"You need a 20% deposit." It's the line most of us grew up hearing — and for a lot of first home buyers, it's the single belief that keeps them renting for years longer than they needed to. The truth is more flexible: in Australia today you can often buy with far less, and the real question isn't can you buy with a smaller deposit, but which path makes the most sense for your situation.
Here's the honest, plain-English version.
What a "20% deposit" actually means
A deposit is your share of the purchase price; the bank lends the rest. On an $800,000 home, a 20% deposit is $160,000. The reason 20% is the magic number is one thing: it's the point at which lenders stop charging Lenders Mortgage Insurance.
Lenders Mortgage Insurance (LMI), explained without the jargon
LMI is a one-off insurance premium that protects the lender (not you) if you can't repay. Lenders require it whenever you borrow more than 80% of the property's value — i.e. when your deposit is under 20%. It can run from a few thousand dollars to well over $20,000, and it's usually added to your loan.
LMI isn't automatically "bad". Sometimes paying it to buy two years earlier beats waiting and watching prices rise faster than you can save. Sometimes it doesn't. That trade-off is exactly the kind of thing worth running the numbers on together.
The low-deposit paths (5–10%)
1. The First Home Guarantee (5% deposit, no LMI)
Under the federal First Home Guarantee scheme, eligible first home buyers can purchase with as little as a 5% deposit and pay no LMI — the government guarantees the gap to the lender. Places and price caps apply and change, so eligibility is worth checking for your specific situation and suburb.
2. A low-deposit loan with LMI
If you don't qualify for a scheme, many lenders will still lend at 90–95% with LMI added. You get in sooner; you just carry the insurance cost.
3. A guarantor loan (potentially no cash deposit)
If a family member is willing to offer the equity in their own home as additional security, a guarantor loan can let you buy with little or no cash deposit — and often avoid LMI entirely. It's a big ask of family, so it needs to be structured carefully.
Don't forget the costs beyond the deposit
Your deposit isn't the only cash you'll need. Budget for stamp duty (first home buyers often get concessions or exemptions, depending on your state and price), conveyancing and legal fees, building and pest inspections, and a small buffer for moving and setup. A genuine plan accounts for all of it — not just the headline deposit.
So, what should you actually do?
Start by working backwards from what you can comfortably borrow and repay, not from a deposit target you've assumed. Use our borrowing power estimator for a rough figure and the mortgage calculator to see real repayments. Then have a proper conversation about whether a scheme, LMI, or a guarantor gets you into the right home at the right time — without overstretching.
