Home loan deposit requirements in Australia

There is no single legal minimum deposit for a home loan in Australia. Each lender sets its own policy, and in practice most lenders look for a deposit of between 5 and 20 per cent of the property value. A 20 per cent deposit generally avoids lenders mortgage insurance, while a smaller deposit is usually possible only with that insurance, a guarantor, or a government guarantee.

The deposit is also only part of the cash required. Transfer duty, legal fees, inspections and moving costs sit on top of it, so the amount a buyer needs to have saved is usually larger than the deposit percentage suggests. This guide explains how each piece works and what to check before setting a savings target.

How deposit size and loan-to-value ratio work together

Lenders describe deposit size through the loan-to-value ratio, or LVR. The LVR is the loan amount divided by the value of the property, expressed as a percentage. A buyer with a 20 per cent deposit has an LVR of 80 per cent. A buyer with a 5 per cent deposit has an LVR of 95 per cent.

Two details matter. First, lenders generally use the lower of the purchase price and their own valuation. If a valuation comes in below the contract price, the LVR rises and the buyer may need to contribute more cash. Second, the LVR influences more than approval. It can affect the interest rate offered, whether insurance is required, and how closely the application is examined.

The Reserve Bank of Australia has observed that loans with higher starting LVRs are more likely to be in negative equity if the property must be sold after prices fall, and that borrowers with high LVRs tend to hold smaller financial buffers. That is why lenders treat a small deposit as higher risk.

Comparing 5%, 10% and 20% deposits

The table below is an illustrative example only. It assumes a hypothetical $700,000 purchase, a 30 year principal and interest loan, and a hypothetical interest rate of 6.00 per cent a year, chosen purely to show the arithmetic. It is not a current market rate, and it ignores fees and any insurance premium.

Deposit	Deposit amount	Loan amount	LVR	Illustrative monthly repayment
5%	$35,000	$665,000	95%	About $3,987
10%	$70,000	$630,000	90%	About $3,777
20%	$140,000	$560,000	80%	About $3,357

In this hypothetical case, the gap between a 5 per cent and a 20 per cent deposit is $105,000 in savings and roughly $630 a month in repayments. The trade-off is time. Saving the extra amount may take years, during which rent is paid and prices may move in either direction. The deposit calculator can help estimate how long a savings target may take, and the mortgage repayment calculator shows how different loan sizes change repayments.

What each deposit level usually means

• 20 per cent or more: generally no lenders mortgage insurance, the widest choice of lenders and products, and more equity as a cushion.
• 10 per cent: widely available, but lenders mortgage insurance usually applies unless a guarantee or guarantor is in place.
• 5 per cent: available from fewer lenders, usually with stricter conditions on savings history, employment and property type, unless the loan is supported by a government guarantee.

Lenders mortgage insurance and when it applies

Lenders mortgage insurance, or LMI, protects the lender, not the borrower, if the borrower cannot repay the loan. According to the Reserve Bank of Australia, lenders generally use mortgage insurance for loans with an LVR of 80 per cent or more, and the insurer charges the lender an upfront premium that is usually passed on to the borrower.

Premiums are set by insurers and vary with the loan size and the LVR, so the cost tends to rise sharply as the deposit shrinks. Many lenders allow the premium to be added to the loan, which avoids an upfront payment but means interest is paid on it over time. Because pricing differs between lenders, borrowers may wish to ask for a written LMI quote early. The LMI calculator gives an indicative estimate for comparison purposes.

LMI does not protect the borrower. A borrower who wants cover for illness, injury or job loss needs to consider separate personal insurance.

Genuine savings and how lenders check them

Many lenders, particularly for loans above 80 or 90 per cent LVR, expect part of the deposit to be "genuine savings". The term is a lender policy concept and not a legal definition, so the details differ. It generally means funds the borrower has accumulated or held over a period, commonly around three months, shown through account statements.

Items lenders may accept as genuine savings include:

• regular deposits into a savings account or term deposit
• shares or managed funds held over time
• in some cases, a consistent rental payment history in place of part of the savings requirement.

Items that often do not count on their own include a recent gift, a one-off windfall, a tax refund, or the proceeds of selling a car. These can usually still form part of the deposit, but the lender may want a minimum share of the purchase price to come from savings the borrower built personally.

