Confused about whether you really need a 20% home loan deposit in Australia? Learn how much deposit you actually need, how super and government schemes can boost your savings, whether to wait or buy sooner, and how to safely use family support to get into your first home faster.
Key Takeaways
- You don’t always need a 20% deposit to buy a home in Australia – many buyers purchase with 5–10%, but you must understand the trade‑off between Lenders Mortgage Insurance (LMI), interest rates and repayments.
- Government incentives like the First Home Guarantee, Regional First Home Buyer Guarantee, Family Home Guarantee and the upcoming Help to Buy scheme can let eligible buyers purchase with deposits as low as 2–5% while reducing or removing LMI.
- The First Home Super Saver (FHSS) Scheme lets you salary‑sacrifice into super, pay just 15% tax on those contributions, then withdraw up to $50,000 plus earnings to boost your first home deposit more tax‑effectively.
- Waiting to save a 20% deposit can take 4–11+ years depending on your location, during which rising property prices and rent may outpace your savings; in some markets, buying sooner with a smaller deposit and paying LMI can leave you better off over time.
How Much Deposit Do You Really Need to Buy a Home in Australia?
Working out your home loan deposit in Australia isn’t as simple as picking a number like 5% or 20%. The “right” deposit depends on your borrowing power, property price, and whether you want to avoid Lenders Mortgage Insurance (LMI). For most owner‑occupiers in Australia, the common target is a 10–20% deposit. Hitting 20% is popular because it usually means:
- No LMI premium added to your loan
- Access to sharper interest rates from many lenders
- Lower monthly repayments and more equity from day one
However, saving 20% in markets like Sydney, Melbourne or Brisbane can take years, especially for first home buyers. That’s why many Australians buy sooner with smaller deposits.
You don’t always need a 20% deposit to get into the market – but you do need to understand the trade‑offs.
In many cases, you can purchase with a 5% deposit, and under certain government guarantee schemes (such as the First Home Guarantee) you may even get in with as little as 2%. But there are important conditions:
- 5% deposit usually means you’ll pay LMI, adding thousands to the cost of your loan. You can learn more about how this works in our detailed guide to Lenders Mortgage Insurance (LMI) in Australia.
- 2–5% with a government guarantee comes with an eligibility criteria: income caps, property price caps, and often only certain lenders.
- You’ll also need to show genuine savings and meet standard servicing and credit criteria. Improving your credit file can help here, see our tips on how to improve your credit score in Australia.
A mortgage broker can help you calculate your true deposit gap, taking into account:
- Your current savings and regular contributions
- Eligible government grants and guarantee schemes
- The First Home Super Saver (FHSS) scheme and how much you can release from super
- Any family support, such as a gift or family guarantee using a parent’s equity
By modelling these factors, a broker can show you:
- Whether you can buy now with a smaller deposit
- The extra cost of LMI versus waiting to save more
- How different deposit sizes change your interest rate and repayments – including how your loan‑to‑value ratio (LVR) affects pricing, which we explain in our article on LVR and its impact on your interest rate.
If you’re unsure how much deposit you really need, speak with a broker before you set a property budget – it can save you time, stress and potentially thousands of dollars over the life of your loan.
Using Super and Government Schemes to Boost Your Home Deposit
Using super and government incentives wisely can fast‑track your first home deposit. The First Home Super Saver (FHSS) Scheme allows you to make extra (voluntary) contributions into your super fund and later withdraw them, plus associated earnings, to use as a deposit.
Key FHSS features:- You can withdraw up to $50,000 in eligible contributions (across all years).
- Contributions are often taxed at just 15%, which is usually lower than your marginal tax rate.
- You keep benefiting from super fund investment returns while you save.
Example scenario: Alex earns $90,000 a year and salary‑sacrifices $12,000 into super over two years under FHSS. Instead of being taxed at their marginal rate, that money is taxed at 15% in super, so more of each dollar goes towards the future deposit. When Alex is ready to buy, they can apply to release the funds (plus earnings) to put towards their first home deposit. Beyond FHSS, several Australian Government home guarantee schemes can help you get into the market sooner with a smaller deposit:
- First Home Guarantee (FHBG): As little as 5% deposit with no Lenders Mortgage Insurance (LMI).
- Regional First Home Buyer Guarantee: Similar benefits, focused on eligible regional areas.
- Family Home Guarantee: For single parents, with deposits from 2%.
