How Much Deposit Do You Need to Buy a House in Australia?

Taking part in the Great Australian Dream of home ownership begins with putting together your deposit. With home loan commitments reaching new record levels in Australia, first-time buyers are becoming more well-informed about the whole process. So how much deposit do you need for a house in Australia?

Well, the minimum deposit you need for a house in Australia is generally 5% of the property value. However, aiming for a 20% deposit is ideal. While this amount can vary depending on your desired property, it’s crucial to understand what a deposit actually entails.

Whether you’re just researching the market or preparing for your first loan, this article has everything you need to know about home loan deposits. We’ll take a look at the average deposit amounts, whether bigger deposits are better and how government lending schemes are helping first-time buyers.

Why Do I Need a Deposit in Australia for a House?

When you’re looking to get a home loan, having a solid deposit amount shows lenders that you’re a lower-risk borrower. Most lenders want to see that your deposit comes from genuine savings – funds you’ve built up over at least three months by regularly putting money aside in a savings account. 

There are some exceptions to this rule (check the genuine savings page for details), but generally, a deposit you’ve saved up yourself demonstrates your ability to make consistent payments, which is key if they approve your loan.

The bigger your deposit, the lower your loan-to-value ratio will be. A lower LVR puts you in a better position to qualify for the lender’s best rates and terms. That said, waiting to save up an even larger deposit isn’t always the right move for everyone’s situation.

In short, having a decent deposit from your own savings habits can improve your chances of home loan approval and scoring a great deal. But there’s a balance to strike between saving more and acting when the time is right for your circumstances.

What is the Minimum Deposit Required to Buy a House in Australia?

To buy a house in Australia, the typical deposit required is around 20% of the property’s purchase price. However, there are some variations and additional factors to consider.

  • Standard Deposit: A 20% deposit is standard and can help you avoid paying Lenders Mortgage Insurance (LMI), which is required if your deposit is less than 20%.

  • Lower Deposits: Some lenders may accept deposits as low as 5-10%, but this usually incurs LMI, which can add significantly to the overall cost of the loan.

  • First Home Buyers: There are government grants and schemes, such as the First Home Owner Grant (FHOG) and the First Home Loan Deposit Scheme (FHLDS), that can help first-time buyers with lower deposits.

  • Expat Considerations: For Australian expatriates, the required deposit might vary depending on the lender’s policies. Many lenders still prefer a 20% deposit for expats, though some may consider lower deposits with additional conditions.

  • Additional Costs: Besides the deposit, buyers should also budget for other expenses such as stamp duty, legal fees, inspection costs, and moving expenses.

By having a larger deposit, you not only reduce the need for LMI but also increase your borrowing capacity and potentially secure better interest rates​​. So, the more savings you have to put towards your budget, the smaller your loan will be.

How Much Do You Save to Buy a House?

Typically, lenders require borrowers to have a down payment of at least 20% of the property’s purchase price. However, in some cases, the minimum down payment can be as low as 5% or even less, provided the borrower meets specific eligibility criteria. Here are some examples illustrating a 5% minimum down payment requirement:

Property Purchase Price Minimum Down Payment (5%) Ideal Down Payment (20%)
$400,000
$20,000
$80,000
$500,000
$25,000
$100,000
$800,000
$40,000
$160,000
$1,000,0000
$50,000
$200,000

In addition to the down payment, buyers should be prepared to have additional funds available to cover closing costs, such as stamp duty and conveyancing fees. These costs generally amount to an additional 5% of the purchase price. However, first-time homebuyers may be eligible for certain benefits that can reduce the stamp duty amount.

For those interested in purchasing an investment property, lenders typically require a higher down payment, often around 10% of the purchase price, along with additional funds to cover closing costs. Depending on the borrower’s financial situation, they may qualify for a lower down payment requirement.

Alternatively, borrowers may have the option to borrow up to 100% of the property value by using the equity from another property they own or even up to 105% of the property value through a guarantor loan. These options can potentially save borrowers thousands of dollars in down payment costs and Lenders Mortgage Insurance (LMI) fees, provided they meet the eligibility criteria.

Use our “How Much Can You Borrow?” calculator to access your borrowing power.

Deposit Requirements Based on Average Property Prices

To give you a better idea of how much deposit you’ll need based on average property prices in Australia, we’ve calculated different deposit percentages based on the average house prices across Australia.

