
How much deposit do you need for a house?
The deposit you need for a house is the amount the lender asks the borrower to contribute to a purchase while they loan you the balance—the home loan. Deposits are usually expressed as a percentage of the property value. So, if a 20% deposit is required to get a loan for a property valued at $600,000, then the deposit amount would be $120,000.
This differs from the overall contribution required for a house purchase which is made up of both the deposit and applicable purchase costs, like stamp duty.
Why do you need a deposit for a house?
A lender needs some comfort when considering any home loan proposal—otherwise known as managing risk. In exchange for lending the money to a borrower, lenders need something to make their position more secure, in case the borrower does not meet their repayment obligations. Often the bank will register an interest in the property you are buying—a mortgage.
In addition to the bank having an interest in the property, they also ask for a deposit so that the loan is less than the value of their security (the property). The deposit reduces the risk of borrowers owing more than their property is worth in the event property prices fall. This situation is commonly referred to as negative equity.
Lenders are in the business of lending money, but they need to do this without being overly risky. Contributing a deposit for a house purchase helps reduce both lender and borrower exposure in the case of a property and economic downturn.
Does the size of the deposit matter?
Yes, yes and yes.
In most cases, lenders consider a deposit equivalent to 20% of the property value as low risk. If a borrower has less than 20%, they might still be able to get a home loan, but it will likely come with a premium for lenders mortgage insurance (LMI)—although there are a few exceptions to this.
And don’t forget, when I say 20%, this is the deposit relating to the lender and home loan only. Borrowers also need to cover any property transaction costs for the purchase—like stamp duty.
Generally-speaking, the smaller your deposit the higher the loan costs (LMI, fees, interest etc.) and vice versa. So, lenders often have different products, rates, and fees for different deposits amounts.
You will see lenders refer to ratios, percentages, and acronyms—a lot. I explain a couple of them here. Understanding their significance might help you better position how you save for a house deposit in Australia.
LVR meaning
This is the Loan to Value Ratio (LVR) expressed as a percentage. If the loan is $480,000 and the property value $600,000 then the LVR is 80%.
If a lender says the maximum LVR is 90%, then the borrower needs a 10% deposit—or $60,000.
LMI meaning
Lenders Mortgage Insurance (LMI) is the lenders insurance policy on your home loan, but the premium is payable by the borrower. Broadly-speaking, it insures the lender against some losses in the event borrowers do not meet their repayment obligations. It enables buyers with smaller deposits access to low deposit home loans, potentially with some extra risk-related costs. It is a fee than in many instances is added to the loan amount.
In most cases any borrower with a LVR over 80% will need to pay LMI. There are exceptions to this that will be subject to specific lender criteria.
The premium payable increases with both loan size and LVR. It is not a steady increase either—it jumps at specific intervals.
Below is a graph showing the lenders mortgage insurance costs for different deposit levels (15%, 11% and 9%) using the median house price in each Australian capital city as reported by CoreLogic (August 2022).

A relatively small change in the deposit amount can make a big difference in upfront costs, like LMI.
Take for example Brisbane with a median house price of $781,850. The difference in deposit amounts of 9% and 11% is $15,637 while the difference in lenders mortgage insurance at these levels is $9,539. If a borrower could contribute an extra 2% deposit, they could save over $9,000 in upfront costs—worth considering.
Of course, a borrower would need to weigh up other factors such as interest rate but given an 11% deposit is improving the risk-position for the lender, they are likely to be rewarded with more favourable overall loan terms as well as upfront savings.
Do your research. Work with your mortgage broker or lender early in the process. Be aware of the impact contributing extra could have on your upfront, and overall, lending costs.
Can I borrower more with a bigger deposit?
Not necessarily.
A bigger deposit is only one side of the story—borrowers still need to prove they can afford the loan.
Among the many lender policies that drive application decisions are two main criteria– deposit size and loan affordability. It is not a matter of having one or the other—they need to be considered together.
Determining an affordable loan size requires a thorough assessment of your personal financial situation—something a mortgage broker can do. The amount assessed as being affordable for you will be based on your personal financial circumstances.
Once you understand what loan amount is affordable, you can then consider how much deposit do you need for a house.
Buyers with smaller deposits can buy sooner—though they may incur higher interest rates and loan costs rates costs.