- Help to Buy (upcoming): A shared‑equity style scheme designed to lower both deposit and repayments.
When these are combined with FHSS, state first home buyer grants and possible stamp duty concessions, you can:
- Cut the upfront cash required.
- Avoid or significantly reduce LMI, saving thousands.
- Potentially bring your purchase forward by several years.
The smartest strategy is often a mix of FHSS, a suitable government guarantee, and state‑based incentives tailored to your situation.
A mortgage broker can model your options, check eligibility, and help you apply in the right order so you do not miss out on any benefits.
Realistic Timeframes: Should You Wait for a 20% Deposit or Buy Sooner?
How long does it really take to save a home deposit in Australia? For many buyers, especially in Sydney and Melbourne, the answer can be confronting. On a median household income, it can take 8–11+ years to save a 20% deposit for a typical property. In many regional areas and smaller capitals, the timeframe is shorter, often around 4–7 years, but it’s still a long stretch of disciplined saving. To put this into perspective:
| Location Type | Typical Time to 20% Deposit* |
|---|
| Sydney & Melbourne (median income) | 8–11+ years |
| Smaller capitals & major regionals | 4–7 years |
| Some affordable regional markets | 3–5 years |
*Indicative only – actual time depends on income, property price and savings rate. During these years, you’re usually paying rent, dealing with rising property prices, and trying to keep savings on track despite cost‑of‑living pressures. That’s why a strict 20% deposit target, while sensible in theory, can be difficult in practice. For many clients, the real question becomes:
- Is it better to wait longer for a 20% deposit?
- Or enter the market sooner with a smaller deposit and potentially pay Lenders Mortgage Insurance (LMI)?
Waiting for a 20% deposit has clear benefits: you avoid LMI, start with lower repayments, and have a larger safety buffer if interest rates rise or your situation changes. However, there are important trade‑offs you should understand.
Here’s what can happen while you wait:- Property prices may rise faster than you can save, pushing your target further away.
- Rents can increase, making it harder to grow your deposit.
- You may miss several years of potential capital growth as an owner.
On the other hand, buying earlier with, say, an 8–10% deposit and paying LMI can sometimes put you ahead over the long term – even though it looks more expensive upfront.
Real‑life style scenario:- Buyer A aims for a 20% deposit and buys in 4 years.
- Buyer B buys in 1 year with an 8% deposit + LMI.
If prices grow over those 3 extra years, Buyer B may gain enough equity to more than offset the cost of LMI and higher initial repayments. But if the market is flat or falls, waiting may be the safer play. This is where a mortgage broker becomes incredibly useful. A broker can:
- Model side‑by‑side scenarios (e.g. buy in 1 year on 8% + LMI vs 4 years with 20%).
- Stress‑test repayments under different rate and price growth assumptions.
- Help you weigh risk vs opportunity in a way that fits your income, family plans and risk comfort.
Whichever path you choose, it’s also worth planning ahead for how you’ll manage your loan once you’re in the market. Simple strategies like extra repayments and offset accounts can shave years off your mortgage – explore these ideas in our guide on
how to pay your home loan off quicker.
Next step: Speak with a broker before you lock yourself into a long savings journey. A tailored scenario comparison can show whether waiting or buying sooner is likely to put you in a stronger position.
Practical Strategies to Save Faster and Reduce ‘Deposit Drag’
Building a home deposit in Australia can feel painfully slow, that’s what many buyers call ‘deposit drag’. The key to beating it is getting intentional about your target and your system, not just “trying to save harder”.
Step 1: Set a crystal‑clear savings target Use this simple framework:
- Define your price range Research suburbs, recent sales and borrowing calculators to set a realistic property price band (e.g. $650k–$750k).
- Choose your deposit percentage Common targets are:
- 20% deposit – avoids LMI and boosts borrowing strength.
- 10–15% deposit – gets you in sooner, often with LMI.
- Lock in a timeframe For example, “$90,000 in 3 years” gives you a monthly and weekly figure to aim for.
A clear target turns vague hopes into a measurable plan – and makes it much easier to adjust if the market or your income changes.
Once the target is set, you can reverse‑engineer how much you need to save each pay cycle and what lifestyle shifts are required. With a target in place, your next job is to build a deposit‑only budget and automate it so momentum doesn’t rely on motivation.