Property Area Average Property Price 20% Deposit 30% Deposit
Sydney
$1,403,767
$280,753
$421,130
Melbourne
$1,001,635
$200,327
$300,491
Brisbane
$829,173
$165,835
$248,752
Perth
$617,933
$123,587
$185,380

Take a look at your desired location and think about how it will inform your deposit plans.

With a deposit amount in mind, you can begin to calculate the cost of your monthly home loan repayments. Try our Mortgage Repayment Calculator and feel more confident that you can repay your loan.

Keep in mind, if you deposit less than 20% you may have to pay LMI.

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

Buying With a 5% Deposit

When purchasing a property in Australia, it is common for buyers to make a deposit of around 5% to 10% of the property’s value when signing the contract of sale. Here are some key points about buying with a 5% deposit in Australia:

Lenders Mortgage Insurance (LMI)

Lenders Mortgage Insurance (LMI) is usually applied to home loans that have a deposit of less than 20%. It refers to a type of insurance on the loan that protects the bank against any losses if a situation arises that means the borrower can’t repay the loan amount.

For example, a house worth $600,000 with a 10% deposit will have the bank lending you $540,000. If you have only paid $60,000 during this loan period, and then your financial situation suddenly changes leaving you unable to pay the loan, the bank will be facing $490,000 in losses.

Even in the rare scenario of seizing a house which might mean the bank sells the house for $460,000, they’ll still be $20,000 out of pocket. There is also the interest rate on top of that which the bank will also be losing out on.

Therefore, LMI is paid by the borrower either in upfront costs or as part of the loan. This will be paid when your home loan is settled. Here are a few things to remember about LMI:

  • LMI only needs to be paid if your deposit is less than 20%.
  • LMI is a form of financial protection for the lender, not the borrower.
  • You won’t arrange the LMI yourself. This will be part of the home loan process and the lender will calculate it for you.
  • You can save paying LMI by having a bigger deposit.

How Much Is Lenders Mortgage Insurance?

This is going to depend on the size of your deposit, the type of loan you take out, and the lender you choose. Your best source of information will be a trusted and experienced mortgage broker.

Brokers available at Odin can show you how to calculate the LMI for your specific circumstances. With appropriate professional advice ready when you need it, we can walk you through all the lending criteria involved in your future home loan.

Loan-to-Value Ratio (LVR)

The LVR is the ratio of the loan amount to the property’s value. With a 5% deposit, your LVR would be 95%, which is considered a high LVR and may result in higher interest rates or stricter lending criteria.

Stamp Duty and Other Costs

When buying a property in Australia, you will also need to factor in additional costs such as stamp duty, legal fees, and other charges. These costs can add up to several thousands of dollars, depending on the property’s value and location.

Savings and Budget

Buying with a 5% deposit means you need to have enough savings for the deposit, as well as additional funds for the other costs mentioned above. It’s also important to have a budget and ensure that you can comfortably afford the ongoing mortgage repayments.

Use Government First Home Buyer Schemes

The Australian government has many state-funded schemes that are now allowing first-time buyers to get their home loans quicker. Certain territories offer a range of grants that support your financial journey.

  • First Home Owner Grant (FHOG): The FHOG is a one-off payment to help first-time buyers purchase or build a new property. This grant can offer $10,000 towards your deposit.
  • First Home Loan Deposit Scheme (FHLDS): The FHLDS is actually a scheme that allows first-time buyers to place a deposit of less than 20% and avoid paying LMI. Buyers are only required to pay 5% of the deposit and the FHLDS will contribute the other 15%.

It’s worth checking if you are eligible for any of these schemes.

Is It Better to Put Down a Bigger Deposit?

Saving for a larger deposit as a first-time homebuyer can provide numerous advantages when applying for a mortgage. A bigger deposit not only gives you access to a wider array of mortgage options but also signals financial stability, which can help secure more attractive loan terms and lower interest rates. Remember, the bigger your deposit, the less you have to borrow, making your monthly mortgage payments more manageable.

