What's the minimum deposit for a home loan in Australia?

How much a bank may be willing to lend you to buy a property will depend on a range of factors, including your income, household expenses, savings, other debts, credit score, and the size of your deposit. In most cases, a lender will offer an 80 per cent LVR (Loan to Value Ratio) home loan, meaning they’ll lend 80 per cent of your home’s value, and you need to pay the remaining deposit of 20 per cent. 

However, some lenders will allow you to apply for a home loan with a minimum deposit as small as 5 per cent of the property value, as long as you also pay Lender’s Mortgage Insurance (LMI). You may even be able to apply with no deposit if your home loan application is supported by a guarantor. Borrowers who work in some specific professions may also be able to borrow more than 80 per cent and pay no LMI. 

What is the average home loan deposit in Australia?

No two home loans are the same since they are likely designed for people with varying incomes, financial circumstances, and credit profiles who probably buy differently priced homes. Accordingly, the deposit each person may pay on their home loan can vary significantly. 

The larger the deposit you can pay, the less you may need to borrow, and the more competitive the interest rates you may be offered. However, saving up a large deposit can be challenging, especially in some Australian capital cities where property prices are high.

It may be possible to apply for a home loan with a deposit of less than 20 per cent. However, the lower your deposit, the more you may have to pay in LMI. This insurance policy covers the lender, not you, against the risk that you’ll default on your mortgage repayments, and most lenders pass the cost of LMI on to the borrower. This could make a big difference to your home loan’s upfront cost.

For example, according to the Australian Bureau of Statistics (ABS), the average loan size for owner-occupier dwellings (including construction, purchase of new dwellings and existing dwellings) in December 2022 was around $604,346. Here are the approximate costs of deposits and LMI for borrowing this amount with different deposits:

Source: ABSRateCity LMI Calculator. Calculations are estimates for illustrative purposes only. Does not account for fees, charges, or other upfront or ongoing costs.

How am I expected to pay my mortgage deposit amount?

Most often, lenders expect you to pay the deposit out of your savings as a bank transfer or cheque. Lenders often prefer that at least part of your deposit (e.g. 5% of the property value) is made up of “genuine savings” such as money earned from your job, as this helps demonstrate good financial habits. Money received as a gift, inheritance, or from selling assets like shares may not count as “genuine savings” until it’s been deposited in your bank for a minimum length of time.

If you can’t save up a higher deposit of at least 20 per cent, you’ll have to factor the cost of LMI into your financial plans. You could consider asking a family member to guarantee your home loan with the value of their own property, but this option isn’t available to everyone, and it may also put your guarantor’s finances at risk.

There are also government programs available that may be able to help supplement your deposit, potentially saving you money in LMI charges. These include:

• The First Home Super Saver Scheme (FHSS), where you make voluntary payments into your superannuation that you can then withdraw to use as part of your deposit. You are limited to only withdrawing up to $10,000, but it can help with your mortgage deposit amount. 
• The Home Guarantee Scheme (HGS), offered by the Australian government’s National Housing Finance and Investment Corporation (NHFIC), provides options for first home buyers and single parents to pay a minimum deposit of just 5 per cent when they take out a home loan from a participating lender without incurring LMI. Previously known as the First Home Loan Deposit Scheme (FHLDS). 
• The First Home Owner’s Grant (FHOG), offered by state and territory governments, can also be used to help you get above the minimum mortgage deposit. The amount you may receive, and the terms and conditions required to qualify, will depend on which state or territory you plan to purchase in, so check the local government website to find out what’s available to you.

Australians who work in selected professional careers, such as doctors, pilots, or lawyers, may also be eligible for special home loans where they can apply with a deposit as small as 5% and also pay no LMI. There may be additional eligibility criteria you’ll also need to fulfil to qualify, such as membership in a recognised industry association.

Depending on your financial situation, there may also be other options available to you that could help your deposit go further. You could consider contacting an expert such as a mortgage broker, who may be able to walk you through your choices and advise you how to get the most out of your home loan deposit.

Compare home loans in Australia