A 20% deposit might be considered ideal—but usually comes with a longer wait.
The home buying process can be a nerve-wracking experience so engaging a mortgage broker early in the home buying journey means you can get some answers and direction for your individual circumstances—a nice way to keep anxieties low.
How much deposit do you need for a house? Considerations.
How much you need for a house deposit in Australia will depend on many factors, all related to, you guessed it—risk. Lenders want to lend, but they must do it responsibly. This is not an exhaustive list, but I cover some factors that affect how much deposit do you need for a house.
Lender appetite
Like most businesses, lenders have specific markets they target. Some focus on small deposit options and some target an array of different borrower types. Appetite for borrowers also change depending on what is happening in the economy and housing markets. A mortgage broker can help narrow down the list of lenders you might consider for a home loan.
In general terms, more lenders offer home loan solutions for borrowers with a 20% deposit compared to 10%, and fewer still when the deposit is 5%. Percentages can be confusing, so I have put these deposits amounts into dollar terms below.
Value of the property
How much deposit do you need for a house is directly related to the value of the property you are using to borrow. Given deposits are expressed as a percentage, the higher the property value the higher the deposit needed.

All borrowers present unique circumstances that may see their purchase costs differ to the table above. But in general, the more you spend on a property, the bigger the deposit needs to be.
Property type
Lenders are constantly reassessing their overall lending position across many areas. For example, not all lenders have the same policy for apartment lending. If a lender feels they have advanced too many loans to borrowers in postcodes with a lot of high-rise developments, or even a specific apartment block, they could either stop lending for a time or demand higher deposits for new borrowers wishing to buy these properties.
Not all properties are treated the same. Other examples where deposit sizes might differ are:
- Apartment sizes (small vs large)
- Land
- Regional property
Credit score
If a borrower has a low credit score, or a history of default, then they might still be able to borrow for a house. Given this is an important measure of credit worthiness, a borrower with a low credit score may need a larger deposit than someone with a high credit score. The lender also might add a premium to any rates or risk fees to feel more comfortable in advancing the loan.
Borrower type
Typically, owner-occupiers can get home loans with smaller deposits than investors. Regulations are designed to encourage this too. There was a point in 2014 where the banking regulator, the Australian Prudential Regulation Authority (APRA) was concerned with over-speculation in residential investment. This led to caps on how much banks could grow the investment lending side of their business.
Lenders reduced investment lending activity by making changes to products and application criteria. Bigger deposits for investment lending is one such hurdle lenders put in place to keep activity within the caps set by the regulator.
Principal and Interest vs Interest Only
Two typical repayment types are interest only vs principal and interest.
Interest only requires a borrower meet costs and fees for a loan without requiring any principal paid during a defined period, usually 1-5yrs, within a total loan term of say 30yrs.
Principal and interest sees a borrower gradually pay back principal which reduces the loan balance over time.
Lenders consider principal and interest rates a more conservative and safe loan. Home loans with principal and interest repayments generally require smaller deposits than those with interest only payments.
What is the cost of buying a house?
The cost of buying a house in Australia should be an area that gets as much attention as deposits. Remember, these are costs, that if applicable, are additional to any deposit required by a lender. Each transaction is unique and as such will differ in the costs that might be applicable. I will touch on a few costs to be aware of, but one cost of buying house needs particular attention, as it can be a significant amount, is stamp duty.
Government fees
Of all the government fees, stamp duty is the main one to be aware of. While there are smaller mortgage-related fees, stamp duty (also known as transfer duty) is by far the most significant.
When you buy a car, you pay stamp duty to the state government. When you buy a house, you also pay stamp duty. The amount paid is influenced by who is acquiring the property and their situation. Some factors that can change the rate amount of stamp duty payable could be:
- First time buyer
- Owner occupier
- Investor
- Non-resident
First home buyers might be eligible for some reductions in stamp duty but that will depend on many factors, so buyers need to check their eligibility.
Given the amount can be in the tens of thousands, buyers need a plan to cover this cost. Remember, these amounts will need to be covered in addition to any deposit required by a lender. The reason for highlighting these costs is so buyers can be prepared.
