First Home Buyers
How much deposit do you actually need in 2026?
12 min read · By Daniel Lagden · 22 June 2026
The short version
- A full 20% deposit avoids LMI but isn't the only way in.
- Eligible first home buyers can buy with as little as 5% (or 2% under some schemes) without LMI.
- Your deposit isn't the only cash you need, budget for transfer duty, legal and inspection costs.
- What you can borrow matters as much as what you've saved.
The honest answer is that you need two numbers, not one. There is the deposit, which is the share of the purchase price you contribute, and there are the costs on top, which are payable in cash at settlement and cannot be added to the loan. Buyers who plan only for the first number are the ones who come up short a fortnight before settlement. On the Gold Coast in 2026 the second number is frequently five figures.
Quick summary: 20 per cent of the price is the clean benchmark, because it avoids mortgage insurance. Buying with 5 to 10 per cent is common and entirely legitimate, it just costs more or requires help. Whichever route you take, budget separately for transfer duty, conveyancing, inspections and lender fees, because none of that can be borrowed.
Why is 20 per cent the number everyone quotes?
Because at a loan of 80 per cent of the property value or less, standard Lenders Mortgage Insurance does not apply. That is the whole reason for the benchmark. LMI protects the lender if you default and the property sells for less than the debt, and you pay the premium even though the cover is theirs. It is not a scam, it is the mechanism that lets banks say yes on smaller deposits, but avoiding it saves real money.
The premium scales sharply with how small your deposit is, and it is usually capitalised, meaning it is added on top of your loan. That matters more than the headline figure suggests: a premium added to a thirty year loan and never paid down costs considerably more than the premium itself once interest is counted.
| Deposit | Amount | Loan | Mortgage insurance |
|---|---|---|---|
| 20% | $150,000 | $600,000 | Not payable |
| 10% | $75,000 | $675,000 | Payable, moderate premium |
| 5% | $37,500 | $712,500 | Payable, highest premium, unless a scheme or guarantor applies |
What are the low deposit routes?
A smaller deposit is not a compromise so much as a different set of trade offs, and there are four established ways through.
- Pay the mortgage insurance. The simplest route. You buy sooner and carry a higher loan, and in a rising market that has often been the cheaper mistake than waiting.
- Use a government guarantee scheme. Eligible first home buyers may purchase with as little as 5 per cent and no mortgage insurance, because a portion of the loan is guaranteed instead. Places, caps and eligibility conditions apply and they change.
- Bring in a guarantor. A family member uses equity in their own property as additional security, lifting your effective deposit above 20 per cent and removing the insurance. This is a serious commitment for them and needs careful structuring and a clear release plan.
- Use a profession based waiver. Some lenders waive mortgage insurance entirely for particular occupations, including a range of medical and other professional roles, even at higher loan to value ratios.
In Queensland there is a fifth factor that is not a deposit at all but behaves like one. If you are a first home buyer purchasing an eligible new home, transfer duty reduces to nil with no value cap. On a $750,000 purchase where duty would otherwise be $26,775, that is $26,775 you no longer need in cash, which is often the difference between buying this year and next.
What are the costs on top, and how much are they?
This is the part that catches people, because these are cash items payable at settlement and they sit outside the loan. Transfer duty is usually the largest by a wide margin, and in Queensland it varies enormously depending on whether a concession applies.
| Cost | Typical range | Notes |
|---|---|---|
| Transfer duty | Nil to $26,775 on a $750,000 purchase | Depends entirely on concession eligibility |
| Conveyancing or legal | $1,000 to $2,500 | Contract review and settlement |
| Building and pest inspection | $500 to $800 | Worth every cent on an established home |
| Lender fees | Nil to around $800 | Application, valuation, settlement, varies |
| Searches and registration | Around $400 | Titles office and council searches |
| Moving and connections | $500 upwards | Easy to forget, still real |
Worked example. A first home buyer purchasing an established $750,000 home with a 10 per cent deposit needs $75,000 for the deposit. Duty on that purchase, with the first home concession tapering above $700,000, is reduced but not nil. Add conveyancing, inspections, lender fees and searches and the cash requirement lands meaningfully above the deposit alone. The same buyer purchasing an eligible new home at the same price pays no duty at all, and the total cash needed drops substantially.
