How Much Deposit Do You Need to Buy Your First Home?

Key Takeaways

• You don’t always need a 20% deposit—many Aussies buy with as little as 5% (but there are trade-offs).
• A bigger deposit means lower repayments, less interest, and you can avoid Lenders Mortgage Insurance (LMI).
• Government schemes can help you get in the door sooner, even with a smaller deposit.
• “Genuine savings” matter—lenders want to see you’ve built up your deposit over time.
• Don’t forget about other upfront costs like stamp duty, legal fees, and moving expenses.
• Use calculators and get pre-approval to know your budget before you start house hunting.
• Mountway Finance is here to guide you every step of the way—book a chat to get started.

Saving for Your First Home Deposit: What You Need to Know

Saving for your first home deposit can feel overwhelming, but knowing exactly what’s required from the start will help you move forward with confidence and clarity.

Buying your first home is a major milestone—one that comes with excitement, anticipation and, let’s be honest, a fair bit of confusion. One of the most common questions we hear at Mountway Finance is: “How much deposit do I actually need?” The answer isn’t always straightforward, but understanding the ins and outs of deposits can help you plan with confidence and take your first steps towards home ownership.

Let’s break down what a deposit is, how much you’ll typically need, what factors can influence the amount, and how you can get there faster. We’ll also clear up some common myths and offer practical tips to help you on your journey.

What Is a Home Deposit?

A home deposit is the upfront amount you pay towards the purchase price of a property. It’s your initial stake in your new home, and it shows lenders you’re serious and financially committed. The deposit is usually paid when you sign the contract of sale, and it forms part of the total purchase price.

The Standard Deposit: 20% Explained

Traditionally, lenders in Australia have required a deposit of 20% of the property’s value. For example, if you’re buying a home for$600,000, a 20% deposit would be$120,000. This isn’t a hard rule, but it’s considered the “gold standard” because it reduces risk for both you and the lender.

With a 20% deposit, you’re borrowing less, which means lower monthly mortgage repayments and less interest paid over the life of your home loan. It also means you’ll avoid paying Lenders Mortgage Insurance (LMI)—a one-off insurance premium that protects the lender if you default on your loan.

Can You Buy With Less Than 20%?

Absolutely. Many first home buyers manage to get into the market with a deposit as low as 5% or 10%. For a$600,000 property, a 5% deposit would be$30,000. But there are a few things to keep in mind if you’re putting down less than 20%.

Lenders Mortgage Insurance (LMI)

If your deposit is less than 20%, most lenders will require you to pay LMI. This can add thousands (sometimes tens of thousands) to your upfront costs, depending on the size of your deposit and the value of the property. LMI is not insurance for you—it protects the lender if you can’t repay your home loan.

Stricter Lending Criteria

With a smaller deposit, lenders may look at your finances more closely. You’ll need to show strong evidence of savings, stable employment and a good credit history. Some lenders may also charge higher interest rates for low-deposit loans, which can affect your mortgage repayments over time.

Government Schemes That Can Help

The good news is there are several government initiatives designed to help first home buyers get into the market sooner, even with a smaller deposit.

First Home Guarantee

This scheme allows eligible first home buyers to purchase a property with as little as a 5% deposit, without having to pay LMI. The government acts as a guarantor for the remaining amount up to 20%. There are property price caps and eligibility criteria, so it’s worth checking if you qualify.

First Home Owner Grant (FHOG)

Depending on your state or territory, you may be eligible for a one-off grant to help with your deposit or other upfront costs. The amount and eligibility rules vary, so it’s important to check what’s available in your area.

First Home Super Saver Scheme (FHSSS)

This scheme allows you to make voluntary contributions to your superannuation, which you can then withdraw to use towards your deposit. Because super contributions are taxed at a lower rate, this can be a tax-effective way to boost your savings.

How Much Should You Really Aim For?

