No, you do not always need a 20% down payment to buy a home in Australia.
Many lenders may accept a home loan deposit of 5% or 10%, subject to their lending rules and your financial position. Eligible buyers may have options with an even smaller deposit through a government scheme. The catch is that a smaller deposit can mean a larger mortgage, higher repayments and extra costs such as Lenders Mortgage Insurance, commonly called LMI.
That answer can feel like a small miracle if you have been watching your savings grow slowly while house prices seem to sprint away in expensive shoes.
Still, “you can buy” and “you should buy now” are not the same thing. In my view, the best home deposit is not automatically 20%. It is the deposit that gets you into a suitable home without leaving your budget gasping for air.
This guide explains how a 5%, 10% or 20% house deposit may affect your home loan, which low-deposit options are available and what to compare before you apply.
Do I Really Need a 20% Down Payment for a Home Loan in Australia?
A 20% down payment is not a law. It is a common target because it usually keeps the loan-to-value ratio, or LVR, at 80% or below.
Your LVR compares the amount you borrow with the value of the property accepted by the lender. If you buy a home for $700,000 and contribute $140,000, your home loan would be $560,000 and your LVR would be 80%, before allowing for fees and other costs.
With an LVR above 80%, you may need to pay LMI or another low-deposit charge. Lender rules, the property, your house loan size and your application all matter. A low deposit does not guarantee approval.
Moneysmart explains that some lenders may accept a deposit as low as 5%, although a smaller deposit may bring higher costs. This is the simple answer search engines and voice assistants often miss: 20% is recommended, but it is not always required.
Do I really need a 20% down payment to avoid LMI?
In many standard home loan applications, a 20% deposit may help you avoid Lenders Mortgage Insurance. However, there are exceptions.
You may avoid LMI with an eligible government guarantee, a suitable family guarantee or a professional LMI waiver offered by some lenders. Each path has conditions and risks. “No LMI” also does not mean “no fees”.
LMI protects the lender, not the borrower. If the property is sold after a default and the sale proceeds do not cover the debt and costs, you may still be responsible for a shortfall.
Can I buy a house with a 5% or 10% deposit?
Yes, some buyers can purchase a house with a 5% or 10% deposit. Approval will depend on the lender’s policy, your income, expenses, debts, credit history, genuine savings and the type and location of the property.
A low deposit home loan normally means you borrow more. That raises your LVR and can increase your repayments, total interest and exposure if property values fall.
It may still be a sensible option if buying sooner suits your life and your budget remains comfortable. The right comparison is not simply “LMI versus no LMI”. It is the full cost and risk of buying now compared with waiting, saving and possibly facing a different property market later.
Why Is a 20% Down Payment Recommended?
A 20% house deposit can make a home loan application stronger because you are asking the lender to fund a smaller share of the property value.
You will usually borrow less, which can reduce monthly mortgage repayments and total interest. You may avoid LMI, qualify for a wider range of home loan products and gain access to sharper pricing, depending on the lender.
You also begin with more equity. That buffer can be reassuring if the property market falls or if you later want to refinance your mortgage.
There is a less exciting but very real emotional benefit too. A smaller loan can provide breathing room when rates rise, the hot-water system stages a rebellion or life delivers one of its famously untimely bills.
Is a 20% down payment always the best choice?
Not always. Waiting years to reach 20% has an opportunity cost. You may keep paying rent, delay an important move or watch suitable homes become more expensive.
You could also make the mistake of using every dollar for the deposit. Owning a home with no emergency buffer is not the calm victory it appears to be. Settlement costs, repairs, rates, insurance and moving expenses arrive whether your savings account feels ready or not.
I would rather see a buyer choose a manageable mortgage and retain a sensible cash buffer than chase the perfect deposit percentage and become financially brittle.
How much deposit do I need for a $600,000 house?
For a $600,000 property, a 5% deposit is $30,000, a 10% deposit is $60,000 and a 20% deposit is $120,000.
These figures are the deposit only. You may also need money for transfer duty or stamp duty, conveyancing, inspections, loan and government fees, insurance, moving costs and urgent repairs. First home buyer grants or stamp duty concessions may reduce some costs, but the rules differ between states and territories.
Your lender may also use its own valuation rather than the contract price when calculating LVR. If the valuation is lower than the price you agreed to pay, you may need to contribute more money.
