How much do you need for a house deposit?

Saving for a home loan deposit can be a significant early hurdle in the home-buying journey, but you’ve got to start somewhere. Finding a monetary goal to keep in sight can be half the battle in putting together the deposit needed for a home loan, so let’s talk dollars.

How much do you need for a house deposit?

A home loan deposit is the amount of money you contribute to the purchase price of a property. It typically ranges from 5% to 20% of a home’s purchase price.

The amount required will depend on the lender you choose. Many traditional lenders ask borrowers to have a deposit of 20% of the purchase price, although some will be willing to accept homebuyers with deposits as small as 5%. Generally, having a deposit of at least 20% means you won’t be required to pay for Lenders Mortgage Insurance (LMI).

LMI is an insurance policy paid for by the borrower that protects their lender should they default on their home loan. Borrowers who have a deposit of at least 20% of the property’s purchase price are generally exempt from paying it.

Some lenders may not require borrowers with a deposit of less than 20% to pay for LMI, depending on their lending policies and the borrower market they’re targetting. From time to time, other lenders may advertise LMI waivers as part of a promotion or special offer.

So, let’s talk money

While it’s generally recommended for a homebuyer to have at least a 20% deposit saved, it can take considerable time to put this amount aside. For some would-be buyers, it may be more feasible to save a smaller deposit and pay LMI to get into the property market sooner. This can particularly be the case in a fast-rising housing market.

It’s also worth mentioning here there are several government schemes that help people with low deposits get into a home sooner, which we’ll also look at in more depth below.

Here’s how much you would need for a deposit for each capital city in Australia, as of November 2024, depending on your ideal loan-to-value ratio (LVR):

Capital City	Median Price	5% Deposit (95% LVR)	10% Deposit (90% LVR)	15% Deposit (85% LVR)	20% Deposit (80% LVR)
Sydney	$1,193,240	$59,662	$119,324	$178,986	$238,648
Melbourne	$778,926	$38,946	$77,892	$116,839	$155,785
Brisbane	$883,357	$44,167	$88,335	$132,503	$176,671
Adelaide	$808,644	$40,432	$80,864	$121,296	$161,728
Perth	$804,621	$40,231	$80,462	$120,693	$160,924
Hobart	$650,881	$32,544	$65,088	$97,632	$130,176
Darwin	$492,692	$24,634	$49,269	$73,903	$98,538
Canberra	$850,223	$42,511	$85,022	$127,533	$170,044
LMI Required?		Yes	Yes	Yes	No

Source: CoreLogic Home Value Index results as of 1 November 2024

It’s important to remember that your deposit doesn’t include all the other related costs that come with buying a house, including:

• LMI (where applicable)

• Stamp duty (our stamp duty calculator can help you estimate how much you will need to pay)

• Home loan fees

• Valuation fees

• Conveyancer and/or legal fees

• Building and pest inspections

• Other costs you may incur

Depending on your circumstances, these fees and charges can add tens of thousands of dollars to the cost of purchasing a home, taking that first hurdle to ownership that much higher.

How do I work out how much I need to save for a deposit?

Simply put, the larger the deposit you can come up with, the smaller your home loan will be. Different lenders have different measures of assessing home loan affordability and your ability to make your repayments.

One rule of thumb is that the amount of debt you have shouldn’t exceed more than six times your gross annual income (that is, before tax). For example, someone who earns a gross annual income of $65,000 should be looking at properties priced in the $390,000 range, which doesn’t buy much in today's market for a single income-earner.

Another rule of thumb when it comes to debt is that households shouldn’t be paying more than 30% of their gross annual income on servicing a home loan. When they exceed this amount, a borrower is said to be in mortgage stress. It’s not a position you want to be in when you’re just starting out as a homeowner.

Of course, these are rough guides. Our borrowing power calculator can give you some idea of how much you can afford to borrow.

Is it worth paying LMI to get into the market sooner?

In some cases, would-be home buyers may decide saving a 20% deposit is a bridge too far, particularly if home values are racing ahead while their wage growth remains steady. It may be better for some to secure their place in the market with the deposit they’ve managed to save and pay for LMI. This will see them in the market for a low deposit home loan, which can present a viable path to homeownership.

Many of these loans will require the borrower to pay for LMI, although how much it costs will depend on the amount they’ve managed to save for their deposit and the value of their property. In theory, the larger the deposit, the lower the cost of the insurance should be.

