How Much Deposit Do You Really Need for a Home Loan?

You don’t always need a 20% deposit. Many lenders accept 5% or 10%. Below 20% you will usually pay lenders mortgage insurance and have fewer lenders to choose from. On an $800,000 home, 5% is $40,000 and 20% is $160,000. That gap changes your repayments and costs.

On an $800,000 home, a 5% deposit is $40,000. A 20% deposit is $160,000. That $120,000 gap shapes three things: your monthly repayment, your lender options and whether lenders mortgage insurance applies. So how much deposit do I need for a home loan? The honest answer is there is no single correct number. The right deposit is whatever gets you into a property without paying more than you need to over the life of the loan.

In this tutorial, we walk the deposit ladder rung by rung: 5%, 10% and 20%. You will see what a smaller deposit costs in LMI. You will also see how many lenders may consider you and what higher repayments look like. We cover guarantor loans, the 5% Deposit Scheme, Help to Buy and the First Home Super Saver Scheme. We look at how to compare saving longer with buying now and how to run your own numbers before you talk to anyone. At Time Home Loans, clients never pay a broker fee. Book a complimentary chat when you are ready. This is general information only, so seek advice before acting.

What a 5% deposit actually costs on an $800,000 home

We use that same $800,000 price throughout. Only the deposit changes, which means only the loan amount and the loan to value ratio (LVR) change. Keep the price fixed and the comparison stays honest.

Every dollar figure below is a worked example with stated assumptions, not a quote. Lenders assess each application on its own merits, and lending criteria, fees and charges apply.

By the end you will be able to put a number on each rung of the deposit ladder, then weigh that cost against saving for another year. To see where your own savings land, try our How Much To Deposit calculator.

Why the 20% rule sticks around, and why it is not a rule

Twenty per cent has been treated like a rule for so long that plenty of buyers never question it. It started as a practical marker: it is around the point where lenders mortgage insurance usually drops away, so people began treating the safe deposit as the only deposit. What a lender actually looks at is the LVR. Divide the loan amount by the property value. A 5% deposit leaves an LVR of 95%, a 10% deposit 90% and a 20% deposit 80%.

There is no law requiring 20%. It is a risk setting. It decides which lenders will look at your application, what insurance they require and how they price the loan. Changes to the First Home Loan Deposit Scheme and later guarantee schemes have already shifted the picture. One report prepared for the Insurance Council of Australia, an LMI industry body, estimates LMI use among first home buyers has fallen to about 1 in 10, down from 3 in 10 before the Home Guarantee Scheme began in 2019. Read those numbers as estimates from an interested party. Even so, a small deposit now looks like a normal path rather than an exception.

Lenders mortgage insurance, in plain English

Now the term behind that 20% figure: Lenders Mortgage Insurance (LMI).

Here is the plain meaning. LMI is a policy that protects the lender, not you. If you default and the sale of the property does not cover what you owe, the insurer pays the lender the shortfall. You do not get a payout. You do not get to keep the property.

It usually applies when your deposit is under 20%, which is the same thing as an LVR above 80%. The bigger the loan sits next to the property value, the more the lender wants that cover.

It is charged as a one-off premium based on the loan amount and the LVR. Most borrowers do not pay it upfront. It gets added to the loan, which means you pay interest on the premium for the life of the loan.

That is the double cost of a small deposit. You borrow more because the deposit is smaller, then you borrow again to cover the insurance.

Some government schemes are described as low deposit with no LMI because the government covers part of the loan instead. Eligibility varies, so always check the scheme documentation.

That insurance decision then moves three other numbers at once.

Three things change at once when your deposit moves

Here is the part most guides skip. Your deposit does not move one lever, it moves three at once.

Second, lender choice. Fewer lenders write loans at 95% LVR, and those that do often attach conditions around loan size, property type or location. At 90% the panel widens. At 80% you sit in the mainstream market, where features such as offset accounts are more likely to stay on the table. Policy shifts move these goalposts, so it pays to keep an eye on lending policy changes.

Third, repayments. A smaller deposit means a bigger loan, so more interest over the life of the loan, plus the premium if insurance applies.

There is a fourth cost that is easy to miss. Saving longer usually means buying later, and prices tend not to wait around while you do it.

Read the three rungs below with all of that in mind. A change in deposit moves those three things together, not one at a time.

The 5% rung: in sooner, with insurance attached

Step onto the 5% rung and the $800,000 example gives you this: a $40,000 deposit, a $760,000 loan and an LVR of 95%.

LMI almost always applies at a 95% LVR. On those assumptions the premium can be substantial, ask for a current quote on your own figures rather than budgeting from someone else’s. It is often added to the loan, so you pay interest on it as well as on the house.

Lender choice narrows at this rung. Fewer lenders accept a 95% LVR. Some also set their own limits on loan size, property type or location, so your shortlist is shorter before you even start comparing.

Repayments are the largest on the ladder, because $760,000 is the biggest loan of the three. Put a stated rate and term against it, then run the same figures at the rungs above to see the monthly gap.

This rung can suit a buyer with steady income, a clean rental history and a good reason to buy now, especially where a government scheme removes the LMI. Remember that what else banks take into consideration matters as much as the deposit itself.

