Last updated: March 2026

How Much Deposit Do You Really Need to Buy Your First Home in 2026?

Ask ten different people how much deposit you need for a house and you’ll get ten different answers. “20%,” your parents will say. “5%,” your mate who just bought will insist. “2%,” you read somewhere online. So what’s the truth?

The answer is: it depends — on which government schemes you use, how much you can borrow, and how much extra cost you’re willing to absorb. In 2026, Australian first home buyers have more pathways to home ownership than ever before, with deposit requirements ranging from as low as 2% to the traditional 20%. Each tier comes with different trade-offs in terms of upfront costs, ongoing repayments, and government support.

This guide breaks down every deposit option available to you, explains the costs and savings at each level, and gives you a practical roadmap to get from where you are now to settlement day.

The Four Deposit Tiers for First Home Buyers

Here’s a clear overview of the deposit tiers available in 2026, from lowest to highest:

Deposit	How	LMI Required?	Key Trade-off
2%	Help to Buy scheme	No	Government owns up to 40% of your home
5%	First Home Guarantee	No (waived)	Higher loan amount, 95% LVR
10–19%	Standard loan with LMI	Yes	LMI adds $5,000–$40,000+ to costs
20%+	Standard loan, no LMI	No	Largest deposit to save, but lowest costs

Let’s explore each option in detail.

Tier 1: 2% Deposit — Help to Buy Scheme

The Help to Buy scheme lets eligible buyers purchase with just a 2% deposit. The Government contributes up to 40% of the purchase price (for new builds) or 30% (for existing homes) as a shared equity partner. You take out a mortgage for the remaining amount.

On a $600,000 property, a 2% deposit is just $12,000. Compare that to $120,000 for a traditional 20% deposit. The catch is that the Government owns a proportional share of your home and its future value. There are also income caps ($100,000 for singles, $160,000 for couples) and limited places (10,000 per year).

Best for: Lower-income first home buyers who want the lowest possible entry point and are comfortable with shared equity.

Tier 2: 5% Deposit — First Home Guarantee

The First Home Guarantee lets you buy with a 5% deposit and no LMI. The Government guarantees 15% of the loan to your lender, effectively giving them the security of a 20% deposit without you having to save it. Since October 2025, there are no income caps and unlimited places.

On a $600,000 property, a 5% deposit is $30,000. You’d borrow $570,000 and pay no LMI. The Government doesn’t own any part of your home — the guarantee is just a risk-reduction mechanism for the lender.

Best for: Buyers who want to keep 100% ownership of their home, avoid LMI, and don’t have a 20% deposit saved.

Tier 3: 10–19% Deposit — Standard Loan With LMI

If you don’t qualify for (or don’t want to use) a government scheme, you can still buy with less than 20% deposit — but you’ll need to pay Lenders Mortgage Insurance (LMI). LMI protects the lender (not you) against the risk of you defaulting on a high-LVR loan.

LMI is a one-off cost that can range from a few thousand dollars to $40,000+ depending on your deposit size and loan amount. Most buyers choose to capitalise it onto their loan, which means you pay interest on it over the life of the mortgage — making the true cost even higher.

Best for: Buyers who have a decent deposit saved but aren’t quite at 20%, and who don’t qualify for government schemes.

Tier 4: 20% Deposit — No LMI Required

The traditional gold standard. With a 20% deposit, you avoid LMI entirely, get access to the best interest rates, and have a lower loan amount with smaller repayments. On a $600,000 property, that’s $120,000.

The downside? It takes years to save that much, and while you’re saving, property prices may be rising. The opportunity cost of waiting can be significant — if prices rise 5% per year, that $600,000 property could be $630,000 by the time you’ve saved the extra deposit.

Best for: Patient savers with high incomes or access to family help, who want the lowest possible long-term cost.

What Is LMI and How Much Does It Cost?

Lenders Mortgage Insurance (LMI) is insurance that protects the lender — not you — if you default on your home loan and the sale of the property doesn’t cover the outstanding balance. It’s required by almost all lenders when your deposit is less than 20% (i.e., your LVR is above 80%).

LMI is typically provided by one of two insurers in Australia: Helia (formerly Genworth) or QBE. The cost depends on your loan amount, your LVR, and whether you’re a first home buyer. Here are some indicative LMI costs:

Property Price	Deposit	LVR	Estimated LMI
$500,000	5% ($25,000)	95%	$18,000 – $22,000
$500,000	10% ($50,000)	90%	$8,000 – $12,000
$500,000	15% ($75,000)	85%	$3,500 – $5,500
$700,000	5% ($35,000)	95%	$28,000 – $35,000
$700,000	10% ($70,000)	90%	$12,000 – $17,000
$700,000	15% ($105,000)	85%	$5,000 – $8,000

As you can see, the difference between a 5% and 15% deposit can mean $15,000–$25,000 more in LMI. This is exactly why the First Home Guarantee (which waives LMI at 5% deposit) is so valuable — it saves you that entire cost.