Additionally, as a first-time buyer, it’s always good to have the future in mind. Those first-time buyers who save as much as possible and acquire a bigger deposit will experience more benefits when applying for a home loan. With a larger deposit, first-time buyers can:

  • Begin to Negotiate a Lower Interest Rate: With a larger deposit, the lender sees you as a less risky client, increasing your bargaining power.
  • Benefit from More Loan Options: Having a larger deposit opens up your options and lets you find a better deal. For example, you can lower your interest payments with an offset account.
  • Borrow Less Money: The bigger your deposit is, the less money you will have to borrow from the bank, which means there will be less interest on the life of the loan.
  • Avoid Paying LMI: As soon as your deposit is over 20%, you know you can avoid paying LMI.

While saving for a larger deposit may require patience, it can ultimately make your monthly mortgage payments more manageable and provide access to preferential rates and loan terms. By prioritising a substantial deposit, first-time buyers can increase their chances of securing a favourable mortgage and positioning themselves for long-term financial success.

Tips for Expats to Save a Larger Deposit

Now you know all the advantages of a larger deposit, it’s useful to know some of the most common ways Australians increase their borrowing capacity.

Develop a Savings Plan​

Don’t try to save without a plan! When thinking about your deposit, you need to create a realistic and precise savings plan. Set personal objectives you can work towards every month.

Simply, calculate how much you need to save over a period of time to reach your deposit goal, and then work out the budget you have every month for living expenses. Put all your details into our Australian Mortgage Calculator and start building your deposit balance today.

Deposit Regularly

When you have a savings plan in place, be prepared to deposit regularly on a set date every month. Rather than having to remind yourself, set up a monthly direct debit that automatically transfers money from your income account to your savings account.

With this all set up, you’ll be naturally saving money every month without having to personally transfer it.

Avoid Unnecessary Expenses

When developing your savings plan, try to also work out a weekly budget for expenses. This will allow you to cut back on anything you don’t feel is necessary, boosting your savings potential.

Think whether you need to eat out every week or whether your gym membership is actually worth it!

Look at High-Interest Savings Accounts

Australians that think seriously about their deposit savings have a high-interest savings account set up to increase their finances every month.

Take a look at online savings accounts that include a higher interest rate and minimal fees.

What Are the Costs of Buying a Property?

Along with your deposit and the LMI, you may face other costs and legal fees. These will include:

  • Stamp Duty: A tax charged by Australian states on property transactions. Use our Stamp Duty Calculator to calculate the costs in your desired area.
  • Conveyancing and Title Changes: You will need to pay a legal team to formally transfer your name and details onto your newly purchased property.
  • Pest and Building Inspection: A charge may be applied for a professional to inspect the property for any issues such as structural damage or termite infestation.
  • Building Insurance: This is an extra cost that will cover your home against any damage caused by fire, explosion, or floods etc.

Using Equity for a New Property Purchase

If you already own a property, you can leverage the equity (the portion of the property’s value that you own outright) as a source of funds for purchasing another property. Here’s how it typically works:

  • Equity Calculation: Determine the equity you have in your existing property by subtracting the outstanding mortgage balance from the current market value of the property.
  • Equity Loan: You may be eligible to take out a loan against the equity in your current property, typically up to 80-90% of the equity value.
  • Deposit and Loan: The equity loan can be used as a down payment or deposit for the new property you wish to purchase. Additionally, you can apply for a separate mortgage loan for the remaining amount based on your income and other financial qualifications.
  • Existing Loan Payoff: If you have an outstanding loan on your existing property, a portion of the equity loan proceeds will be used to pay off that loan first.
  • Negative Gearing Consideration: Lenders may consider any negative gearing (where the rental income is less than the property expenses) on your existing property when determining your borrowing capacity for the new property.

What If I Don’t Have a Deposit?

If you don’t have enough funds for a down payment, you may be able to use a guarantor, typically a family member with sufficient equity in their own property, to secure your mortgage. Here’s how it works:

  • Guarantor Equity: Your guarantor (e.g., parents) uses the equity in their property as collateral for your mortgage.
  • No Down Payment: With a guarantor, you may be able to borrow the full purchase price of the property, plus closing costs, without a down payment.
  • Avoid Lenders Mortgage Insurance (LMI): By using a guarantor, you can avoid paying the LMI, which is typically required when borrowing with a low down payment.
  • Eligibility Requirements: Both you and your guarantor must meet specific eligibility criteria set by the lender for a guarantor loan.

It’s important to carefully review the terms, conditions, and potential risks associated with using equity or a guarantor for a property purchase.

