How much deposit do you need for a house?
Buying a home comes with all sorts of expenses. But before you get your foot in the door, you’ll need to save up for a house deposit and qualify for a home loan.
It’s an important step in the home loan process, but you might have some questions, like how much do I need to save for a deposit? When do I pay it, and to whom? And does it really matter if I don’t have a big house deposit?
How much do you need for a house deposit in Australia?
The most common house deposit amount in Australia is 20% of the property value, which gives you a loan-to-value ratio (LVR) of 80%.
In a country where house prices are growing frequently, this means the average deposit size can reach six figures.
The 20% deposit rule can be a bit prohibitive, depending on the value of the property you’re interested in. Thankfully, home loan lenders and the government have given prospective homeowners a couple of ways around this roadblock.
Can I still get a home loan if I don’t have a 20% deposit?
While most lenders will prefer a borrower with a 20% deposit, that doesn’t mean they’ll turn you away if you fall short. There are two main ways to get a home loan without a 20% deposit: Lenders Mortgage Insurance, or government homebuyer schemes.
Lenders Mortgage Insurance (LMI)
Many lenders will allow you to borrow with up to 95% LVR, as long as you pay for a product called Lenders Mortgage Insurance (LMI). This is a type of insurance that protects your lender’s profits if you can’t finish paying off your home loan.
LMI is calculated on a sliding scale, so the lower your deposit (and, consequently, the more you have to borrow), the higher your LMI costs will be.
It can be expensive to pay LMI, so it’s generally best to avoid it if you have the option.
Homebuyer schemes
Government-led home loan schemes, such as Help to Buy, can waive LMI altogether, even with a deposit as low as 2%. Click the button below to see which schemes suit your needs.
Deposit amounts required for different property values
To give you a rough idea of what a home deposit looks like with different property values, we’ve put together the following table.
| Home value | 20% deposit |
| $400,000 | $80,000 |
| $500,000 | $100,000 |
| $600,000 | $120,000 |
| $700,000 | $140,000 |
| $800,000 | $160,000 |
| $900,000 | $180,000 |
| $1,000,000 | $200,000 |
House deposit calculator formula
To calculate how much a 20% house deposit is, you’ll need to multiply the price of the home by 20%, or 0.2. For example, calculating a 20% deposit on a $500,000 home can be done like so:
- Deposit = $500,000 x (20/100)
- Deposit = $500,000 x 0.2
- Deposit = $100,000.
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When do I pay the deposit when buying a house?
You will be required to pay the deposit when you sign the contract of sale. This means, if you’re buying at auction, you’ll need to pay the deposit on the spot.
Once the contract is signed and the deposit is paid, you’re locked in. Different states have different rules about cooling-off periods when it comes to deposits on properties. However, the property isn’t technically yours until settlement is complete.
Getting ready to buy? Learn how to save for a deposit here, or compare home loans today.
FAQs
Should I take out a home loan with a 5% deposit?
A low deposit home loan can help you get on the property market sooner, but it pays to be aware of the risks involved.
For starters, a smaller deposit means you’ll need to borrow more, which translates to more interest paid over the life of your loan. For example:
Interest paid on a $500,000 property purchase at 5.00% p.a. interest, over 25 years
| Minimum deposit | Monthly repayments | Total interest paid | |
| 20% deposit | $100,000 | $2,338 | $301,508 |
| 15% deposit | $75,000 | $2,485 | $320,352 |
| 10% deposit | $50,000 | $2,631 | $339,197 |
| 5% deposit | $25,000 | $2,777 | $358,041 |
A low deposit also means that you will have less equity in your property during the early stages of your loan. This can cause problems if property prices fall and you end up in negative equity.
Can I use my super for a house deposit in Australia?
The government’s First Home Super Saver scheme (FHSS) allows you to make voluntary contributions into your super account to help you save for a deposit. If eligible for the scheme, you’re able to withdraw up to $15,000 of your FHSS contributions per financial year, up to a maximum of $50,000 across multiple years.
* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.
** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.
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