What Are the Deposit Requirements for a Home Loan?

What Deposit Do You Actually Need?

Most lenders require a deposit of at least 20% of the property value to avoid paying Lenders Mortgage Insurance (LMI). If your deposit is below 20%, you'll typically pay LMI, which protects the lender if you default on the loan. The premium depends on your loan amount and LVR, and in some cases can add thousands of dollars to your upfront costs.

Consider a buyer purchasing in Wagga Wagga who has saved $60,000. If they're looking at property in the current market, that deposit would comfortably cover the 20% threshold for many homes in the area without triggering LMI. However, if they're purchasing closer to Albury or in higher-priced pockets around Orange, that same amount might only represent 15% of the property value, meaning LMI would apply unless they saved more or used a government scheme.

Genuine Savings and What Actually Counts

Lenders don't just look at how much you've saved. They want to see genuine savings accumulated over at least three months. This includes funds held in savings accounts, term deposits, and shares. Money received as a gift from family can form part of your deposit, but lenders typically want at least 5% of the purchase price to come from your own verified savings.

What doesn't count? Proceeds from selling a car, tax refunds received in the last three months, or lottery winnings. If you're planning to use equity from an existing property rather than cash savings, that's assessed differently again and falls under refinancing or accessing equity from your current loan.

The Australian Government 5% Deposit Scheme

The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with a deposit of as little as 5% of the property value, with Housing Australia providing a guarantee to the lender of up to 15% so you reach a combined 20% without paying LMI. No income caps apply, and no annual place limits exist.

For regional New South Wales buyers, the property price caps are $1,500,000 in regional centres including Central Coast, Coffs Harbour-Grafton, Illawarra, Mid North Coast, Richmond-Tweed, and Newcastle and Lake Macquarie. In other regional areas across New South Wales, the cap is $800,000. Applications are made through participating lenders, not directly through Housing Australia.

In our experience, buyers in towns like Dubbo, Tamworth, or Bathurst often assume they need a full 20% deposit because that's what their parents needed. Once they understand the 5% Deposit Scheme is available with no income limits, it opens up the possibility of purchasing much sooner while continuing to rent or save for other goals.

Help to Buy and Shared Equity Options

Under the Help to Buy scheme, the Australian Government contributes up to 40% of the purchase price for a new home and up to 30% for an existing home in exchange for a proportional equity stake, with a minimum 2% deposit required. From 1 July 2026, income limits are $103,000 for individual applicants and $165,000 for joint applicants or single parents.

As an example, a teacher in Bathurst earning $95,000 could purchase an existing home using Help to Buy. If the property is valued at $500,000, the government would contribute $150,000 and the buyer would need a minimum deposit of $10,000, with the remainder financed through a home loan. The government holds a 30% equity share in the property, which the buyer can buy out over time or repay when they sell.

Help to Buy cannot be combined with the 5% Deposit Scheme, but it can generally be used alongside state duty concessions and grants where available. Up to 10,000 places are available nationally in the current financial year, and applications are made through participating lenders.

How Lenders Assess Your Deposit Size

Your deposit size directly affects your loan to value ratio (LVR), which is the amount you borrow as a percentage of the property value. A lower LVR means less risk for the lender and often translates to access to lower rates or more flexible loan features.

Lenders also apply a serviceability buffer when assessing your application. They test whether you can afford repayments at a rate at least 3 percentage points above the actual loan product rate. A larger deposit reduces the loan amount, which improves your serviceability and can increase your borrowing capacity.

We regularly see buyers who are borderline on serviceability suddenly become comfortable once they increase their deposit from 10% to 15%. That extra 5% can make the difference between an approval and a decline, particularly if you're self-employed or have other financial commitments.

Planning Your Deposit as a First Home Buyer

If you're entering the market for the first time, understanding what you need to save and what schemes you're eligible for is the starting point. New South Wales offers a first home owner grant of $10,000 for new builds or substantially renovated homes with a purchase price cap of $600,000, or a combined land and build cap of $750,000. A full transfer duty exemption applies on properties valued up to $800,000, with a sliding concession up to $1,000,000.

For first home buyers in regional New South Wales, combining the duty exemption with the 5% Deposit Scheme can reduce the cash required at settlement significantly. You still need to budget for conveyancing, building and pest inspections, and loan establishment costs, but the upfront burden is much lower than it was a few years ago.

The key is to start the conversation early. If you're 12 months away from being purchase-ready, we can map out what you need to save, which scheme suits your situation, and which lenders on the government panels offer the most suitable loan products for your circumstances.

Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions