Most Australians still hear the old rule: “You need 20%.” That is often a strong target because it can reduce lender risk and, in many cases, helps you avoid Lenders Mortgage Insurance (LMI). But the real answer is more nuanced: your required deposit depends on your loan-to-value ratio (LVR), borrower profile, property type, location, evidence of savings, and lender policy.
To make this practical, this guide uses a modern reference point: a $1,000,000 property. That is not because every home costs that amount, but because examples like “$300,000 homes” no longer reflect the lived reality of most metro borrowers, and outdated numbers erode trust instantly.
General information only: This page provides general information and does not take into account your objectives, financial situation, or needs. Credit is subject to assessment, lender criteria, and verification. Fees, costs, and conditions vary by product, state, and borrower circumstances.
Apply Online | Request Callback
At-a-Glance: Deposit Scenarios for a $1,000,000 Property
Below are simple illustrations of deposit sizes at common LVR bands. These figures exclude other costs such as stamp duty and government fees (which vary by state and buyer type).
- 20% deposit (80% LVR): $200,000
- 15% deposit (85% LVR): $150,000 (LMI may apply)
- 10% deposit (90% LVR): $100,000 (LMI often applies)
- 5% deposit (95% LVR): $50,000 (limited pathways; stricter criteria; LMI often applies)
A “deposit” is only one part of the upfront cost. In many real-world purchases, borrowers also need to budget for:
- Stamp duty (or concessions where eligible)
- Transfer and registration fees
- Legal and settlement costs
- Building/pest inspections (where relevant)
- Lender fees (where applicable)
A competent plan treats deposit + costs as a single “upfront funding requirement”.
What Does “Deposit” Really Mean?
In everyday language, “deposit” means the money you contribute toward the property purchase price. In lender terms, the deposit interacts with:
- LVR (Loan-to-Value Ratio): The percentage of the property value you are borrowing.
- Example: Borrowing $800,000 against a $1,000,000 property = 80% LVR.
- Genuine savings: Many lenders want evidence that at least part of your funds were accumulated over time (for example, consistent savings over three months or more), not purely a last-minute lump sum.
- LMI (Lenders Mortgage Insurance): An insurance premium typically charged when the LVR is above a certain threshold (often above 80%). It protects the lender, not the borrower. Whether it applies and how it is calculated depends on the lender and the overall risk profile.
Deposit Bands Explained (What Changes as the Deposit Changes)
- 20% Deposit (80% LVR): The “Strong Position” Scenario
- A 20% deposit can offer:
- Lower perceived risk to lenders
- Often improved pricing or product access (varies by lender)
- Frequently reduced or avoided LMI (subject to lender rules)
- More resilience if property values fluctuate
- For a $1,000,000 purchase, that typically means $200,000 deposit, plus costs.
- Who it suits: borrowers prioritising stronger approvals, pricing stability, and lower risk exposure.
- A 20% deposit can offer:
- 15% Deposit (85% LVR): A Common Middle Path
- A 15% deposit can be workable, but:
- LMI may apply
- Lender policy scrutiny tends to increase
- Genuine savings evidence can become more important
- For a $1,000,000 purchase: $150,000 deposit, plus costs.
- Who it suits: borrowers with strong income quality and clean credit who want to buy sooner rather than wait for the full 20%.
- A 15% deposit can be workable, but:
- 10% Deposit (90% LVR): Feasible, But More Sensitive
- A 10% deposit can be achievable, but typically comes with:
- LMI often applying
- Greater sensitivity to living expenses, liabilities, and documentation
- Tighter tolerances for credit conduct issues
- For a $1,000,000 purchase: $100,000 deposit, plus costs.
- Who it suits: borrowers with stable income and strong serviceability who can demonstrate disciplined money management.
- A 10% deposit can be achievable, but typically comes with:
- 5% Deposit (95% LVR): Possible Pathway, Highest Friction
- A 5% deposit scenario is often the most constrained:
- Highest policy intensity
- Stronger evidence requirements (income stability, expenses, savings story)
- Property type and location restrictions may apply
- LMI often applies
- For a $1,000,000 purchase: $50,000 deposit, plus costs.
- Who it suits: specific circumstances where the borrower profile is strong and the lender’s policy supports it.
