Buying your first home is an exciting milestone, but understanding how much deposit you need can be confusing. Do you really need 20%? Can you buy with 5%? What government support is available to help?
This guide will break it all down, including how to calculate your deposit, available grants and concessions, and extra costs to consider (as of March 2025).
Understanding home deposits
A home deposit is the upfront amount you contribute towards the purchase of a property. The remaining balance is covered by a home loan.
The size of your deposit affects:
-
How much you need to borrow
-
Whether you need to pay Lender’s Mortgage Insurance (LMI)
-
Your loan interest rate and repayments
Key Factors That Affect Your Deposit
Several factors influence how much deposit you need:
-
Lender Requirements – A 20% deposit is preferred, but many lenders accept as little as 5%.
-
Property Price – The higher the property value, the larger the deposit.
-
Lender's Mortgage Insurance (LMI) – If your deposit is below 20%, LMI will likely apply, adding to your costs.
-
Government Assistance – First-home buyers may qualify for grants and concessions.
-
Additional Costs – Stamp duty, legal fees, and inspections can add thousands to your upfront expenses.
How to Calculate Your Deposit
Want to know how much you need to save? Use this simple formula:
Deposit Required = Property Price × Deposit Percentage
Example Calculations
|
Property Price
|
20% Deposit
|
10% Deposit
|
5% Deposit
|
2% Deposit
|
|
$500,000
|
$100,000
|
$50,000
|
$25,000
|
$10,000
|
|
$600,000
|
$120,000
|
$60,000
|
$30,000
|
$12,000
|
|
$800,000
|
$160,000
|
$80,000
|
$40,000
|
$16,000
|
*Using an online home deposit calculator can help estimate your savings goal.
How Much Deposit Do You Need?
20% Deposit – The Gold Standard
A 20% deposit is preferred by lenders as it reduces their risk and allows you to avoid LMI.
|
Property Price
|
20% Deposit Required
|
|
$500,000
|
$100,000
|
|
$600,000
|
$120,000
|
|
$800,000
|
$160,000
|
A 20% deposit also secures better loan terms, lower interest rates, and reduced repayments.
Lower deposit options – what’s possible?
If saving 20% isn’t realistic, you can still buy a home with a smaller deposit, but it may involve extra costs:
-
10% Deposit – Requires LMI, increasing the total loan cost.
-
5% Deposit – Common for first-home buyers but comes with LMI and stricter loan requirements.
-
2% Deposit (for eligible buyers) – Some government schemes allow single parents or first-home buyers to purchase with just 2%, without LMI.
Government support for First-Home Buyers
Both the Australian and Victorian governments offer various grants and concessions to help reduce costs.
First Home Owner Grant (FHOG) – VIC
Eligible first-home buyers can receive a $10,000 grant when purchasing or building a new home valued up to $750,000. This grant applies to properties that have not been previously sold or occupied.
Stamp Duty Exemptions & Concessions – VIC
First-home buyers may benefit from stamp duty relief:
-
Full exemption – No stamp duty for homes valued up to $600,000.
-
Concession – Reduced stamp duty for homes valued between $600,001 and $750,000.
First Home Guarantee (FHBG) – Australia-wide
Eligible first-home buyers can purchase a home with just a 5% deposit and no LMI. The scheme is available to 35,000 buyers per year.
Family Home Guarantee (FHG) – Australia-wide
Single parents can buy with a 2% deposit and no LMI, making homeownership more accessible.
Victorian Homebuyer Fund (Shared equity scheme)
The Victorian Government contributes up to 25% towards your home purchase, reducing your loan size and deposit requirement.
For eligibility and more details, check the Victorian First Home Buyer Guide.
Additional costs to consider
Aside from the deposit, be aware of these upfront costs:
-
Stamp duty – A major cost, but discounts and exemptions apply for first-home buyers.
-
Lender’s Mortgage Insurance (LMI) – Required if your deposit is under 20%.
-
Legal & conveyancing fees – Usually between $1,000 - $3,000.
-
Building & pest inspections – Around $300 - $600.
-
Moving & setup costs – Includes removalists, utilities, and furniture.
Make It Simple
You don’t always need 20% to buy a home. Here’s a quick breakdown:
How Much Deposit Do I Need?
|
Deposit Percentage
|
Deposit for $600,000 Home
|
Do You Pay LMI?
|
Government Schemes Available?
|
|
20% (Ideal)
|
$120,000
|
No
|
No special schemes needed
|
|
10%
|
$60,000
|
Yes
|
No
|
|
5% (Minimum for Most Lenders)
|
$30,000
|
Yes
|
First Home Guarantee (FHBG)
|
|
2% (For Single Parents)
|
$12,000
|
No
|
Family Home Guarantee (FHG)
|
Example Calculation
If you're buying a $600,000 home with:
-
20% deposit → Pay $120,000 upfront, no LMI
-
5% deposit → Pay $30,000 upfront, but LMI applies
-
2% deposit (if eligible) → Pay $12,000 upfront, no LMI
By planning ahead, exploring your options, and taking advantage of government support, you can enter the property market sooner and reduce upfront costs.
Publisher Website: www.homeshelf.com.au