How Much Deposit Do You Really Need?
The standard answer is "20%". But that is only part of the picture. With the First Home Guarantee, eligible first home buyers can purchase with 5% deposit and no LMI. With a 10–15% deposit and LMI, you can buy earlier and repay LMI over time. Understanding the tradeoffs at each deposit level helps you decide whether to save longer or buy sooner.
Why 20% exists as the benchmark
At 20% deposit, you have an 80% Loan to Value Ratio (LVR). Most lenders consider 80% LVR the threshold for standard lending — below it, the loan carries additional risk from the lender's perspective, which triggers LMI.
The 20% benchmark is not a legal requirement or a minimum — it is the threshold below which Lenders Mortgage Insurance applies. Understanding what LMI is (and who it actually protects) helps you make a more informed decision.
What is LMI — and why you pay for it
Lenders Mortgage Insurance (LMI) is insurance that protects the lender — not you — if you default on your loan and the property sells for less than the outstanding loan balance. If there is a shortfall, the insurer covers the lender's loss.
Despite being for the lender's benefit, you pay the premium. LMI is typically added to your loan balance at settlement and repaid as part of your mortgage over time. It does not protect you from repossession or financial hardship.
- →Who pays: The borrower — typically capitalised (added to the loan balance)
- →When it applies: Any purchase with LVR above 80% (less than 20% deposit), unless using First Home Guarantee or another approved scheme
- →Cost range: $4,000 to $30,000+ depending on loan size, LVR, and insurer
Indicative LMI costs by purchase price and deposit
The table below shows indicative LMI costs at different purchase prices and deposit levels. The jump from 10% to 15% deposit significantly reduces LMI, and 20% eliminates it entirely.
| Purchase price | Deposit % | Deposit $ | LMI estimate |
|---|---|---|---|
| $600,000 | 10% | $60,000 | ~$10,000–$14,000 |
| 15% | $90,000 | ~$4,000–$7,000 | |
| 20% | $120,000 | $0 | |
| $800,000 | 10% | $80,000 | ~$15,000–$20,000 |
| 15% | $120,000 | ~$6,000–$10,000 | |
| 20% | $160,000 | $0 | |
| $1,000,000 | 10% | $100,000 | ~$20,000–$28,000 |
| 15% | $150,000 | ~$9,000–$14,000 | |
| 20% | $200,000 | $0 |
LMI figures are indicative based on standard insurer rates in 2026. Your actual LMI will be calculated by your lender at application. Rates vary by lender and insurer.
How to avoid LMI
- ✓Save to 20% deposit. The most straightforward path. Use the Deposit Calculator to track your progress and timeline.
- ✓First Home Guarantee. Eligible first home buyers can purchase with 5% deposit and no LMI. The government guarantees 15% to the lender. Income and price caps apply — check current eligibility with your lender or a mortgage broker.
- ✓Family guarantee. A parent's property can be used as additional security to cover the shortfall — eliminating LMI. This approach carries significant risk for parents (they may lose their property if you default) and requires careful legal advice.
- ✓Professional exemptions. Some lenders offer no-LMI deals for specific professions (doctors, lawyers, accountants) at higher LVRs. A mortgage broker can identify which lenders offer this for your profession.
The timing tradeoff — save longer vs buy sooner
Waiting to save 20% vs buying with 10% + LMI involves a real tradeoff. The right answer depends on market conditions:
Use the Deposit Calculator to model your savings timeline and the Total Upfront Cost Calculator to see your full cash requirement at each deposit level.
Common deposit benchmarks
| Deposit level | What it means |
|---|---|
| 5% | Minimum with First Home Guarantee (income and price caps). Also the minimum for most lenders with LMI — some lenders require 10%. |
| 10% | More common LMI entry point — LMI cost is somewhat lower than at 5%. Accepted by all major lenders with LMI. |
| 15% | Significantly lower LMI than 10%. Some lenders offer better rates and products at 85% LVR. A strong target if 20% is not achievable on your timeline. |
| 20% | No LMI. Standard lending conditions. Most competitive rates. Full product range available. The threshold at which LMI is eliminated. |
Deposit vs total cash required
A 10% deposit on an $800,000 property ($80,000) plus $25,000–$40,000 in stamp duty, legal fees, inspections, and moving costs requires $105,000–$120,000 in total cash. Many buyers underestimate this and are caught short at settlement. Run the Total Upfront Cost Calculator to get an accurate figure for your state and purchase price.