Lenders also want to see a genuine savings history in many cases, meaning funds accumulated over time rather than appearing in your account last week. A gift can still work, but it is treated differently and needs to be declared properly rather than explained away later.
Can you use equity instead of cash?
If you already own property, often yes. Usable equity is generally the difference between 80 per cent of your property's current value and what you still owe on it, and it can be released to fund a deposit on the next purchase. That is how a great many investors and upgraders fund a second property without saving a fresh deposit.
Two cautions. Releasing equity increases your total debt, which counts against both your serviceability and the debt to income cap discussed below. And the release depends on a current valuation supporting the figure you are relying on, which is not guaranteed in a flat market.
Why does a bigger deposit not always mean a bigger loan?
Because deposit and borrowing capacity are two separate tests and you must pass both. The deposit determines the loan to value ratio and therefore your mortgage insurance position. Borrowing capacity determines whether a lender believes you can service the repayments, and it is assessed at a rate three percentage points above the actual rate.
Since 2026 there is a third constraint. Most lenders now apply a debt to income ceiling of around six times gross income regardless of what serviceability allows. On an income of $120,000 that points to a total debt limit near $720,000, and any existing debt including undrawn credit card limits comes off that figure first. Plenty of buyers have a deposit that would support a larger purchase and a cap that will not let them make it.
This is the most common source of disappointment we see. A buyer saves diligently, arrives with a strong deposit, and discovers the ceiling was never the deposit. Establish your borrowing capacity and your debt to income position before you fix on a price bracket, not after you have started attending inspections.
So should you buy now or keep saving?
There is no universal answer, but the trade off can be made explicit rather than emotional. Waiting to reach 20 per cent saves the mortgage insurance premium and reduces your loan. Buying sooner with a smaller deposit costs the premium but starts your ownership earlier, and in a market where prices are rising the deposit target moves away from you while you save toward it.
- If you are close to 20 per cent and prices in your bracket are flat, waiting often wins.
- If you are a long way from 20 per cent and eligible for a scheme, a guarantor or a duty exemption, buying sooner usually wins.
- If your borrowing capacity rather than your deposit is the binding constraint, saving longer may not change the outcome at all, and the work belongs on your commitments and structure instead.
The right way to settle it is to model both properly, with the real duty position and the real capacity figure in front of you, rather than working from a rule of thumb.
General information only, current as at August 2026. Scheme eligibility, mortgage insurance premiums, duty concessions, prudential settings and lender policy all change, and the figures above are illustrative rather than quotes. Confirm your own position before you act on it. This is not credit advice.
Frequently asked questions
Can I buy a house with a 5 per cent deposit in Australia?
Yes. It commonly means paying Lenders Mortgage Insurance, though eligible first home buyers may avoid it through a government guarantee scheme, a guarantor arrangement or a profession based waiver.
Does the deposit include stamp duty and other costs?
No, and this is the most common budgeting error. Transfer duty, conveyancing, inspections and lender fees are payable in cash at settlement on top of the deposit, and generally cannot be added to the loan.
How much do I need for a $750,000 house?
A 20 per cent deposit is $150,000 and avoids mortgage insurance. At 10 per cent it is $75,000 with insurance payable. Then add the cash costs, which in Queensland swing widely depending on whether a duty concession applies.
Is Lenders Mortgage Insurance ever worth paying?
Often. It is a one off premium that lets you buy years earlier, and in a rising market waiting to avoid it can cost more than the premium. The right answer depends on your bracket and how fast you could realistically save.
Can my parents help without giving me cash?
Yes, through a guarantor arrangement where they offer equity in their own property as additional security. It is a genuine legal commitment for them and should be structured with a clear plan for releasing it.
Do lenders check where my deposit came from?
Yes. Many want to see genuine savings accumulated over time. Gifts and inheritances can still be used but are treated differently and need to be declared properly up front.
Will a bigger deposit always let me borrow more?
No. Serviceability at the buffered assessment rate and the debt to income cap of around six times gross income can both bind before your deposit does. Sometimes the constraint is your commitments, not your savings.