The First Home Super Saver Scheme (FHSSS) Explained

The First Home Super Saver Scheme (FHSSS) is one of the most underutilised tools available to first home buyers. It allows you to make voluntary contributions to your superannuation and then withdraw them (plus earnings) to put towards your first home deposit. The key advantage is tax savings: contributions are taxed at just 15% (inside super) rather than your marginal tax rate (which could be 30–45%).

How the FHSSS Works Step by Step

Make voluntary super contributions: You can contribute up to $15,000 per financial year and a maximum of $50,000 in total across all years. These can be salary-sacrifice contributions (pre-tax) or personal deductible contributions.
Contributions grow inside super: Your FHSSS contributions earn a deemed rate of return (the shortfall interest charge rate, currently around 4–5%) rather than your fund’s actual investment return.
Apply to the ATO for release: When you’re ready to buy, you apply to the ATO for a FHSSS determination (to find out how much you can withdraw) and then a release request.
Funds are released: The ATO instructs your super fund to release the money. Withdrawals are taxed at your marginal rate minus a 30% offset, making the effective tax rate significantly lower than if you’d saved the same amount in a bank account.
Use the funds for your deposit: You must sign a contract to buy or build a home within 12 months of the release (extensions may be available).

FHSSS Tax Savings Example

Let’s say you earn $90,000 per year (marginal tax rate: 32.5% plus Medicare levy of 2% = 34.5%) and salary-sacrifice $15,000 per year into super for 3 years ($45,000 total):

Tax paid inside super: 15% x $45,000 = $6,750
Tax you would have paid outside super: 34.5% x $45,000 = $15,525
Tax saving: $15,525 – $6,750 = $8,775
Plus deemed earnings on the contributions while inside super

That’s nearly $9,000 more towards your deposit compared to saving the same amount in a regular savings account — and that doesn’t include the interest earned inside super. The FHSSS is particularly powerful for higher-income earners who face the steepest marginal tax rates.

Guarantor Loans: Using Family Support

A guarantor loan (sometimes called a family guarantee or family pledge) allows a family member — usually a parent — to use the equity in their own property as security for part of your home loan. This can enable you to borrow up to 100% of the purchase price (or even slightly more to cover costs) without paying LMI.

Here’s how it typically works:

Your parent offers a limited guarantee — usually covering 20% of the property value — secured against their own home.
Your lender treats the guarantee as equivalent to a 20% deposit, so no LMI is charged.
You make all the repayments. Your parent’s guarantee is only called upon if you default and the sale of your property doesn’t cover the debt.
Once you’ve built up enough equity (usually 20%), the guarantee can be released and your parent’s property is freed.

Important considerations: Guarantor loans carry real risk for your family member. If you can’t make repayments, their home could be at stake. Both parties should get independent legal and financial advice before proceeding. Most lenders also require the guarantor to have a certain amount of equity in their property and to demonstrate that they can continue to service their own debts.

Using the FHOG as a Deposit Boost

The First Home Owner Grant (FHOG) provides eligible buyers with a cash grant — typically $10,000 to $30,000 depending on the state — for purchasing or building a new home. While the FHOG is usually paid at settlement, some lenders allow you to include the expected grant amount as part of your deposit calculation when assessing your loan.

For example, if you’re buying a $500,000 new home in Queensland (FHOG: $30,000) and have $20,000 in savings:

Your personal savings: $20,000
FHOG: $30,000
Effective deposit: $50,000 (10%)
Combined with the First Home Guarantee, you could potentially use the extra FHOG funds to cover upfront costs rather than needing additional savings.

Not all lenders treat the FHOG the same way, so check with your broker or lender about how they factor it into your application.

Other Upfront Costs You Need to Budget For

Your deposit is just one piece of the puzzle. First home buyers are often caught off guard by the additional upfront costs that come on top of the deposit. Budget for the following:

Stamp duty (transfer duty): $0 to $30,000+ depending on your state and whether you qualify for an exemption. See our full guide for state-by-state details.
Legal/conveyancing fees: $1,500 – $3,000 for a solicitor or conveyancer to handle the legal transfer of property.
Building and pest inspection: $400 – $800, highly recommended before any purchase to identify structural issues or termite damage.
Strata report (apartments/units): $200 – $400 to review the body corporate records for any issues or upcoming special levies.
Loan application fees: $0 – $600 depending on the lender. Many lenders waive this for first home buyers.
Valuation fee: $0 – $500. Some lenders include this in the loan package; others charge separately.
Mortgage registration fee: $100 – $200, a government fee to register the mortgage on the property title.
Title transfer fee: $100 – $500 depending on the state.
Home and contents insurance: $1,000 – $2,500 per year, required by your lender from the date of settlement.
Moving costs: $500 – $2,000 for removalists, depending on distance and volume.
Connection fees: $200 – $500 for utilities, internet, and other services at your new address.