- A 5% deposit scenario is often the most constrained:
Genuine Savings: What Lenders Often Look For
Many lenders want evidence that at least part of your funds were accumulated over time. Typical evidence includes:
- Consistent savings contributions
- Stable account conduct with limited gambling/overdraft patterns
- Clear source-of-funds documentation
- Transparent explanations for any large, unusual credits
A deposit story that is clear, documented, and consistent can materially improve approval confidence.
Can a Gift Count as a Deposit?
Gifts may be acceptable depending on lender policy and your verification evidence. A compliant approach requires:
- Source of funds clarity
- Donor identification (where required)
- Documentation confirming it is a gift, not a repayable loan
- Bank statements showing the trail
Some lenders will treat gifted funds differently from genuine savings, which can affect thresholds and approval considerations.
First Home Buyer Support: FHOG and Stamp Duty Concessions
If you are a first home buyer, you may be eligible for:
- First Home Owner Grant (FHOG)
- Stamp duty exemptions or concessions (state-based)
These supports can help narrow the gap, but they do not automatically change lender deposit or servicing requirements. Eligibility, property caps, and rules differ by state and can change over time.
For accurate scheme details, borrowers should review their relevant state revenue office guidance and confirm eligibility before committing.
First Home Buyers Loan | Download Our Free Guide
The Part People Miss: Costs Beyond the Deposit
Even borrowers with a strong deposit can get caught out if they do not budget for purchase costs. Depending on your state and circumstances, upfront costs can be significant.
A practical rule: treat the project as “deposit + costs + contingency,” not just “deposit”.
Tips on Saving a Deposit (Modernised for 2025 Reality)
Saving for a deposit is less about motivation and more about system design.
- Build a “deposit budget” in plain English
Track:- Rent, food, transport, insurance
- Subscriptions and discretionary spend
- Actual surplus each pay cycle
- Automate savings like a bill
Set an automatic transfer on pay day into a dedicated savings account. Behaviour beats willpower. - Reduce friction by separating accounts
One account for bills. One account for spending. One account for deposit savings. This reduces accidental leakage. - Document your story as you go
Clean bank conduct matters. Avoid unexplained cash deposits and keep records of large credits. - Be cautious with investing your deposit
Investing can help, but it can also create volatility. If you invest, understand the downside risk and timeline risk. For many borrowers, stability and traceability matter just as much as return.
What Mortgage House Can Help With
Mortgage House can assist by:
- Estimating deposit levels based on your target property value and likely LVR range
- Clarifying what documentation and savings evidence is commonly required
- Helping you understand the difference between deposit, costs, and policy thresholds
- Supporting an application pathway that aligns with lender criteria and responsible lending obligations
All outcomes are subject to verification, assessment, and lender policy.
FAQs
Do I need a 20% deposit to buy a home?
Not always. Many borrowers aim for 10–20%, and smaller deposit pathways can exist depending on lender policy and borrower profile. A 20% deposit can improve pricing, reduce risk, and often avoids LMI, but it is not the only route.
What is LMI and who pays it?
LMI is typically charged when the LVR is above a threshold (often above 80%). The borrower usually pays the premium (either upfront or capitalised), but it protects the lender. Rules vary by lender and product.
What counts as genuine savings?
Often this means funds accumulated over time (for example, consistent savings over months), shown through bank statements and clean account conduct. Exact rules vary by lender.
Can I use FHOG as part of my deposit?
It may assist with the upfront gap, but grants and concessions do not automatically guarantee loan approval. Lender policy and servicing still apply.
How do I know what deposit I need for my situation?
The practical method is to start with your target property value, choose a target LVR band (80/85/90/95), then add estimated costs and confirm how your savings evidence will be assessed.
How much deposit do I need for a home loan in Australia?
Most borrowers aim for 10% to 20% of the property value. For a $1,000,000 property, that is usually $100,000 to $200,000, plus purchase costs like stamp duty and legal fees. The exact deposit depends on your LVR, borrower profile, and lender policy.
What deposit avoids LMI?
Often a 20% deposit (80% LVR) is a common pathway to reduce or avoid LMI, depending on the lender and situation. Some borrowers may still have LMI alternatives or lender-specific exceptions, but these are assessed case-by-case.
Can I buy a home with a 5% deposit?
Some pathways can allow smaller deposits, but requirements are typically stricter and LMI often applies. Eligibility depends on the lender, your income stability, credit history, property type, and evidence of savings.
Deposit Comparison Tool
A borrower with $1.2 million equity opens a $600 k line of credit, draws $250 k for an investment, repays $100 k after profits and instantly regains $450 k available — no re-approval needed.