Can I Get a Low Deposit Home Loan Without Paying LMI?
Yes, some eligible borrowers can obtain a low deposit home loan without paying LMI. The most common routes are an Australian Government scheme, a family guarantee or an eligible professional waiver.
The rules can change, so always check the current criteria before making an offer on a property.
Can first home buyers use the Australian Government 5% Deposit Scheme?
Eligible first home buyers may buy with a minimum 5% deposit through the Australian Government 5% Deposit Scheme without paying LMI. The expanded scheme has no income caps or waiting lists, but borrower, owner-occupier and property price rules still apply.
Eligible single parents or legal guardians with at least one dependant may access the Single Parent Stream with a minimum 2% deposit. The government guarantees part of the loan to the participating lender; it does not pay your deposit or make your home loan repayments.
The Scheme is available through participating lenders. These include major lender brands and other banks and credit unions, so it is worth comparing the loan rate, comparison rate, fees, features and service—not merely the presence of a familiar logo. You can review the current framework through Australian Treasury’s home ownership support information.
Does Help to Buy require a 20% deposit?
No. Help to Buy requires eligible applicants to have a minimum 2% deposit, not a 20% cash deposit.
Under this shared-equity scheme, the Australian Government may contribute up to 30% of the purchase price of an existing home or up to 40% for a newly built home. You take out a mortgage for the remaining amount through a participating lender.
This is different from the 5% Deposit Scheme. With Help to Buy, the government shares in changes to the property’s value in proportion to its equity interest. Income caps, property price caps, financial-capacity rules and other eligibility conditions apply. Read the current details on the Australian Government First Home Buyers website.
Can a family guarantor replace a 20% house deposit?
A family guarantee may let a close relative use part of the equity in their property as extra security for your home loan. This can reduce the effective LVR and may help you avoid LMI without providing a full 20% cash deposit.
The guarantor is taking on a genuine legal and financial risk. If you cannot meet the loan obligations, the lender may seek repayment from the guaranteed security. Both borrower and guarantor should understand the limit and duration of the guarantee and obtain independent legal and financial advice.
What Is Lenders Mortgage Insurance on a Low Deposit Home Loan?
Lenders Mortgage Insurance is usually a one-off cost that protects the lender if a borrower defaults and the lender suffers a loss after the property is sold.
The premium may depend on the loan amount, LVR, lender, insurer and application. It can sometimes be added to the home loan, but that increases the amount borrowed and may mean paying interest on the premium.
CommBank states that LMI can generally range from 1% to 5% of the loan amount and gives an example where LMI on a $500,000 loan with a 10% deposit could exceed $10,000. That is an illustration, not a quote for your application. You can read CommBank’s LMI guide for the assumptions behind its example.
Is it worth paying LMI instead of waiting for a 20% deposit?
Sometimes. LMI may be the cost of entering the market sooner. Whether that is worthwhile depends on the premium, the loan rate, the property, how long saving the extra deposit may take and whether repayments remain affordable under pressure.
Do not assume future capital growth will rescue a stretched budget. Property prices can rise, remain flat or fall. A decision should work based on your current income and a realistic safety margin, not a heroic forecast.
Ask for an estimated LMI cost and compare the total loan cost at several deposit levels. The answer often becomes clearer when you see the numbers side by side.
How Do CommBank, NAB, ANZ and Other Lenders Treat a Smaller Deposit?
CommBank home loans, NAB home loans, ANZ home loans, Westpac home loans and loans from smaller banks or non-bank lenders do not all follow one identical low-deposit policy.
A lender may accept a 5% or 10% deposit for one borrower or property but require more for another. Some postcodes, apartments, unusual properties, investment loans, construction loans and large loan amounts can attract tighter LVR limits.
Some lenders also offer LMI waivers for eligible doctors, lawyers, accountants or other professionals. Professional eligibility, income, membership requirements and maximum LVR can vary.
Brand recognition should never replace comparison. Check the advertised interest rate, comparison rate, annual and upfront fees, offset account, redraw, extra repayment rules, cashback conditions and the rate that applies at your actual LVR. A low advertised home loan rate may not be available with a 5% deposit.
Which lender is best for a 5% deposit home loan?