As a rough guide, budget 3–5% of the purchase price for upfront costs on top of your deposit. On a $600,000 property, that’s an additional $18,000–$30,000 (though stamp duty exemptions can significantly reduce this figure).

Practical Saving Strategies

Knowing how much you need is one thing — actually saving it is another. Here are proven strategies that work for Australian first home buyers:

Set up a dedicated savings account: Use a high-interest savings account specifically for your deposit. Many banks offer bonus interest rates of 5%+ if you deposit a minimum amount each month and make no withdrawals.
Automate your savings: Set up an automatic transfer on payday so the money moves before you’re tempted to spend it. Even $500 per week adds up to $26,000 per year.
Use the FHSSS: As detailed above, salary-sacrificing into super through the FHSSS can boost your savings by thousands through tax advantages.
Reduce your biggest expenses: Housing costs (rent) and transport are typically the largest line items. Consider house-sharing, moving to a cheaper area temporarily, or reducing car expenses.
Pick up extra income: Freelancing, overtime, or a side hustle can accelerate your timeline significantly. Even an extra $500 per month means $6,000 more per year towards your deposit.
Track your spending: Use a budgeting app to identify where your money goes. Most people are surprised by how much they spend on subscriptions, eating out, and discretionary purchases.
Take advantage of windfalls: Tax returns, bonuses, gifts, or inheritance — direct any unexpected income straight into your deposit fund.

Timeline: How Long Will It Take to Save?

Here’s a realistic timeline for saving different deposit amounts on a $600,000 property, assuming you can put away $1,500 per month (approximately $350 per week):

Deposit Target	Amount Needed	Time to Save (at $1,500/month)
2% (Help to Buy)	$12,000	~8 months
5% (First Home Guarantee)	$30,000	~20 months
10%	$60,000	~3.3 years
15%	$90,000	~5 years
20%	$120,000	~6.7 years

The difference between saving 2% and 20% is nearly 6 years. During that time, property prices could rise substantially. This is the core argument for using government schemes to enter the market sooner — the cost of waiting can outweigh the cost of a higher LVR loan or shared equity arrangement.

Frequently Asked Questions

Can I use a gift from my parents as my deposit?

Yes, most lenders accept gifted funds as part of your deposit, but they’ll require a statutory declaration from the gift giver confirming the money is a genuine gift (not a loan) and that repayment is not expected. Some lenders may also require you to have a portion of genuine savings in addition to the gift. Check with your lender for their specific policy.

Do I need to save the deposit in cash, or can I use other assets?

Most lenders want to see cash savings in a bank account. Shares, cryptocurrency, or other investments typically need to be sold and converted to cash before they count towards your deposit. Some lenders may accept term deposits. Speak to your broker about what your specific lender will accept.

What counts as “genuine savings”?

Genuine savings are funds you’ve accumulated over time through regular saving (typically at least 3 months). Lenders want to see a pattern of saving behaviour. Lump sums that appear suddenly (e.g., from selling an asset or receiving a gift) may not count as genuine savings, though different lenders have different policies. A mortgage broker can help you navigate this.

Is it better to save more or buy sooner?

There’s no one-size-fits-all answer. In a rising market, buying sooner with a smaller deposit (and using government schemes to avoid LMI) can be financially better than waiting years to save 20% while prices climb. In a flat or falling market, a larger deposit gives you more equity and lower repayments from day one. Consider your local market conditions, your ability to service the loan, and your risk tolerance.

Can I use my FHSSS withdrawal and the First Home Guarantee together?

Absolutely. The FHSSS helps you save your deposit faster through tax advantages, and the First Home Guarantee waives LMI when you buy with 5%. Using both together is one of the most effective strategies for first home buyers in 2026. You could also combine these with stamp duty exemptions and the First Home Owner Grant for new builds.

Putting It All Together: Your Action Plan

Here’s a practical roadmap to get from renting to owning:

Decide your deposit target: Based on the tiers above, choose which pathway suits your financial situation and timeline.
Start the FHSSS now: Even if you’re a year or two away from buying, start salary-sacrificing into super immediately to maximise tax savings.
Research your state’s benefits: Check the FHOG, stamp duty exemptions, and federal schemes you’re eligible for.
Get pre-approved: Once you’re within striking distance of your deposit target, speak to a broker or lender to confirm your borrowing capacity.
Budget for all upfront costs: Don’t forget conveyancing, inspections, insurance, and moving costs on top of your deposit.
Buy your first home: With the right combination of savings, government support, and lending, you’ll be surprised how achievable it really is.

The deposit hurdle is real, but it’s lower than it’s ever been thanks to the range of government schemes available in 2026. Whether you enter with 2% through Help to Buy, 5% through the First Home Guarantee, or 20% on your own terms, the most important step is starting — and starting today.