Buying a home is a huge milestone – and one of the first hurdles many buyers face is the down payment. If you’re wondering how much you actually need, whether you can get away with a smaller amount, or how to save faster, you’re not alone. The good news? You have options – and the “magic number” isn’t always 20%.
In this guide, we’ll break down everything you need to know about down payments: what they are, how much you really need in Australia, how they affect your loan and repayments, and strategies to get you across the line sooner.
What Is a Down Payment?
A down payment is the initial lump sum you contribute toward purchasing your property. It’s calculated as a percentage of the property’s purchase price.
For example:
- If you’re buying a $600,000 home and putting down 20%, your deposit is $120,000.
- If you’re putting down 10%, that’s $60,000.
The rest of the property value is typically covered by your home loan. Your down payment essentially shows the lender you’ve got a stake in the purchase – and reduces their risk in lending to you.
How Much Do You Need for a Home in Australia?
The Short Answer: At Least 5% – But More Is Better
In Australia, most lenders require a minimum deposit of 5% of the property’s purchase price. However, the gold standard is 20% – and that’s often where the confusion comes in.
Let’s break it down:
- 5% deposit: The minimum for most home loans. If you’re eligible for a lender’s mortgage insurance (LMI) waiver or government scheme, this might be all you need. However, LMI will apply unless you qualify for an exemption.
- 10% deposit: You’ll still pay LMI, but it’s less than what you’d pay with a 5% deposit.
- 20% deposit: This is the benchmark to avoid LMI altogether. It may also unlock better interest rates and loan terms.
Important to know: Lenders Mortgage Insurance (LMI) protects the lender – not you – in case you default on your loan. It can cost thousands depending on your loan size and deposit.
Benefits of a Larger Down Payment
While it’s possible to buy with a low deposit, there are several reasons to aim higher if you can.
1. Avoid Lenders Mortgage Insurance
The biggest win with a 20% deposit is avoiding LMI. For example, on a $700,000 home with a 10% deposit, LMI could cost you up to $15,000 or more.
2. Lower Loan Repayments
A bigger deposit = smaller loan. That translates into lower monthly repayments and reduced long-term interest costs.
3. Better Interest Rates
Borrowers with lower loan-to-value ratios (LVR) – typically under 80% – are often offered sharper interest rates. This is because you’re seen as a lower-risk customer.
4. Faster Equity Growth
With more skin in the game, you’ll own more of your property from day one. That puts you in a stronger equity position if you ever want to refinance, borrow for renovations, or sell.
What if You Can’t Save a 20% Deposit?
That’s okay. Plenty of first-time buyers in Australia purchase property with a smaller deposit – and there are several schemes designed to help you get your foot on the ladder.
1. First Home Guarantee (FHBG)
Under the FHBG, eligible first home buyers can purchase a home with as little as 5% deposit, with the government guaranteeing the remaining 15%. This means you can skip LMI entirely – even without a 20% deposit.
2. Family Guarantee Loans
If a family member is willing to act as a guarantor, you may be able to buy with little or no deposit – and still avoid LMI. This arrangement involves using equity in their property as security for part of your loan.
3. LMI Waivers for Professionals
Doctors, lawyers, and some other professionals may be eligible for LMI waivers through certain lenders with a deposit as low as 10%.
Strategies to Save for Your Down Payment Faster
Saving for a down payment can feel like climbing a mountain – but it’s more achievable when you have a plan. Here are some proven ways to speed up your savings:
1. Set a Clear Target
Start by calculating your target amount (including stamp duty and other upfront costs) and set a realistic savings timeline. For instance:
- 5% on a $600,000 home = $30,000
- 10% = $60,000
- 20% = $120,000
Use a deposit goal calculator to map it out.
2. Open a Separate Savings Account
Keep your deposit savings separate from your everyday account. Consider a high-interest savings account or term deposit to grow your money while keeping it out of reach for impulse spending.
3. Cut Unnecessary Spending
Small changes add up. Reduce subscriptions, limit takeaway meals, or swap holidays for staycations while you’re in savings mode. Use budgeting apps to track progress and stay on target.
4. Boost Your Income
Pick up extra shifts, freelance on the side, or turn a hobby into income. Even a few hundred dollars a month in extra earnings can fast-track your savings.
5. Use Your Super Wisely
The First Home Super Saver Scheme (FHSSS) allows first-time buyers to contribute up to $15,000 per year (and $50,000 total) into super for a home deposit. The benefit? You’ll pay less tax on those savings, helping you grow your deposit faster.
6. Explore Gifting or Inheritance
Some lenders accept gifts from family as part or all of your deposit – provided you can show that the funds are non-repayable. If you receive an inheritance or lump sum, consider setting it aside for your down payment.
Can You Buy a Home With No Deposit?
Yes – in some situations. No-deposit home loans may be available if:
- You’re eligible for a guarantor loan
- You qualify under a government-backed scheme
- You have other assets (like a car or shares) to offer as security
Keep in mind: zero-deposit loans typically carry higher risk and stricter eligibility criteria.
The Bottom Line: There’s No One-Size-Fits-All
There’s no universal down payment rule – and what works best for you depends on your financial goals, budget, and how quickly you want to get into the market.
Here’s a quick summary:
| Deposit Amount | Pros | Cons |
| 5% | Lower upfront cost; quicker entry to market | Requires LMI (unless waived); higher repayments |
| 10% | Smaller LMI; more lender options | Still pays some LMI |
| 20% | No LMI; lower repayments; better rates | Higher upfront savings required |
If you’re unsure what path to take, speak to a mortgage broker. They can assess your finances, show you what’s possible, and match you with lenders that suit your goals.
Final Thoughts
Saving for a down payment is one of the biggest steps on the path to homeownership – but it’s also one of the most rewarding. Whether you’re aiming for the minimum 5% or targeting 20% to avoid LMI, what matters most is choosing a plan that works for your timeline and budget.
With the right strategy, support, and a bit of discipline, you’ll be unlocking your front door sooner than you think.