There is no single best lender for every 5% deposit home loan. The right fit depends on your eligibility, borrowing capacity, property, employment, credit profile and need for loan features.
Compare offers from major banks such as Commonwealth Bank, NAB, ANZ and Westpac with suitable smaller lenders. Some comparison services do not cover the whole market, and not every lender participates in every government scheme.
The goal is not to collect the most lender logos. It is to find a loan you can qualify for, afford and live with after the excitement of settlement day has faded.
What Extra Costs Do I Need Beyond the Home Loan Deposit?
Your house deposit is only one part of the upfront cost of buying property.
Depending on your state, property and eligibility, you may need to budget for stamp duty, transfer and mortgage registration fees, conveyancing or legal work, building and pest inspections, valuation or application fees, home insurance, moving expenses and utility connections.
You may also need an immediate maintenance fund. The first week in a new home has a strange talent for revealing one dripping tap, one stubborn door and one appliance that has chosen retirement.
Keep these costs separate when testing your deposit. A “10% deposit” is not truly 10% if legal fees and moving costs have to come out of the same money.
Should I Buy With 5%, 10% or Wait for a 20% Down Payment?
Start with three mortgage scenarios: buying with your current deposit, waiting until you reach 10%, and waiting until you reach 20%.
For each option, compare the loan amount, LVR, estimated LMI or low-deposit charge, interest rate, comparison rate, monthly repayment, cash left after settlement and total interest over the period you expect to hold the loan.
Then stress-test the repayment at a higher rate. Ask what happens if your income falls, childcare costs rise or the property needs an urgent repair. A lender’s maximum approval is not the same as your comfortable budget.
If a smaller deposit gets you into a suitable home while leaving a sound emergency buffer and affordable repayments, waiting for 20% may not be necessary. If buying now would leave you with no savings and a mortgage that only works on a perfect month, relief can quickly turn into frustration.
The smartest percentage is the one supported by the full picture.
Frequently Asked Questions About a 20% Down Payment
Do I really need a 20% down payment to buy a house?
No. Some Australian lenders accept deposits of 5% or 10%, subject to lending criteria. Eligible buyers may also use a government scheme with a 5% or 2% minimum deposit. A deposit below 20% may lead to LMI, a low-deposit charge, a higher rate or tighter loan conditions.
Can I get a mortgage with a 5% deposit in Australia?
Yes, a 5% deposit home loan may be available through participating government-scheme lenders or under a lender’s standard low-deposit policy. Approval depends on your finances, the property and the lender’s rules.
Do first home buyers have to pay LMI with a 5% deposit?
Not always. Eligible first home buyers using the Australian Government 5% Deposit Scheme can buy with a minimum 5% deposit without paying LMI. Buyers outside the scheme may need LMI or another low-deposit charge.
Is Help to Buy the same as the 5% Deposit Scheme?
No. Help to Buy is a shared-equity scheme that requires a minimum 2% deposit and gives the government an equity interest in the home. The 5% Deposit Scheme uses a government guarantee to support an eligible low-deposit home loan; the government does not take an ownership share.
Does LMI protect me if I cannot repay my home loan?
No. LMI protects the lender. It is not mortgage repayment insurance or income protection for the borrower.
Is a 10% house deposit enough?
A 10% house deposit may be enough with some lenders, but LMI may apply and the available rate can differ from rates offered at an 80% LVR. You must also have enough money for buying costs and a cash buffer.
Can I use a guarantor instead of saving a 20% deposit?
Possibly. A suitable family guarantee may reduce the need for a 20% cash deposit or LMI. It places the guarantor’s property and finances at risk, so independent advice is important.
Compare Before You Let the 20% Myth Delay Your Move
You do not need to treat a 20% down payment as the locked gate to home ownership. A 5% deposit home loan, 10% house deposit, government scheme or family guarantee may offer another route.
The real question is whether the total loan is suitable, affordable and competitive for you.
Compare home loan rates on Ratebuster, then use the mortgage calculators to test different deposits, interest rates and repayments. A few minutes comparing the numbers could show whether you are closer to buying a home than you thought—or whether waiting a little longer would give you the safer win.
General information only. This article does not consider your objectives, financial situation or needs. Eligibility, rates, fees, government schemes and lending criteria can change. Check current rules and consider professional advice before applying or entering a property contract.