Use automation and the right accounts- Create a dedicated “deposit only” account Keep it separate from everyday spending to avoid accidental dipping.
- Automate transfers on payday Treat your deposit like a non‑negotiable bill. A set amount moves into savings before you start spending.
- Choose a high‑interest or term‑deposit style option Consider a high‑interest savings or term deposit to earn more while protecting your capital.
| Strategy | Benefit for First‑Home Buyers |
|---|
| Automatic transfers on payday | Removes temptation and builds consistent momentum |
| High‑interest savings account | Earns extra interest while keeping funds accessible |
| Term deposit for part of savings | Locks in a rate and reduces the urge to spend |
Simple example You want a $80,000 deposit in 4 years. That’s roughly $385 per week. By:
- Automating $400/week from your pay into a high‑interest account, and
- Parking an extra bonus or tax return into a short term deposit,
you build in a buffer and let interest do part of the heavy lifting. If you’re self‑employed, it’s especially important to get your income and tax records in order early, as lenders will scrutinise your documents closely. For more on this, read our
top 10 tips for self‑employed applicants looking for a loan. If you’d like tailored figures based on your income and preferred suburbs, a broker can help you model different targets and timelines before you commit.
Using Family Support and Broker Guidance Safely on the Path to Your First Home
Getting into your first home in Australia often becomes possible with a bit of family support and the right mortgage broker guidance. Family can help in a few different ways, each with its own rules, risks and benefits. Common forms of family assistance include:
- Gifted funds – parents or relatives give you money towards your deposit with no expectation of repayment. Bank of Mom and Dad has helped number of First Home Buyers over the years.
- Informal or formal loans – funds are lent to you, sometimes documented with a simple loan agreement.
- Guarantor structures – a parent uses the equity in their home to secure part of your loan, allowing you to buy with a smaller cash deposit.
Example – Mia and her parents in Melbourne Mia has saved 8% of the purchase price for a unit. Her parents top this up with a $20,000 gift and offer a limited family guarantee secured against their home. With help from a broker, Mia avoids LMI, secures a sharper interest rate and keeps her parents’ guarantee limited to 20% of the property value rather than the full loan. When structured correctly, family help can:
- Reduce the time it takes to get into your first home.
- Minimise or avoid Lenders Mortgage Insurance (LMI).
- Improve your overall borrowing power and choice of lenders.
The key is making sure each role, borrower, parent, and broker, is clearly understood from the outset. While family support can be a powerful boost, it also introduces real financial risk, especially with guarantee arrangements.
| Option | Key Benefit | Main Risk/Consideration |
|---|
| Gifted funds | Simple, no repayments required | Must prove it’s a genuine gift to the lender |
| Family loan | Flexible terms between family members | Can strain relationships if expectations differ |
| Family guarantee | Buy sooner, possibly avoid LMI | Guarantor’s home is on the line if you default |
| Paying LMI instead | Keeps family assets separate | Extra cost added to your loan |
With guarantees, it’s critical to:
- Limit the guarantee amount so only a portion of the loan is secured by the parents’ property.
- Plan an exit strategy , for example, releasing the guarantee once your loan falls below 80% of the property value.
- Compare the risks of a guarantee against simply paying LMI and keeping family property separate.
A good broker’s job isn’t just to get the loan approved , it’s to protect both you and your family from unnecessary risk.
By engaging a mortgage broker early, you can:
- Properly structure family gifts, loans or guarantees to meet lender policy.
- Protect family relationships with clear documentation and expectations.
- Clean up your credit profile and align your savings plan with available first home buyer schemes, grants and stamp duty concessions.
For further reading, check out our explainer on
Lenders Mortgage Insurance and how it works. Discover more on managing your borrowing in our guide to
loan‑to‑value ratio (LVR) and its impact on interest rates, and explore practical strategies such as
paying your home loan off quicker and
tips for self‑employed loan applicants. If your credit history needs work, you may also benefit from our article on
improving your credit score in Australia. Buying your first home is a major step, but you don’t have to wait forever for a 20% deposit. By combining smarter saving habits, super and government incentives, and (where appropriate) careful family support, you can create a clear, realistic pathway into the market that aligns with your financial comfort and long‑term goals.
Disclaimer:
All information on this website is general in nature and not intended as financial, investment, legal, or tax advice. It may not suit your personal circumstances. You should seek independent professional advice before acting on any content. We accept no liability for actions taken based on this information.