Gifted deposits and guarantor loans

Gifted deposits

Lenders generally accept a gift from a close family member towards a deposit. They usually ask for a signed letter confirming that the money is a gift, is not repayable, and carries no interest. If the money is in fact a loan, it must be disclosed, because the repayments affect the lender's assessment of what the borrower can afford. Some lenders still require a portion of genuine savings alongside the gift.

Guarantor loans

With a family guarantee, a relative, usually a parent, offers part of the equity in their own home as additional security. This can reduce the effective LVR to 80 per cent or below, which may remove the need for LMI even where the buyer has a small deposit. The buyer still has to show the capacity to repay the whole loan.

The risk falls on the guarantor. If the borrower defaults and the sale of the property does not clear the debt, the lender can call on the guarantee, which may put the guarantor's home at risk. Points to check include whether the guarantee is limited to a fixed amount, the conditions for releasing it once the loan falls below a set LVR, and whether the guarantor has obtained independent legal advice, which many lenders require.

The Australian Government 5% Deposit Scheme

The former Home Guarantee Scheme is now presented by the Australian Government as the 5% Deposit Scheme, administered by Housing Australia. Under the scheme, Housing Australia guarantees part of an eligible buyer's loan so that a participating lender can lend without LMI.

According to the Australian Government's First Home Buyers website, as at September 2026:

• first home buyers may purchase with a minimum 5 per cent deposit, and eligible single parents or legal guardians with a minimum 2 per cent deposit
• there are no income caps, which were removed from 1 October 2025, and places are unlimited with no waiting list
• property price caps apply and vary by location
• applications are made through a participating lender, not directly to Housing Australia
• buyers have 90 days from scheme pre-approval to find a home and sign a contract
• buyers must live in the property as owner-occupiers, and a buyer who stops meeting the ongoing obligations may lose the guarantee and be required to pay for LMI.

The guarantee is not a cash payment and does not reduce the loan. A buyer using a 5 per cent deposit still borrows 95 per cent of the price, pays interest on that amount, and must satisfy the lender's normal credit assessment. Price caps and eligibility rules can change, so they should be confirmed with a participating lender at the time of application.

The same website describes two related programs. The Help to Buy shared equity scheme requires a minimum 2 per cent deposit, with the Government contributing up to 30 per cent of the price for existing homes or 40 per cent for new homes, subject to income caps, price caps and a limited number of places each year. The First Home Super Saver Scheme allows eligible buyers to withdraw voluntary superannuation contributions, up to $15,000 from any one year and $50,000 in total, towards a first home. State and territory assistance is summarised in the government grants guide.

Upfront costs that sit on top of the deposit

A common mistake is to treat the deposit as the full savings target. Buyers generally also need cash for:

• Transfer duty (stamp duty): usually the largest cost, set by each state and territory. Concessions for first home buyers differ widely. For example, Revenue NSW states that, for contracts exchanged on or after 1 July 2023, eligible first home buyers pay no transfer duty on homes valued up to $800,000, with a concessional rate for homes valued above $800,000 and below $1,000,000. The stamp duty calculator gives an estimate by state.
• Legal or conveyancing fees and government registration fees for the transfer and mortgage.
• Building, pest and strata inspections, which are often paid for before an offer is made and may be repeated across several properties.
• Lender fees, such as application, valuation or settlement fees, and any LMI premium not added to the loan.
• Adjustments at settlement for council and water rates, plus building insurance, which lenders generally require from settlement or earlier.
• Moving costs and a cash buffer for the first months of ownership.

Lenders also check that the buyer has enough funds to complete the purchase, so a shortfall in these costs can affect approval, not only the household budget.

What to check before choosing a deposit target

1. Estimate a realistic price range using the borrowing power calculator and recent sales in the target area.
2. Add transfer duty and other upfront costs to the deposit to find the true savings target.
3. Compare the cost of buying sooner with a smaller deposit, including LMI and higher repayments, against the cost of waiting.
4. Confirm eligibility for the 5% Deposit Scheme and any state concession with the administering agency or a participating lender.
5. Keep clear records of savings, and document any gift in writing.
6. Leave a buffer after settlement, because repayments can rise if interest rates increase.

This article is general information only and does not take personal circumstances into account. A licensed credit adviser can confirm how lender policies apply to an individual situation, and the first home buyer hub sets out the wider purchase process.