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So, you now know exactly what you need to start saving for your deposit, and how much you’ll need to secure that dream house.

Do you think you’ve saved enough to afford your ideal property? If so, then let’s chat about it today with a free online assessment. Maybe you just want to find out how much deposit you’ll need for your first home. Well, we’re here to help you today.

Speak with one of our specialists at a day and time that suits you, and help to secure your place on the Great Australian Dream!

Get a free Australian mortgage assessment today.

Apply online to get a free recommendation with real rates and repayments.

Frequently Asked Questions

If you’re looking to purchase a property with a $10,000 deposit, this will be possible with the First Home Owners Grant (FHOG) and the First Home Loan Deposit Scheme (FHLDS). The FHLDS, for example, will cover 15% of your deposit when you pay 5% without having to pay LMI.

If you want to buy a $300,000 house, you should aim for a 20% deposit, which would be $60,000. A lower deposit of 10% ($30,000) or 5% ($15,000) will require you to pay an LMI to show you can repay the loan. The FHLDS allows first-home buyers to use a 5% deposit without paying LMI.

If you’re looking to buy a house worth $500,000, the average deposit percentage of 20% will cost you $100,000. If you don’t have this and want a lower percentage, 10% and 5% deposits will come with the catch of paying LMI.

$40,000 at 20% will equal a total property value of $200,000. This is more unlikely, and you may need to consider either saving more for the deposit or having a 10% or 5% deposit. However, if you have a deposit lower than 20%, you will need to pay LMI.

The minimum deposit required for buying a house in Australia can vary, but typically it is around 5% to 10% of the property’s purchase price.

For Australian expatriates, the minimum deposit requirements can be stricter, often around 20%, though some lenders might accept lower deposits with additional conditions.

While the minimum deposit can start at 5%, aiming for a higher deposit can provide better financial security and loan terms​​.

There are two ways to look at this, depending if you’re interested in the typical deposit amount for first-home buyers or the average deposit nationwide (which might include investors and upgraders).

  • Average First-Home Buyer Deposit: This is around $106,743 according to Finder. It can vary significantly by state, with NSW having the highest average deposit requirement at $128,469 and Tasmania the lowest at $81,438.
  • National Average Deposit: This is a bit trickier to pinpoint as there isn’t a central data source. However, estimates suggest it could be around $119,560.

Keep in mind that these are just averages and the deposit you’ll need will vary depending on your circumstances. It’s always best to talk to a lender or mortgage broker to get an accurate idea of how much deposit you’ll need.

Saving for a home loan deposit in Australia can be a challenge, but there are steps you can take to reach your goal faster. Below are some house deposit tips for Australia.

1. Set a Clear Goal

  • Research Property Prices: Find out what kind of property you want and in which areas. This will help you determine a realistic deposit target.
  • Factor in Additional Costs: Don’t forget about stamp duty, conveyancing fees, and other buying costs when calculating your total savings goal.
  • Consider a 20% Deposit: While some lenders might allow a lower deposit, aiming for 20% will save you money on mortgage lenders mortgage insurance (LMI).

2. Become a Budgeting Pro

  • Track Your Spending: Knowing where your money goes is crucial. There are many budgeting apps and tools available to help.
  • Create a Realistic Savings plan: Factor in your income and expenses to determine how much you can realistically save each week or month.
  • Automate Your Savings: Set up automatic transfers to your savings account so you’re not tempted to spend that money.

3. Boost Your Savings

  • Reduce Expenses: Look for ways to cut back on non-essential spending like entertainment, eating out, or subscriptions.
  • Increase Your Income: Consider a side hustle, freelance work, or asking for a raise to accelerate your savings.
  • Explore Government Programs: First Home Owner Grants (FHOG) can help eligible first-time buyers with a lump sum towards their deposit.

4. Make Your Money Work for You

  • Shop Around for High-Interest Savings Accounts: Look for accounts that offer competitive interest rates to maximize your returns.
  • Consider a Savings Challenge: There are many savings challenges where you commit to saving a specific amount every week or month.

5. Additional Tips

  • Pay Off Existing Debts: High-interest debts can eat into your savings potential.
  • Seek Professional Advice: A mortgage broker can help you understand your borrowing power and explore different loan options.
  • Be Patient and Disciplined: Saving for a house deposit takes time and commitment. Stick to your plan and celebrate your milestones!
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