While it’s possible to buy with a 5% deposit, aiming for a higher deposit can put you in a stronger financial position. The more you put down upfront, the less you need to borrow, which means lower monthly repayments and less interest over the life of your mortgage. Some lenders only offer their best interest rates to borrowers with larger deposits. And as mentioned, a 20% deposit means you won’t have to pay LMI, saving you thousands.

That said, waiting too long to save a bigger deposit can mean missing out on rising property prices. It’s about finding the right balance for your circumstances.

What Counts Towards Your Deposit?

Lenders like to see that your deposit is made up of “genuine savings”—money you’ve saved over time, rather than a lump sum gift or windfall. Generally, genuine savings are funds that have been held in your account for at least three months. However, some lenders will accept gifts from family, inheritances or proceeds from the sale of assets as part of your deposit, especially if you can show a strong savings history.

Other Upfront Costs to Consider

Your deposit isn’t the only upfront cost when buying a home. You’ll also need to budget for things like stamp duty (a government tax on property purchases), legal and conveyancing fees, building and pest inspections, loan application fees, and moving costs. Factoring these costs into your savings plan will help you avoid any nasty surprises.

Using Calculators to Plan Your Purchase

When planning your first home purchase, it’s wise to use tools like a mortgage calculator or borrowing calculator. These calculators can help you estimate how much you can borrow, what your mortgage repayments might look like, and how different interest rates could affect your budget. Many lenders and brokers, including Mountway Finance, offer a Home Loan Repayment Calculator on their websites to help you make informed decisions.

The Importance of Conditional Pre-Approval

Before you start house hunting, it’s a good idea to seek conditional pre-approval for your home loan. This gives you a clear idea of your borrowing power and shows sellers you’re a serious buyer. Conditional pre-approval can also help you move quickly when you find the right property, as your loan application will already be underway.

Understanding Your Home Loan Contract

Once your offer is accepted, you’ll need to sign a home loan contract. This document outlines the terms of your loan, including the interest rate, repayment schedule and any applicable fees. It’s important to review your contract carefully and ask questions if anything is unclear. At Mountway Finance, we’re here to guide you through every step, ensuring you understand your obligations and feel confident in your decision.

Can You Benefit from Interest Rate Reductions?

Interest rates can have a significant impact on your mortgage repayments. If interest rates fall after you’ve taken out your home loan, you may be able to refinance or negotiate a better deal. Keeping an eye on the market and reviewing your loan regularly can help you take advantage of interest rate reductions and save money over time.

Tips for Saving Your Deposit Faster

Saving a deposit can feel daunting, but there are ways to speed up the process. Set a clear goal and break it down into monthly or weekly targets. Open a dedicated savings account to keep your deposit separate from everyday spending. Automate your savings so you’re not tempted to spend what you should be saving. Cut back on non-essentials—small sacrifices now can make a big difference over time. Consider a side hustle for extra income, and check for any government support you might be eligible for.

Common Myths About Home Deposits

There’s a lot of misinformation out there about how much you need to save. Let’s clear up a few common myths:

“You must have a 20% deposit to buy a home.” Not true. While 20% is ideal, many buyers get in with less, especially with government support.

“LMI is always a bad thing.” LMI adds to your costs, but it can be a worthwhile trade-off if it means getting into the market sooner, especially if property prices are rising faster than you can save.

“All lenders have the same rules.” Different lenders have different policies on deposit size, genuine savings and acceptable sources of funds. A mortgage broker can help you find the right fit.

How Mountway Finance Can Help

At Mountway Finance, we understand that saving a deposit is one of the biggest hurdles for first home buyers. Our team is here to guide you through every step, from working out how much you need, to finding the right home loan and accessing government support. We’ll help you understand your options, avoid common pitfalls and make informed decisions with confidence.

There’s no one-size-fits-all answer to the question of how much deposit you need. It depends on your circumstances, your goals and the property you want to buy. The key is to start with a clear plan, understand your options and seek expert advice early. Buying your first home is a journey, and you don’t have to do it alone.