Home loan resources

How much deposit do I need for a home loan?

How much deposit for I need for a home loan?

Voiced by AJ Duncanson, Mozo Data Services Director

So, you are thinking about purchasing a property, but there is one thing standing in your way. Saving up for the deposit.

Gone are the days of no deposit loans. These days, as an absolute minimum you will need a deposit of 5% although the recommended amount is 20%.

Lenders want to see that you have genuine savings that you have built up over time. They need to see that you have good savings habits that meet your ongoing repayments and it also gives the lenders a buffer in case property values fall in the future.

Now to show you how much you might need to save for your dream home, let’s use the example of first home owner James who is looking to purchase a property worth $600,000.

Like many first home buyers, James thinks that saving 20% ($120,000) will take him far too long so he decides, he’ll aim for his banks minimum deposit requirement of 5%, which on a $600,000 property would be $30,000.

Now on top of his home deposit, James also needs to budget for the second biggest property buying expense, stamp duty.

This is a tax charged by state and territory governments and for James who lives in NSW, this cost will be around $23,000 and that’s not all. Since his deposit is under 20%, he’ll also have to pay lenders mortgage insurance.

Now this is not an insurance designed to cover James, this is an insurance that covers the lender in case James can’t make his repayments and all lenders will ask you to pay for this if your deposit is less than 20%.

Now for James, this is pretty pricey, it’s almost $26,000. Thankfully, James’ lender gives him the option to add it to his loan amount. Of course, this means he will pay a little more in interest but getting in the property door earlier is worth it to James.

Now once he’s saved his 5% deposit, and the cost of stamp duty, James will also need to make sure he has an extra few thousand dollars for all those other expenses that creep into property purchasing like conveyancing costs, and maybe loan application and valuation fees which brings the total amount that James need to save for his first home to at least $56,000 - and that is before a visit to Ikea.

So if like James if you have property in your sites, the most important thing to remember is all good things comes to those who wait - or rather to those who plan. Set your eyes on the prize by creating yourself a budget and a savings plan and start yourself on your own path to home ownership.

Nearly have enough for that dream property? Once you’re ready, track down a great home loan deal at Mozo.com.au.

While buying a property is an exciting time, what’s not exciting is getting your head around all the home buying number crunching. Even before you need to think about what your loan repayment costs will be or how much stamp duty you’ll need to pay, you’ll need to save up a deposit.

How much deposit you’ll need for a home loan will depend on whether you are buying a house or apartment to live in or as an investment.


If you are purchasing a property in which you will live, the standard down payment you will need for a home loan is 20% of the value of the property. This means if you’re looking to purchase a property for $500,000 you’ll need a home loan deposit of $100,000.

Saving up $100,000 is no easy feat, which is why lenders offer more flexible options to owner-occupiers to help get you in your dream home sooner. In the past it was possible to get a loan without any deposit but this is no longer the case.

The minimum deposit you’ll need for a home loan is 5%, as the maximum you will be able to borrow is 95% of the property value. When talking about how much deposit you’ll require for a home loan, there is some must know jargon you’ll need to be across:

Loan to Value Ratio (LVR): LVR is the ratio of the loan amount you wish to borrow in relation to the value of the property you’re looking to purchase. For example if you’re buying an apartment for $250,000 and you have a 10% deposit of $25,000, your LVR is 90%.

Lenders will use the LVR calculation to determine whether or not you will have to get mortgage insurance. You can work out your LVR easily by dividing the loan amount by the value of the property and then multiplying this amount by 100. If your home loan has an LVR of 80% or more you are required to take out Lender’s Mortgage Insurance.

Lender’s Mortgage Insurance (LMI): LMI is an insurance that protects the lender in the unfortunate event that you default on your mortgage repayments. The cost for this insurance can be up to 3% of your home loan amount and can be included either as an upfront cost or in your loan repayments over the term of the loan.

It is important to understand that this insurance does not protect you if you can’t meet your repayments, it covers the bank. If you want to cover yourself in case of illness and redundancy you need to take out mortgage or income protection insurance in addition to LMI.

