There is no single deposit amount that suits every first home buyer. A larger deposit generally lowers the loan-to-value ratio and may avoid LMI, but waiting to save more can also delay a purchase. The right target is the one that covers both your deposit and the other costs of buying without exhausting your cash buffer.
The 20% deposit is a benchmark, not a rule
A 20% deposit means the loan is 80% of the property's value. It is a useful benchmark because LMI often applies above that level, but it is not a legal minimum and it is not the only way to buy. Some lending options allow a smaller deposit, subject to lender policy, income, property and eligibility requirements.
The important question is not only "Can I get a loan?" It is "What will the loan cost, and will I still have enough cash for duty, fees and surprises?"
Compare three deposit scenarios
For any property price, model at least three versions:
- A lower deposit: shows whether LMI may apply and how little cash remains after costs.
- Your current savings target: the most realistic near-term option.
- A larger deposit: shows how the loan, LVR and repayments change if you keep saving.
Enter each scenario into the Borrowing Power Calculator. It shows an indicative LVR and LMI estimate alongside your borrowing result. Then run the final loan amount through the Repayment Estimator at your expected rate and at a higher rate.
Do not forget purchase costs
Savings are often discussed as though every dollar becomes the deposit. In practice, some cash may be needed for transfer duty, conveyancing, inspections, registration and moving. First-home buyer concessions can help, but they depend on your circumstances and local rules.
Read First Home Buyer Costs in Australia before choosing a deposit target. It gives you a checklist of the expenses that sit outside the advertised property price.
Smaller deposits and LMI
LMI protects the lender, not the borrower, if the property is sold for less than the outstanding debt. It is commonly charged when the loan is a high proportion of the property's value and may be paid upfront or added to the loan. The premium varies by lender, insurer, loan purpose and borrower profile, so treat any online estimate as a starting point only.
Paying LMI is not automatically a bad decision. For some buyers, it may be the cost of buying earlier. For others, waiting until they have a larger deposit may produce a lower loan and more breathing room. Compare the full cash position, monthly repayment and risk tolerance rather than deciding based on the LMI figure alone.
Check schemes separately from your deposit plan
Programs such as the Home Guarantee Scheme may help eligible buyers purchase with a lower deposit without the usual LMI outcome, but places and conditions are limited and can change. Check Housing Australia's current program information and speak with a participating lender before treating a scheme as certain.
Next steps
Use the LMI guide for first home buyers to understand the trade-off in more detail. Then return to the calculator with the amount you can genuinely contribute after costs, not the headline amount in your savings account.