Why 20% matters — and when 5% is enough
The 20% deposit threshold is important because it avoids Lenders Mortgage Insurance (LMI). Below 80% LVR (loan-to-value ratio), lenders require you to purchase LMI — a one-off insurance policy that protects the lender, not you, in case you default. It adds $8,000–$25,000+ to your loan depending on price and LVR.
However, saving 20% can take years in a rising market. The First Home Guarantee now allows eligible first home buyers to purchase with just 5% and no LMI — the government guarantees the remaining 15%. Income caps were removed in October 2025.
First Home Guarantee (2025–26)
Deposit required5% (no LMI payable)
Income capNone (removed Oct 2025)
Sydney price capUp to $1.5m
Melbourne price capUp to $950k
Brisbane price capUp to $1m
PlacesUnlimited (cap removed)
Deposit needed at common property prices
| Property price | 5% deposit | 10% deposit | 20% deposit | LMI at 10% |
|---|---|---|---|---|
| $500,000 | $25,000 | $50,000 | $100,000 | ~$8,400 |
| $600,000 | $30,000 | $60,000 | $120,000 | ~$10,100 |
| $700,000 | $35,000 | $70,000 | $140,000 | ~$11,800 |
| $800,000 | $40,000 | $80,000 | $160,000 | ~$13,500 |
| $900,000 | $45,000 | $90,000 | $180,000 | ~$15,200 |
| $1,000,000 | $50,000 | $100,000 | $200,000 | ~$16,800 |
LMI estimates are indicative. Actual LMI depends on your lender and individual circumstances.