The 10% rung: a smaller premium and a wider panel

If you can put a bit more aside, the 10% rung changes the picture. On the same $800,000 example, a 10% deposit is $80,000. That leaves a $720,000 loan and an LVR of 90%.

LMI usually still applies at 90%, but the premium steps down as the LVR falls. Each extra dollar of deposit can trim it, so the price of insurance is not one fixed number. How LMI is calculated depends on the loan amount and LVR, ask your lender or broker for a current quote.

More lenders will consider a 90% LVR than a 95% LVR. A wider panel means more room to compare rate, fees and features instead of taking whatever is on offer.

Repayments drop because you borrow $40,000 less. The exact saving depends on your rate and term, so use a repayment calculator with your own figures.

This rung is often the first realistic stop for buyers who do not qualify for a scheme and do not have a guarantor. It is also where the save for one more year question usually gets asked. If that is you, our first home buyer loans page shows how the lender panel shifts as your deposit grows.

The 20% rung: no LMI, and a different set of choices

Now you are at the top rung. On the same $800,000 property you put in $160,000 and borrow $640,000, an LVR of 80%.

This is where lenders mortgage insurance usually falls away with most lenders. That is what gives the 20% figure its reputation.

Lender choice widens again too. At 80% LVR you sit in the mainstream of the market. Features like offset accounts and extra repayments are more likely to be available without conditions attached.

Repayments are the smallest of the three rungs because the loan is the smallest. But 20% is not a finish line. Some lenders price differently again below 80% LVR. That extra money could also do other work, like covering stamp duty, holding a cash buffer or funding a renovation.

The honest catch is time. Getting to 20% takes longer. The market does not pause while you save.

Whether that wait is worth it is the next question, and it is best answered with two sets of numbers side by side.

Saving longer versus buying now: the comparison that matters

So the question becomes this. Do you save longer and pay less insurance, or buy now and let time do the rest? Put two totals side by side. One side: the LMI premium and the extra repayments you avoid by reaching 20%. The other: rent and price growth while you save.

One report, prepared for the Insurance Council of Australia, which represents the LMI industry, estimates the expanded Home Guarantee Scheme could lift national prices by 3.5% to 6.6% across 2026 and several years after. On an $800,000 home that is roughly $28,000 to $52,800 more. Treat it as a projection, not a promise. The same report warns early price rises could cancel out some or all of the LMI savings from buying sooner. It also found about nine in ten borrowers helped by the scheme in 2023-24 would have bought anyway using LMI, family help or other support.

Run both totals on your own numbers, with our residential market news update as one starting point. Decide which cost you would rather carry. Neither answer is automatically right.

Can I buy with a 5% deposit and no LMI?

If saving to 20% is the hurdle in front of you, two routes can move it: a guarantor loan and a government scheme.

Be clear about what they change and what they do not. They change the deposit and the insurance requirement. They do not change the loan amount, the repayment or the way a lender assesses your income, expenses and credit history.

Eligibility shifts around. Price caps, location and property type all vary between schemes, so read the scheme documentation rather than planning around a headline number.

These routes are worth raising early, because they can change which lenders are worth approaching and which documents you need to gather. Knowing that, you can shop around for the right loan with a clearer picture instead of guessing.

Guarantor loans: when family equity stands behind you

One of those routes is a guarantor loan, where a family member puts their own property up as extra security or gives a limited guarantee. The lender treats part of your loan as lower risk, which can remove LMI and the need to save a 20% deposit.

The catch is real. If you cannot pay and the property sells for less than the debt, their guarantee can be called on. Many lenders expect them to get independent legal advice before signing.

Structure matters too. A capped guarantee, one limited to a set dollar amount and one released once your LVR falls all behave differently. Ask what happens if your guarantor wants to step back later.

Have the awkward conversation early. Encourage them to speak with a solicitor or financial adviser. This is a family decision as much as a lending one. If family equity is not an option, the government schemes are the other way in.

The 5% Deposit Scheme and the Home Guarantee Scheme

A guarantor is one route. A government scheme can do similar work without putting family property on the line.

Under the Australian Government’s 5% Deposit Scheme, formerly the Home Guarantee Scheme, the first home buyers site says eligible buyers can purchase with a 5% deposit, or 2% for single parents, and describes it as low deposit with no LMI. The same material lists no income caps and no limit on places, with the government guaranteeing a share of the property price, reported as up to 15%.

The Housing Australia page carries matching detail, so treat the two as the same source rather than two independent confirmations. What matters is eligibility: price caps that vary by suburb, state and postcode, plus the property types accepted. Both the purchase price and the lender’s valuation must sit at or below the cap.

Read the scheme documentation before you rely on it. Ask how the guarantee interacts with your lender’s own criteria, because participating lenders still assess your loan the way they assess any other.

Help to Buy and a smaller slice of your own deposit

If saving to 20% is the hurdle, Help to Buy works differently from a guarantee. It is a shared equity scheme, which means the government buys a share of the home alongside you rather than standing behind part of your loan.