Other house purchase costs
There are numerous other costs you might incur in the process of buying a house. If you allow approximately $5,000 to cover these in any preliminary workings, it will have your somewhat prepared. Once you have met with a lender or mortgage broker and narrowed down any likely purchase scenario, you will be able to better define these additional costs. Some of the services and costs to allow for are listed here:
- A professional to assist with the transfer of ownership and associated paperwork. Depending on the state you reside in this person could be a conveyancer, settlement agent or solicitor.
- House inspections. Often related to pest and structural integrity.
- Moving house costs.
- Insurances and all the other costs of owning your own home.
What are some low deposit options?
Low deposit home loans attract a lot of attention for good reason—it is hard to save money for a house deposit. Some low deposit home loan options can get you into your own home sooner, without the risk that can see property values moving beyond your reach.
Some low deposit home loans have extra fees and charges, and some do not. Don’t assume it is 20% deposit or nothing. The home loan market presents many options for would-be borrowers to consider.
Guarantor home loan
A guarantor home loan allows the borrower to potentially avoid deposit requirements as the lender gets comfort with the home loan proposal another way. They work with the guarantor (generally an adult family member) who might have a property or spare cash that they could offer as the extra security needed for the lender. The borrower still borrows the money, but the guarantor enters legal agreement to pay back the guaranteed portion of the loan in the event the borrower fails to do so.
Provided borrowers can prove their capacity to afford the loan, some lenders consider approving a home loan with a 0% deposit and furthermore, also allow costs like stamp duty to be borrowed also.
Guarantors should always considers the risks as well as seek independent legal advice when considering involvement in a guarantor home loan.
Government incentives
Australian Federal and State Government incentives are wide and varied with a similar purpose—providing options for people to buy a home. Some examples of the borrowers the programs can help are programs are for first home buyers, others for single parent families. The assistance can be in the form of a one-off lump sum payment, savings schemes or support for a low deposit home loan without lenders mortgage insurance.
Their also various shared equity schemes which are another way of buying a property with little or no deposit—provided it suits your goals and objectives, and you meet the eligibility criteria.
Given the complexity of this area you should consider engaging a mortgage broker to assist help you determine if you are eligible for these schemes or not.
What lenders look for in a deposit
The smaller the deposit, the more scrutiny that the origin of savings invites. If you are planning on producing a deposit from somewhere else other than savings—selling a car or receiving a gift from family—then it is recommended, you engage a mortgage broker for advice on how that might be treated.
Genuine savings
When applying for a home loan to buy a house, lenders sometimes need to distinguish between what is savings versus genuine savings. Lenders consider a borrower having demonstrated genuine savings if they have saved, or at least maintained a level of savings for a period of three months or more, equivalent to 5% of the property purchase price.
Lenders are usually more interested in seeing genuine savings when deposits are less than 10%. A general expectation at this level of deposit is that at least 5% of the property value is “genuine savings”.
A common source of genuine savings is what many would assume—regular contributions building up over time across your bank accounts. Another source of genuine savings could be shares you owned for three months or more.
In the absence of genuine savings some banks might look to a good record of making rental payments on time every time for the last three months.
Lenders are trying to get a feel for how potential borrowers manage their money so engage with your lender or mortgage broker early in the process so you can understand what level of documentation you might need to produce for an application.
Selling assets
For deposits greater than 10% of the property value, lenders are less likely to require an in-depth look at your savings history. In this case you may not need to demonstrate genuine savings, rather show the lender you have the money available and ready for the purchase. Your deposit could come from a variety of sources. Some of which could be:
- State Government grants that offer lump-sum payments
- Receive money as a gift from a family member
- Sell a car
Final word
How much deposit you need for a house depends on both the lenders requirements, but also on the size of the loan that is right for you.
In addition to how much deposit you need to buy a house, buyers also need to consider the other costs of buying a house when saving for a house.
Engage professionals early in the home buying process so that you can prepare.
Graph: LMI Costs at Varying Deposit Amounts – For Each Capital City Median House Value
*LMI rates provided from Commbank LMI as at September 2022. They are indicative only and should not be relied on. Assumptions:
30yr loan term
Established home
House purchased for owner-occupation
Not first-time buyer
Not self-employed
*Table: Guide for Deposit Size Examples
Different deposit levels (5%, 10% and 20%) at varying house prices
Assume: Established house, OO, no grants/rebates
Not accounting for other purchase costs such as government fees, solicitor, house inspections etc.