How Much Deposit Do I Need to Buy a Home?

Your home deposit is only one part of the money you need to buy a property. A useful plan covers the deposit, purchase costs and a cash buffer, then checks how the loan will affect your regular budget.

This guide explains common deposit sizes, loan-to-value ratio, lenders mortgage insurance and the extra costs Australian buyers should allow for. It is general information, not personal financial or credit advice. Lending policies and government programs change, so confirm the current rules with your lender or licensed mortgage broker.

WHAT DOES A HOME DEPOSIT DO?

A deposit is the amount of the purchase price you contribute from your own funds. The lender provides the remaining amount through the home loan, subject to approval and its valuation of the property.

The deposit affects your loan-to-value ratio, usually called LVR. For example, if a property is valued at $700,000 and you borrow $560,000, the LVR is 80%. A lower LVR usually means you are borrowing less relative to the property value, which can improve your choice of loans and reduce risk.

HOW MUCH DEPOSIT SHOULD I AIM FOR?

A 20% deposit plus buying costs is a useful target because it may help you avoid lenders mortgage insurance. On a $700,000 property, a 20% deposit is $140,000. You would still need to allow separately for purchase costs and a buffer.

A smaller deposit may be possible. Some lenders accept deposits of 10% or 5%, and eligible buyers may have access to government guarantee schemes. A smaller deposit lets you buy sooner but usually creates a larger loan, higher repayments and less equity at the beginning.

The right target depends on your income, expenses, time frame, property price and eligibility for assistance. Compare the total cost and risk of buying sooner with the time required to save a larger deposit.

WHAT IS LENDERS MORTGAGE INSURANCE?

Lenders mortgage insurance, or LMI, generally protects the lender if a borrower cannot repay the loan and the sale of the property does not cover the debt. It does not protect the buyer.

LMI may apply when you borrow more than 80% of the property value. The cost depends on the lender, loan amount, LVR and other factors. It may be paid upfront or added to the loan, which means interest can be charged on it. Ask for the dollar cost and the effect on repayments when comparing loan options.

Remember that the lender may value the property below your agreed purchase price. If that happens, your usable deposit percentage can fall and you may need extra cash, a smaller loan or a different purchase.

COSTS TO SAVE FOR AS WELL AS THE DEPOSIT

1. Transfer duty

Transfer duty depends on the property, price and your eligibility for a concession. Queensland first-home-buyer concessions can materially change the amount, so use the current Queensland Revenue Office information or calculator before committing.

2. Legal work and searches

Allow for a solicitor or conveyancer to review the contract, complete searches and manage settlement. Obtain a quote that explains what is included and which searches or third-party fees are additional.

3. Building and pest inspections

Inspection costs vary with the property and location. These reports can help you understand visible defects, safety concerns and timber-pest risks before a contractual condition expires.

4. Loan and valuation costs

Possible costs include application, valuation, settlement, package and ongoing fees. Compare the interest rate, comparison rate, fees and loan features together.

5. Moving and immediate ownership costs

Allow for moving, insurance, utility connections, council rates or body corporate adjustments, essential repairs and basic purchases. Keep an emergency buffer after settlement rather than using every available dollar.

HOW TO BUILD YOUR DEPOSIT PLAN

Set a realistic purchase range

Estimate the repayments you could manage comfortably and work backwards to a sensible loan and property price. Leave room for rate rises, income changes and ongoing property costs.

Calculate three savings buckets

Track the deposit, purchase costs and post-settlement buffer separately. This makes it clearer whether you are ready to buy without draining your emergency savings.

Automate regular saving

Move savings to a separate high-interest account soon after each payday. A consistent amount makes progress visible and helps demonstrate a savings pattern to a lender.

Reduce expensive debt

Credit-card balances, personal loans and other commitments can reduce borrowing capacity. Review debts and unused credit limits before applying, and obtain advice before making major changes.

Compare loan scenarios

Ask a lender or licensed mortgage broker to show the repayments and total costs for different deposits. Compare 5%, 10% and 20% scenarios where relevant, including LMI and interest.

Check assistance before relying on it

Government guarantees, grants and concessions have eligibility rules, property caps and occupancy conditions. Confirm the current details through official government sources before signing a contract.

DEPOSIT PLANNING CHECKLIST

• Set a comfortable maximum repayment and purchase price.
• Calculate 5%, 10% and 20% deposit amounts for that price.
• Add transfer duty, legal work, inspections, loan fees and moving costs.
• Keep an emergency buffer for repairs and unexpected expenses.
• Check whether LMI applies and what it costs.
• Ask how the lender will treat grants, gifts and genuine savings.
• Check current government assistance and eligibility conditions.
• Obtain suitable pre-approval before making an offer.
• Recheck your figures for each specific property.

FREQUENTLY ASKED QUESTIONS

Is a 20% deposit compulsory?

No. Many buyers use a smaller deposit, subject to lender approval, LMI and any government-program rules. A 20% deposit remains a useful comparison point because it may avoid LMI and reduce the loan.

Can the First Home Owner Grant form part of my deposit?

A lender may consider an eligible grant as part of the funds available for a purchase, but its policy and timing requirements apply. In Queensland, the grant is for eligible new homes and has its own conditions. Confirm both the grant rules and the lender’s treatment before relying on it.

Do I need genuine savings?

Some lenders require part of the deposit to be held or accumulated as genuine savings over a set period. Policies differ, including how lenders treat gifts, grants, rent history and sale proceeds. Ask what evidence your chosen lender requires.

What if the bank values the property below my offer?

The lender normally calculates the loan against its accepted value. A lower valuation can increase the LVR and the cash contribution required. Discuss the shortfall and your options with the lender, broker and legal adviser before a finance deadline expires.

PLAN THE NEXT STEP

Use your target property price to calculate the deposit, buying costs and buffer as separate amounts. HomeMentor is being designed to keep those figures, documents, questions and deadlines together through the buying journey.

Sources checked 9 September 2026: Australian Securities and Investments Commission Moneysmart deposit and home-buying guidance; Queensland Government home-buyer financial help.