Our lenders mortgage insurance calculator can provide an estimate of how much you might be up for based on the property’s value, the loan amount, and whether you’re a first home buyer.

Property price	5% deposit	Upfront LMI Estimate	10% deposit	Upfront LMI Estimate	15% deposit	Upfront LMI Estimate
$400,000	$20,000	$15,428	$40,000	$6,552	$60,000	$3,390
$600,000	$30,000	$31,008	$60,000	$9,828	$90,000	$5,100
$800,000	$40,000	$41,344	$80,000	$14,400	$120,000	$6,800

Source: YourMortgage lenders mortgage insurance calculator

Bear in mind, the above figures are a guide only. How LMI is calculated varies between lenders and insurers and may depend on a number of other factors.

Can I avoid paying for LMI even if I have a smaller deposit?

There are several government incentives and initiatives that make it possible for eligible first home buyers to purchase a property with a smaller deposit and avoid LMI.

The federal government’s Home Guarantee Scheme offers support for first home buyers, regional first home buyers, and eligible single parents. Find more details on the scheme below.

Most state and territory governments also offer First Home Owner Grants as well as stamp duty concessions and exemptions.

The First Home Guarantee (FHBG)

Allows eligible first home buyers to purchase a home with a deposit as low as 5% without paying for LMI, with the government effectively guarantoring up to 15% of the value of the home. The scheme can be used for new and existing homes, and property price caps apply.

The Regional First Home Buyer Guarantee (RFHBG)

Is a similar scheme that allows eligible first home buyers to purchase a regional property with a deposit as low as 5%. The government guarantees the remaining amount up to 15% of the home purchase, with the owner not having to pay LMI. It can also be used for existing or new homes as long as the property meets the price cap and regional area criteria.

The Family Home Guarantee (FHG)

Allows eligible single parents to build or buy a home with a deposit as low as 2% and avoid the cost of LMI, with the government guaranteeing up to 18% of the property value. A maximum annual income cap of $125,000 applies.

Guarantor loans

Another option to secure a home loan with a smaller deposit and avoid LMI is to take out the loan with a guarantor – essentially a person or persons who promises to take over the loan in the event you can’t meet your obligations.

A guarantor may offer additional security towards the loan, commonly in the form of equity in their own property. In the eyes of the lender, this makes a home loan far less risky and often averts the need to pay for LMI. It may also give you access to a lower interest rate.

Of course, there are considerable risks associated with being a guarantor and these need to be carefully considered by all parties. But generally, guarantors don’t stay attached to a home loan for the term of the loan and can be removed after the borrower pays off a requisite portion of the loan.

How to save up for a house deposit

If you’re serious about saving for a deposit, it’s important you come up with a plan for how you can effectively put money aside for it. Here are some useful strategies:

Pay off your existing debts

Settling all your existing debts, especially credit card debt or other high-interest loans, will make saving for a deposit much easier. Concentrate on paying those off first and once they’re cleared, make a budget to put funds aside regularly for a home loan deposit.

Paying down any existing debts also boosts your chances of getting approved for a home loan and securing it at a competitive rate

If you think it’s going to be difficult to settle all your existing debts at once, you could consider consolidating them into a single loan facility with a lower interest rate. This can effectively reduce your monthly debt repayments, enabling you to put more towards a deposit.

Allocate savings from every payday

One of the most common ways people save for a home deposit is to set money aside from their fortnightly or monthly pay in a high interest savings account. It could be a good idea to set up a direct payment with your employer so the funds go straight into your savings account.

Even a modest amount set aside from each pay will add up over time. To supercharge your balance, put any tax refunds, commissions, or bonuses straight into the account so you’re not tempted to spend them.

Cut back on extra expenses

There are many ways to reduce your day-to-day expenses. It can be as simple as making your daily coffees instead of buying them, switching to cheaper grocery brands, taking your lunch to work, cooking at home instead of eating out, purchasing second-hand items instead of buying from retailers. The measures don’t have to be draconian – mindfulness is key.

Reach out to a broker

Before diving into the market and looking at prospective properties, it’s wise to determine how much you’ll feasibly be able to contribute as a deposit and the size of the mortgage you’ll be able to afford. Calculating the other costs associated with getting a home loan is also crucial.

It can be wise to consult a mortgage broker with specialist knowledge of the home loan market who can examine your finances, explain your options to you, and help you find the best mortgage for your particular circumstances. You can find a mortgage broker in your area or ask friends and family if they have any recommendations.