A $900,000 first home in Sydney’s north-west can make a 20% deposit sound like an impossible target. That is $180,000 before you account for stamp duty, conveyancing and moving costs. The good news is that asking how much deposit for first home buyers is needed does not have one fixed answer. Many Australians buy with less than 20%, provided the loan structure, property choice and ongoing repayments are right for them.
The deposit that makes sense is not simply the biggest amount you can save. It is the amount that helps you buy without leaving your cash flow stretched, your emergency savings empty or your future plans on hold.
How much deposit for a first home is enough?
As a general guide, a 20% deposit is often considered the benchmark because it usually avoids lender’s mortgage insurance (LMI). But it is not the minimum required to enter the market. Depending on the lender, your eligibility and the support available to you, you may be able to purchase with a 5%, 10% or 15% genuine savings deposit.
Using an $800,000 property as an example, a 5% deposit is $40,000, a 10% deposit is $80,000 and a 20% deposit is $160,000. The lower your deposit, the more you borrow and the more important it becomes to understand the total cost of the loan, not just the upfront amount.
For many first-home buyers in areas such as Box Hill, Schofields, Riverstone, Kellyville and Parramatta, the practical question is whether waiting to save another $40,000 or $80,000 is worth it. Property prices, rent, interest rates and personal circumstances can all change while you wait. There is no universal answer, but there is a better way to assess the trade-off.
The difference between a 5%, 10% and 20% deposit
A 5% deposit: buy sooner, with more to consider
A 5% deposit can be a realistic starting point for eligible buyers, particularly where a government-backed guarantee scheme or a family guarantee is available. It may allow you to buy earlier, but you will generally borrow 95% of the property value. This means higher repayments than with a larger deposit and, outside eligible guarantee arrangements, LMI may apply.
LMI protects the lender, not the borrower, if a property sale does not cover the loan balance. It is often added to the loan rather than paid upfront, which can make entry easier but increases the amount on which you pay interest. A low-deposit loan can still be a sound decision when it aligns with your income, savings buffer and long-term plans. It should not be chosen simply because it gets you approved fastest.
A 10% deposit: a useful middle ground
For many buyers, 10% provides a more balanced pathway. You borrow less than you would with a 5% deposit, which can improve repayment comfort and reduce LMI compared with a 95% loan. You may still pay LMI, and the amount varies by lender, loan size, profession, property type and borrower profile.
This option can suit established professionals whose income is likely to grow, including accountants, lawyers, IT specialists and medical or allied-health practitioners. However, lenders assess your position as it stands today. Expected promotions, future bonuses and planned contracting income may be relevant in some circumstances, but they should not be the only reason a loan works on paper.
A 20% deposit: lower borrowing risk, not always the only goal
With a 20% deposit, you typically borrow up to 80% of the property’s value. This often removes LMI and may give you access to sharper pricing or a broader range of lender options. It also creates more equity from day one, which can be helpful if values soften after purchase.
Yet a 20% deposit is not automatically the best strategy if saving it takes many more years, especially if you are paying high rent or targeting a market where prices are moving. It is equally unhelpful to use every dollar you have to reach 20%, then have nothing left for repairs, strata levies, insurance excesses or an unexpected change in work.
Your deposit is only one part of the cash you need
A common first-home-buyer mistake is treating the deposit as the full upfront target. In reality, you need to budget for purchase costs as well. The amount depends on the property, state or territory, loan type and concessions for which you qualify.
These costs may include stamp duty, conveyancing or solicitor fees, building and pest inspections, lender fees, valuation charges where applicable, home and contents insurance, and moving expenses. For apartments or townhouses, it is also wise to review strata reports, planned works and ongoing levies before committing.
First-home buyer concessions and exemptions can make a significant difference, particularly in New South Wales, but property price thresholds and eligibility rules apply. Government schemes, including first-home buyer guarantees, also have conditions relating to income, property price caps, owner-occupier use and available places. Rules and lender policies change, so a strategy should be checked against current requirements before you make an offer.
Where can your deposit come from?
Most lenders want to understand the source of your deposit and whether you have demonstrated genuine saving behaviour. Regular savings held over time are generally straightforward. Other sources can also be acceptable, including a gift from family, proceeds from an asset sale, an inheritance, a bonus, or equity support through a family guarantee.
A family guarantee can reduce or remove the need for LMI without requiring a parent or close family member to hand over cash. Instead, they may use equity in their own property as additional security for part of your loan. It can be powerful, but it is a serious legal and financial commitment for everyone involved. The guarantee should be limited where possible, independently understood and structured with a clear plan for release.
For self-employed buyers and business owners, the challenge is often not the deposit alone. Lenders may need to see business financials, tax returns, activity statements, retained earnings or a clear explanation of income that differs from a standard salary. A larger deposit can strengthen an application, but the right lender and documentation strategy can be just as important.
How to decide what you can safely put down
Start with the purchase price range you are genuinely comfortable with, rather than the highest amount a calculator suggests. Then test the repayments at an interest rate higher than today’s rate. Consider childcare, car finance, HECS or HELP repayments, credit card limits, insurance, strata fees and the lifestyle costs you do not want to abandon after settlement.
Next, keep a cash buffer. The right amount varies, but buying a home with no funds left after settlement can turn a manageable mortgage into a stressful one. A buffer gives you room for repairs, changes in income and the normal surprises that come with ownership.
Finally, compare the total outcome of different deposit sizes. A 5% deposit may mean buying earlier but paying LMI and higher repayments. A 20% deposit may lower the loan cost but delay your purchase. A 10% deposit may provide the middle ground. The best choice depends on your timeline, employment stability, family plans and the type of property you want to own.
A smarter first-home strategy is personal
The strongest lending strategy connects your deposit to the rest of your financial picture. A PAYG professional with bonuses may have different options from a contractor with variable income. A couple buying their first apartment in Wentworthville may need a different approach from a family targeting a house-and-land package in the north-west growth corridor. The same deposit percentage can produce very different lending outcomes.
Before you begin inspections or pay a holding deposit, seek a clear assessment of borrowing capacity, likely upfront costs and the loan pathways available to you. At NextGen JC, that starts with understanding your income, goals and the terms that will support the next stage of your life, not simply matching you to a generic loan product.
Your first deposit does not need to be perfect. It needs to be well planned, supported by the right structure and large enough to help you move forward with confidence.