a realistic timeframe, can significantly help you reach your deposit goal more quickly.
5. What to Do Next
- Use a borrowing power / mortgage calculator to see how much you might be able to borrow.
- Estimate all upfront and ongoing costs related to purchasing a home (stamp duty, legal fees etc.).
- Set a realistic savings target (deposit + costs) and timeline.
- Explore whether you qualify for schemes like First Home Owner Grant (FHOG) or stamp duty concessions in your state/territory.
- Talk to a mortgage broker or lender early — they can help you understand which loan products or incentives you might qualify for.
6. Key Takeaways (SEO Keywords Included)
- Generally, you’ll need a 20% deposit of the property purchase price to avoid LMI.
- If your deposit is lower (e.g. 5%), you’ll likely incur Lenders Mortgage Insurance (LMI).
- Some buyers can secure a lower deposit via government deposit schemes, guarantor support, or LMI waivers, subject to eligibility.
- Always account for upfront costs (stamp duty, legal, registration) and ongoing costs (rates, maintenance) in your total saving goal.
- Use budgeting tools, a dedicated savings account, debt reduction, and rewards strategies to help you save faster.
