How Much Deposit Do I Need To Buy A House?

A man is calculating his resources to buy a house.

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How Much Deposit Do I Need To Buy A House?

To get a home loan, you need a cash deposit. The deposit covers a percentage of the purchase price of the property you want to buy, while the home loan covers the rest of the property price.

The amount you can borrow for a home loan will have an impact on the type of properties you look at, as well as the suburbs you consider.

How much you can borrow for a home loan is determined by a number of things but mostly it is based on the deposit you have up front. This determines your borrowing power.

In most cases, home loan lenders will lend up to 80% of the property value, meaning you’ll need to come up with the other 20% (your deposit).

Can I Get A Home Loan With Less Than 20% Deposit?

Yes, even though the standard deposit is now 20% , some lenders will allow applicants to borrow with as little as 5% deposit on the purchase price of the property they wish to buy. This is of course all dependent on the the applicant’s individual circumstance, and you should seek advice from the lender or a mortgage broker.

A smaller deposit does come with much greater risk. If interest rates rise or unexpected expenses pop up and you’re borrowing at maximum capacity, you could get caught short. Because there’s a greater risk, you’ll need to pay Lenders Mortgage Insurance (LMI). LMI is paid to the bank’s insurer to cover the bank in the event you default on your home loan. You can pay your LMI as an upfront cost or, depending on how much LMI you have to pay, you can add it to your home loan amount.

Other cons on a smaller deposit are:

  • You will pay more in Lenders Mortgage Insurance.
  • There are fewer loan options available to you
  • More interest is paid in total
  • Possibility of Higher interest rates being applied to your loan

Deposit Amounts At A Glance:

Property Sale Price $500,000

20% Deposit  $100,000

10% Deposit $50,000

5% Deposit $25,000

Property Sale Price $750,000

20% Deposit $150,000

10% Deposit $75,000

5% Deposit $37,500

(it is always best to do your savings based on 20% deposit)

What Do Lenders Want To See From The Borrower?

Lenders will always expect that a borrower meets certain requirements before they will approve an application for finance.

Some of these criteria are listed below

Steady Income/Disposable Income

Lenders want to know you’ll be able to afford your repayments over the loan period (term).

Most lenders consider ‘steady employment’ to be the last 2 years of consistent work. Most prefer that you’ve been with your current employer for more than 12 months. 

A lender can estimate how much you would be able to borrow and expected repayments based on current interest rates. From this, calculate whether you can afford to buy the type of house you want in the area you want to live and still have income left.

Savings For Deposit

Proof of savings to satisfy the deposit demands of the loan.

Savings For Up-Front Costs

As well as a deposit, you need savings for other up-front home ownership costs as per below.

Good Credit Profile

When you apply for a loan, a lender orders a credit report on you from a credit bureau.

Credit bureaus keep records of people’s debts and how regularly they’re paid. A good credit rating means you have a history of paying your bills on time.

Existing Debts

Loans (e.g. personal loan, car loan) and debts (e.g. credit card accounts, store cards) may reduce the amount of money you can borrow. But regular payment of these debts does assist your credit profile.

You may have to clear or reduce these before lenders will consider your home loan application.

What Other Upfront Costs Will You Need To Factor In?

Other costs a borrower needs to be able to cover are:

  • Conveyancing fees
  • Legal fees
  • Stamp duty
  • Building and pest inspection
  • Mortgage registration fee
  • Transfer fee
  • Loan application fee

Support For First Time Buyers

There are a number of ways the government can assist with buying a home, which can also affect the deposit you need to pay.

First Home Owners Grant

This state government grant is aimed at discounting the amount first-home owners pay depending on whether they buy property in metro or regional areas or whether it’s a new or established home.

For example, in Victoria the grant is $10,000 for those buying in metro areas but doubles to $20,000 for those looking in regional areas.

First Home Guarantee

The First Home Guarantee is designed to help first home buyers enter the market quicker by providing a guarantee on 15 per cent of a new home’s value. This means eligible first time buyers can potentially purchase a property with as little as five per cent deposit without having to take out Lenders Mortgage Insurance (LMI).

Family Home Guarantee

The Family home guarantee, allows eligible single parents to buy a property with a deposit as low as 2%, without having to pay LMI.

Under the Family Home Guarantee, single parents could build a new home or purchase an existing home with a deposit of as little as 2%, plus costs, with the government guaranteeing up to 18% of the value of the property.

First Home Super Saver Scheme

The First Home Super Saver scheme is a government scheme that allows first-home buyers to access their super to help buy a property.

Regional Home Guarantee

The Regional home guarantee is an expansion of the First Home Guarantee which allows eligible buyers to purchase a new home outside of metro areas with a smaller deposit.

The Regional Home Guarantee allows borrowers to avoid paying LMI, because the government acts as a guarantor on part of the loan.


All of the above finance requirements need to be factored in when you are thinking of obtaining a home loan and the deposit required to enable that home loan to be undertaken. The advice from Select Legal is to have a sustainable savings plan that helps accumulate your deposit. It is a good way to show you can meet home loan repayments – also, make sure you’re making regular repayments on credit cards or other credit products you have, to help increase your credit score. Keep abreast of all legislative requirements and Federal and State laws pertaining to home buying. There are many options available to you, that may require legal advice.

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