How Much Do You Need for a Home Deposit?
Speaking with Kaili Watkins, Home Loan Specialist at Westpac, and Anne Flaherty, Senior Economist at REA Group, we lay down the facts, clear the fog, and settle the debate to help you make an informed decision on your own property journey.
Buying a home is a major financial milestone—and for many, the biggest hurdle is saving enough for a deposit. But how much do you actually need, and what options are available if you don’t have the full amount saved? We break it all down with insights from Kaili Watkins, Westpac Home Loan Specialist, and Anne Flaherty, Senior Economist at REA Group.
What Is a Home Deposit?
A home deposit is the initial lump sum payment made when purchasing a property. Traditionally, a 20% deposit is recommended. That means for a $1 million property, you’d need $200,000 upfront.
But this can be a steep target for many Australians.
How Long Does It Take to Save a 20% Deposit?
Saving a full 20% deposit can take years—on average:
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Nationally: approx. 6 years
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Greater Sydney: approx.~10 years
This makes alternatives, such as smaller deposits and government support, increasingly important for buyers wanting to enter the market sooner.
Can You Buy with Less Than 20%?
Yes, many buyers purchase homes with as little as 5-10% deposit, especially when supported by:
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Lenders Mortgage Insurance (LMI)
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Government schemes
For example, a 5% deposit on a $1 million property is $50,000. Some banks, including Westpac, allow purchases with deposits as low as 5–15%, but buyers may need to pay LMI.
What Is Lenders Mortgage Insurance (LMI)?
LMI protects the lender—not the buyer—when a loan is issued with less than 20% deposit. It helps banks like Westpac reduce risk, but it's an additional cost to the buyer.
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The smaller your deposit, the higher the LMI cost.
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Deposits under 10% can result in significant LMI premiums.
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It’s important to seek guidance to weigh the benefits against the costs.
Government Schemes to Help First Home Buyers
Several government initiatives aim to reduce the deposit barrier:
1. First Home Guarantee Scheme
Allows eligible buyers to purchase a home with just 5% deposit and no LMI.
2. Help to Buy Scheme
The government co-purchases up to 30-40% of a property, reducing upfront and ongoing costs.
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Available for new and existing homes
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Buyers repay a smaller loan and own a portion of the property alongside the government
Both schemes aim to help first-time buyers enter the market sooner, especially in high-cost areas.
Can You Buy with No Deposit?
While rare, purchasing with no deposit can be possible under specific circumstances, such as:
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Guarantor loans (often supported by a family member)
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Special government support for low-income earners or essential workers
These options come with added risks and requirements, so expert advice is crucial.
Don’t Forget Upfront Costs
Besides the deposit, home buyers must budget for additional costs such as:
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Stamp Duty (varies by state and property value)
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Legal and conveyancing fees
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Lenders Mortgage Insurance (if applicable)
These can amount to tens of thousands of dollars and cannot typically be rolled into the home loan.
Final Advice: Start with Expert Guidance
Planning early with the help of a home loan specialist and financial advisor is key. They can help you:
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Assess your borrowing capacity
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Explore deposit strategies
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Understand the pros and cons of LMI
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Apply for relevant government schemes
Contact AZ Property to learn more about these listings
Website: www.az-property.com.au
Phone: 08 9355 2757
Enquiry send to [email protected]
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