How Much Deposit Do You Need to Buy a House in Australia? (2025)
Published by SWIFT ACCOUNTANTS PTY LTD · Last reviewed
Saving a home deposit is the most significant financial challenge facing Australians today. The standard deposit is 20% of the purchase price — but most first home buyers enter the market with considerably less, relying on government schemes like the First Home Guarantee or paying Lenders Mortgage Insurance. This guide explains your options, the true costs involved, and realistic savings timelines based on real Australian incomes.
The 20% Deposit Standard: Why It Matters
In the Australian lending market, a 20% deposit has long been the benchmark for standard home loan approval. When you borrow with a deposit of 20% or more, you have an 80% loan-to-value ratio (LVR) or less — meaning the lender is exposed to a smaller portion of the property's value. At this threshold, lenders do not require Lenders Mortgage Insurance, and you typically access better interest rates.
On a $700,000 home — close to the median price in many Australian capital cities — a 20% deposit is $140,000. For a first home buyer on $80,000 per year saving aggressively, this represents approximately six to seven years of saving. The challenge is compounded by rising property prices, which can outpace savings growth.
The good news: several government initiatives allow eligible buyers to enter the market with deposits as low as 5%, either by paying LMI or by accessing guarantee schemes that avoid LMI entirely.
Deposit Required by Property Price (5%, 10%, 20%)
| Property Price | 5% Deposit | 10% Deposit | 20% Deposit (no LMI) |
|---|---|---|---|
| $400,000 | $20,000 | $40,000 | $80,000 |
| $600,000 | $30,000 | $60,000 | $120,000 |
| $800,000 | $40,000 | $80,000 | $160,000 |
| $1,000,000 | $50,000 | $100,000 | $200,000 |
Note: These are deposit amounts only. Additional upfront costs — stamp duty, conveyancing, building inspection, and moving costs — are payable on top of the deposit.
Lenders Mortgage Insurance (LMI): What It Costs
If you buy with less than a 20% deposit, most lenders require you to pay Lenders Mortgage Insurance (LMI). Despite the name, LMI protects the lender, not you. If you default on the loan and the property sells for less than the outstanding balance, LMI compensates the lender — you may still owe the shortfall.
LMI is a one-off premium typically added to your loan balance (capitalised), meaning you pay interest on it over the life of the loan. Indicative LMI costs based on purchase price and LVR:
- $600,000 property, 10% deposit (90% LVR): approximately $8,000 to $15,000 in LMI
- $600,000 property, 5% deposit (95% LVR): approximately $18,000 to $25,000 in LMI
- $800,000 property, 5% deposit (95% LVR): approximately $25,000 to $35,000 in LMI
LMI amounts vary by lender and the insurer they use (primarily Genworth/Helia or QBE Lenders Mortgage Insurance). While paying LMI means accepting a higher loan balance, it can enable entry into a rising property market years earlier than saving a full 20% deposit — potentially offsetting the LMI cost through capital growth.
The First Home Guarantee: Buying With 5% and No LMI
The First Home Guarantee (FHBG), administered by the National Housing Finance and Investment Corporation (NHFIC), allows eligible first home buyers to purchase with as little as a 5% deposit without paying LMI. The federal government guarantees 15% of the property value to the lender, bridging the gap to an effective 20% deposit.
Key FHBG details for 2025-26:
- Places available: 35,000 per financial year
- Income caps: $125,000 per year for singles; $200,000 combined for couples
- Property price caps: vary by location — $900,000 in Sydney and NSW regional areas; $800,000 in Melbourne and Victoria regional; $700,000 in Brisbane and Queensland regional; lower in other states
- Eligible properties: existing dwellings, new builds, house and land packages, townhouses, apartments
- Application process: through participating lenders (not directly through NHFIC)
The government guarantee is not a grant — you do not receive cash. It simply means the lender treats your 5% deposit as equivalent to 20% for the purpose of LMI requirements. Full NHFIC details are available at nhfic.gov.au.
Regional First Home Buyer Guarantee
The Regional First Home Buyer Guarantee (RFHBG) provides 10,000 additional places per year for eligible buyers purchasing in regional locations. The income and deposit requirements mirror the FHBG, but the eligible locations are restricted to regional areas as defined by NHFIC. Buyers must also have lived in the regional area for at least 12 months before applying.
Property price caps for the regional scheme are lower than the urban scheme — typically $600,000 to $750,000 depending on the state and specific regional area. However, property prices in many regional areas are within these thresholds, making the scheme well-suited to regional buyers seeking to enter the market with a smaller deposit.
Hidden Costs Beyond the Deposit
A common mistake among first home buyers is budgeting only for the deposit. The true upfront cost of buying is considerably higher when you include:
- Stamp duty: varies by state and purchase price; can be $20,000 to $40,000+ on a $700,000 purchase in NSW (concessions apply for first home buyers below thresholds)
- Conveyancing fees: typically $1,000 to $2,500 depending on property complexity and state
- Building and pest inspection: approximately $400 to $800 for a standard house
- Loan application fees: some lenders charge establishment fees; varies by lender
- LMI (if applicable): can be $8,000 to $35,000 depending on LVR and purchase price
- Moving costs: $500 to $3,000 for a metropolitan move; more for interstate
- Home and contents insurance: first premium typically due at settlement
As a practical rule of thumb, budget for upfront costs of approximately 5% of the purchase price in addition to your deposit — so on a $600,000 home, allow around $30,000 beyond your deposit for transaction costs. First home buyers receiving stamp duty exemptions in their state may budget less.
Savings Timeline: How Long Does It Take?
For an individual on $80,000 gross annual income, take-home pay after income tax and Medicare Levy is approximately $61,000 per year, or $5,080 per month. Assuming monthly living costs of $3,080 (rent, food, transport, utilities, lifestyle), a savings rate of $2,000 per month is achievable with discipline.
At $2,000 per month savings:
- $30,000 deposit (5% of $600,000): approximately 15 months
- $60,000 deposit (10% of $600,000): approximately 30 months (2.5 years)
- $120,000 deposit (20% of $600,000): approximately 60 months (5 years)
These timelines exclude interest earned in a high-interest savings account (currently 4.5% to 5.5% from major online savings accounts), which can materially reduce the time to goal. They also exclude the First Home Super Saver Scheme (FHSS), which allows you to save up to $15,000 per year and $50,000 in total inside your super fund for a first home deposit — potentially accessing a better tax rate on savings growth.