Property Investor

If you are looking at purchasing an investment property then how much deposit you’ll need for a home loan will be different than someone who is buying a property to live in. The reason is, that many of the major banks have changed their lending criteria for investment loans. It used to be that you would only need a 5 - 10% deposit for an investment loan, but this has now changed and you’ll now need a 20% downpayment for a home loan.

Some non-bank lenders will not have the same criteria so depending on your overall financial situation it may be possible to still get a low deposit investment loan. If you fall into this category, speak with Mozo’s home loan experts. We deal with a range of non-bank lenders and can help you to find a home loan that’s suitable for your investment needs. Learn more and send us a enquiry to Mozo Home Loan Negotiators.

Home Loan Deposit Calculator

So now that you have got your head wrapped around all that home lending jargon, it’s time to find out how much deposit you will need for a home loan. Here’s our deposit saving cheat sheet which helps you to calculate how much you’ll need to save.

20% Deposit - LVR <80%


Property Value
500000 600000 700000 800000 900000 1000000

100000 120000 140000 160000 180000 200000


  • More competitive interest rates
  • Don’t have to pay LMI
  • Larger loan amounts


  • Bigger deposit
  • Takes longer to enter property market

10% Deposit - LVR 90%


Property Value
500000 600000 700000 800000 900000 1000000

50000 60000 70000 80000 90000 100000


  • Get into the market quicker
  • Greater choice of home loan


  • Need to pay LMI
  • Limited availability for investors

5% Deposit - 95% LVR


Property Value
500000 600000 700000 800000 900000 1000000

25000 30000 35000 40000 45000 50000


  • Less time to enter property


  • Need to pay LMI
  • Not widely available
  • Smaller maximum loan amounts

Tips for saving a home loan deposit

Now you know how much you need for a deposit you can get on the fast track to home ownership with these sure-fire saving tips:

1. Check out your state’s FHOG scheme

Attention first home buyers! The First Home Owners Grant, a one-off and tax-free payment, could be the key to cracking that 20% home loan deposit you need. See your state's grant amount and requirements here. With a visit to our first home buyers hub you can also find other useful tips to secure your dream home sooner.

2. Take advantage of the First Home Saver Super Scheme (if you can)

Want to fast-track your savings? From July 1 2017, first home buyers can sacrifice a portion of their salary and top up their super. There are juicy tax benefits to this scheme, especially once you reach the $30,000 savings limit and withdraw your funds (as required by the Australian Tax Office), for the purpose of buying your first home. Read more about the scheme in this detailed guide.

3. Show genuine savings

These days most Aussie lenders have a mandatory genuine savings requirement which means if you’re applying for a home loan with an LVR of more than 85% you’ll need to show proof of regular savings of at least 3 months.
You can grow your genuine savings nest egg by setting up direct deposits into a high interest savings account. Search for a competitive savings account in Mozo’s savings account database.

4. Consider asking a family member to go guarantor

Saving for a home loan deposit can be a lengthy process, so if it is an option available to you consider getting a parent or family member on board to act as a security guarantor to your home loan. Not only will this help you get in the property door sooner, but you’ll also avoid the cost of lenders mortgage insurance if you don’t have a deposit over 20%.

5. Budget

A little sacrifice goes a long way when saving up for the deposit of your dream home, so say goodbye to your Friday night take-outs and impromptu overseas adventures (for now). Punch your income and expenses into the Mozo budget calculator to see where you can afford to tighten your waistband.

6. Calculate your (hypothetical) repayment costs

Determine how much your monthly repayments will be using Mozo’s home loan repayments calculator and if they’re more than expected it may just mean that purchasing a smaller property or looking for a property in a more affordable area is on the cards.

7. Get a second job

Dust off your CV and apply for a casual job on the side. Jobs like bartending or working in the hospitality industry are booming right now and can really kickstart your savings in a big way (think about all those tips!).

8. Work out how much you could borrow on your income

How much you'll be able to borrow will differ depending on your income -
what you can borrow on a $50,000 income is pretty different to what you
might be able to borrow if you're earning $100,000 a year.

If you know how much a lender is likely to let you borrow on your income, you'll have a clearer idea of not only the kind of properties that might be in your price range, but also what sort of deposit you'll need to save up.  If you can borrow $250,000, and your dream home is worth $310,000, you'll need to make up the difference as a deposit. 

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