The deposit options
5% Deposit
Example: $25,000 on a $500,000 property
- Requires genuine savings (usually 2–3 years of regular deposits) or family gift
- Subject to lender policies; not all lenders accept 5% deposits
- Mortgage Insurance (LMI) applies: 5–8% of loan amount (~$24,000–$38,000 added to loan)
- Option: Use Home Guarantee Scheme to avoid LMI (see below)
10% Deposit
Example: $50,000 on a $500,000 property
- More lender options and lower LMI (~2–4%, e.g., $8,000–$16,000)
- Shorter time to save than 20%, but still requires discipline
- Good balance: LMI cost is lower, rate options improve, repayments are manageable
20% Deposit (Standard)
Example: $100,000 on a $500,000 property
- No LMI: Saves $8,000–$30,000 depending on amount borrowed
- Best rate options and most lender flexibility
- Requires significant savings time, but lowest long-term cost
Understanding Mortgage Insurance (LMI)
LMI protects the lender if you default, but you pay the premium. It's added to your loan and increases repayments.
Example: $500,000 property, 5% deposit ($25,000)
- Loan amount: $475,000
- LMI (~8%): ~$38,000
- Total you owe: $513,000
- Monthly repayment impact: roughly $200–250 extra per month
Genuine Savings
Most lenders want evidence that you've saved consistently for your deposit, especially with lower deposits. Why? It shows discipline with money and reduces risk.
- Time frame: Usually 2–3 years of regular monthly deposits
- Evidence: Bank statements showing consistent deposits into a savings account
- Exceptions: Family gifts, inheritance, or superannuation co-contribution schemes may not require the same savings history
- Recent savings: If you've had a sudden increase in savings (e.g., selling a car or bonus), you may need to explain it
First Home Buyer Schemes & Guarantees
Government schemes can reduce upfront costs or deposit requirements. See our First Home Grants and Schemes guide for full details.
Home Guarantee Scheme (HGS)
Eligible first home buyers may purchase with a 5% deposit and no LMI, using a government guarantee instead. Subject to lender and scheme eligibility.
First Home Owner Grant (FHOG)
A one-time grant (typically $5,000–$20,000 depending on state) to help with deposit and purchase costs. Eligibility depends on property price and location.
Comparing lender policies
Different lenders have different rules:
- Some lenders require 10% minimum deposit; others accept 5%
- Some lenders are stricter on genuine savings history
- Interest rates for 5% deposits may be 0.3–0.5% higher than 20% deposits
- LMI costs vary by lender (shop around to save $5,000+)
Which deposit path is right for you?
Use our calculators or talk to CredQ about your situation. We can model 5%, 10% and 20% scenarios to show long-term costs and help you decide.
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