A small minimum deposit applies, and the government takes a share of the property alongside you, check the current scheme documentation at housingaustralia.gov.au for the exact percentages, as they may vary by eligibility category. The government contributes up to 30% of the purchase price for existing homes or up to 40% for newly built homes.

Because the government owns part of the property, you borrow less. That is why the deposit can be so small.

You repay the government’s share when you can or when you sell. Before you sign, ask how that share is valued when you buy it back. If it is valued at the market price at that time, a rising market increases what you repay.

Eligibility rules and property price caps apply, so check the current scheme documentation before you plan around it.

First Home Super Saver Scheme and super as a deposit account

Help to Buy leans on the government’s balance sheet. This scheme leans on your super instead.

You make voluntary contributions, up to $15,000 a financial year and $50,000 in total, then withdraw that money plus associated earnings when you buy. Those contributions are taxed at a lower rate than ordinary income, so the deposit grows faster than it would in a savings account.

In plain terms, you build the deposit inside super and take it out later. Conditions apply. You generally need to be 18 or over, have never owned property, plan to live in the home and request your withdrawal before you take ownership. Check whether your fund supports it.

This is general information only. Speak to your accountant or financial adviser about how it would work for you.

Run your own numbers before you pick a route.

How to run your own numbers before you talk to anyone

Super is one way to build the deposit. Whatever route you use, start with three figures: the property price, the deposit you can genuinely access, and the loan amount left over. Everything else follows from those.

That gives you your loan to value ratio (LVR). Divide the loan by the property value. If the result sits above 80%, expect lenders mortgage insurance to apply, so ask for a current premium quote on your own figures rather than guessing.

Run a home loan deposit calculator or repayment calculator at 5%, 10% and 20%, keeping the rate and term identical. That way you compare deposits, not products.

Then add the costs people forget: stamp duty, conveyancing, building and pest inspections, lender fees and moving costs. The deposit is not the whole upfront bill. A slightly smaller deposit plus a cash buffer can beat stretching to your last dollar.

If you would rather someone check the panel for you, a broker can compare loans from a panel of 50+ lenders and tell you where your deposit fits. Time Home Loans clients never pay a broker fee at any stage.

Common questions about home loan deposits

Once you have your three figures, the next step is usually a list of questions. The ones that come up most often depend on your income, your deposit and the property you are looking at, so the answers move with your situation.

What follows is general information only. It is not credit advice and does not take into account your objectives, financial situation or needs. Lending criteria, fees and charges apply.

A short conversation with a broker is often quicker than reading another guide, see below for how to book.

How much deposit do I need for a home loan?

Here is the short answer.

There is no single deposit figure every lender requires. Each lender sets its own limits. Many will consider a 5% or 10% deposit while some will look at less through a government scheme or a guarantor.

A practical starting point is the amount you can genuinely access without emptying your savings. Test that number against the 5%, 10% and 20% rungs covered next.

Is a low deposit home loan worth it?

Once you have your deposit figure, the real question is whether using it now beats saving longer. A low deposit home loan can work if the extra cost over the life of the loan is less than what waiting costs you. That might be rent, rising prices or a lease ending at an awkward time.

It looks less appealing when the LMI premium and bigger loan stretch your budget thin. You also need a buffer for repairs, rate changes or a few months without income. A loan you can barely cover is not a win.

So run both versions on paper: buy now at your deposit and wait and save. Compare the total cost. The comparison is the answer, not the deposit percentage by itself.

When does lenders mortgage insurance stop applying?

The premium does not follow you forever. Once your LVR falls to 80%, many lenders stop charging LMI. That is the rung where it disappears from the deal.

Some government schemes work differently. They are described as low deposit with no LMI because the government covers part of the loan, so a 5% deposit, or 2% in some cases, can go through without the premium. Eligibility rules and price caps still apply.

Refinancing can remove it later too. If your property has grown in value or you have paid the loan down, your LVR may now sit under 80%. Ask for a fresh valuation and check, rather than assuming the insurance is gone.

The deposit number that fits you

Run the ladder on your own numbers, using the $800,000 example from earlier: $40,000, $80,000 and $160,000. Note at each rung whether LMI applies, how many lenders will consider you and what the repayment does to your budget. Pick the version you can live with comfortably. Schemes and guarantor options are worth exploring if 20% remains out of reach, and scheme documentation will show you the current eligibility rules and price caps.

Want to run those numbers? Book a complimentary chat with Time Home Loans. We compare loans from a panel of 50+ lenders and clients never pay a broker fee. This article is general information only and is not credit advice. It does not take into account your objectives, financial situation or needs. Lending criteria, fees and charges apply. Time Home Loans Pty Ltd ABN 53 161 695 012 is a Corporate Authorised Credit Representative (529395) under Australian Credit Licence 384324.

Conclusion

A 5%, 10% or 20% deposit is not a pass or fail mark. It is a trade-off.

The 20% rung avoids LMI, but it can cost you time in rent and price growth while you save. Government schemes and guarantor loans can narrow that gap, as long as you check eligibility rules and price caps first. This is general information only and does not take into account your objectives, financial situation or needs. Seek advice before acting.

Related: guarantor guide · savings goal calculator

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