Mozo guides

How much deposit do I need for a home loan?

Piggy bank over a house with a question mark collage

Buying a property is an exciting experience, but there are some pretty daunting dollar figures you’ll need to cover. These can include your prospective home loan repayments, the stamp duty you’ll need to pay, and any moving or renovation costs. But the first figure you’ll need to focus on is how much you’ll need to save for a deposit. 

A mortgage deposit is important because it establishes your financial stake in the property, or how much of home equity you have upfront. The bigger the deposit, the less of the overall property price your home loan lender has to cover, which decreases the overall risk of lending money to you.

Your deposit is also crucial to calculating your loan-to-value ratio (LVR) for this reason, and your LVR can impact what interest rate you're eligible for. Generally speaking, lower LVRs get lower interest rates

Of course, the size of the deposit will depend on the price of the property and whether or not it’s a home you’re going to live in or an investment property. So what is a typical home loan deposit? What are the costs involved? And what are the best ways to start saving for a home loan deposit?

Let’s get into it.

How much do owner-occupiers need for a home loan deposit?

Family outside owner-occupied home

If you’re purchasing a house or unit to live in (i.e. you’re an owner-occupier buyer), the standard down payment or deposit you’ll need for a home loan in Australia is 20% of the value of the property.

Simply put, that means if you were looking to buy a property for $500,000 you would need a deposit of $100,000. You can use a home deposit calculator to apply this to your own property purchase and work out how much of a deposit you will need.

Saving up $100,000 is no easy feat — and given the current state of house prices in Australia, you could be looking at far more. So many home loan lenders actually offer more flexible options to owner-occupiers, meaning that it’s possible to get a mortgage with a deposit as low as 5% of the property’s price. Interestingly, it was actually possible for buyers to take out a loan with zero deposit in the past, but that’s no longer the case.

But before you get too excited at the idea of only having to save up 5% for a house deposit, there are a few cost factors that you’ll need to consider.

Home loan interest rates

Lenders partially base home loan interest rates on a borrower's loan-to-value ratio (LVR) - so a borrower with a 20% deposit would have an LVR of 80% and one with a 5% deposit would have an 95% LVR.

Lenders tend to charge higher interest rates on home loans with higher LVRs, which means saving up for an 80% deposit could be one way to ensure that you’re getting a more competitive rate.

Higher LVRs get slapped with less competitive rates because there's more financial risk to the lender that you could struggle with repayments or slide into negative equity

Lenders mortgage insurance

The other cost factor that borrowers with a deposit below 20% will likely have to shell out for is lenders mortgage insurance (LMI). Unfortunately, LMI can run into the thousands or even tens of thousands of dollars, which could make saving up for a 20% deposit a more attractive (and cost effective) option for some buyers.

How much do property investors need for a home loan deposit?

Investors outside investment property

Thinking about purchasing an investment property? Well, the size of the deposit you’ll need for a home loan could be different to that of an owner-occupier who is buying a property to live in.

This is because some lenders have tighter lending criteria for investment loans. It used to be the case that as an investor you would only need a 5% to 10% deposit for an investment loan with the majority of lenders, but some banks have since changed their lending guidelines meaning a 20% downpayment is now required.

Of course, if you’re interested in seeing what kind of mortgage options are out there as an investor - including the deposit requirements involved - you can get started by using Mozo’s dedicated investment loan comparison table.

What does a 20% deposit look like in Australian capital cities?

Sydney CBD collage

We know that a standard home loan deposit in Australia is 20% of the property’s value, but what does a 20% deposit actually look like?

If you’re interested in a rough guide, we’ve crunched the 20% deposit figure for each capital city based on CoreLogic’s median home values from July 2023.

CityMedian value20% deposit
Sydney$1,073k$214k
Melbourne$762k$152k
Brisbane$725k$145k
Adelaide$663k$132k
Perth$588k$118k
Hobart$651k$130k
Darwin$492k$98.4k
Canberra$830k$166k

At the end of the day, however, those are just figures based on median property prices. Your own deposit size will come down to the price of specific property you’ve got your eye on.

If you’re curious about how much you could afford to borrow, let our home loan borrowing calculator crunch the numbers for you.

Pros and cons of different home deposit sizes

Woman shrugs with question marks

Now that you’re familiar with some of the differences between borrowers when it comes to deposits, as well as what a typical deposit actually looks like, let’s lay down the positives and negatives involved with a 5% home deposit and a 20% home deposit.


Borrowing with a 5% deposit

Pros

  • Lower cost hurdle. You won’t have to save as much money, which means you can enter the market sooner.

Cons

  • High interest rates. Interest rates are typically higher for higher LVRs. 
  • LMI. You may have to pay lenders mortgage insurance to offset the financial risk to the mortgage lender.
  • Less choice. Your choice of mortgages may be more limited, especially as an investor, if you buy in with a smaller home loan deposit. 

Borrowing with a 20% deposit 

Pros

  • Better interest rates. You'll have access to lower home loan rates because you're stumping up a bigger financial stake in your property. 
  • No LMI! You can avoid paying lenders mortgage insurance, since you're opting for the standard and most common home loan option. 
  • More choice. There's a greater choice of lenders and home loan offers if you opt for a 20% deposit, since 20% is the deposit expectation most lenders have. 

Cons

  • Time. It may take longer to save up for a 20% home loan deposit, during which time house prices may have risen. 

Home loan deposit saving tips

Dapper man thinks of ideas with a piggy bank collage

Ready to start saving up for a home loan deposit? We’ve rounded up six handy tips to help you along the way.

1. Get your home buying budget in order

Saving up for a home deposit can require a serious financial overhaul, which is why reassessing your home buying budget or even setting up a new one is a must-do. To get started, punch your income and expenses into Mozo's budget calculator to see where you can afford to tighten your waistband.

2. Save, save, save

These days, most Australian lenders will conduct a thorough audit of your finances before issuing you a loan, including looking at your savings. That’s why it’s important to be able to show a history of genuine savings (at least three months is a good start) before you apply. One easy way to start is to set up regular weekly, fortnightly, or monthly contributions into a high interest savings account.

3. Make use of First Home Owner Grant schemes and stamp duty exemptions

A number of Australian states and territories offer special financial assistance to first home buyers in the way of First Home Owners Grants (one-off, tax-free payments) or stamp duty exemptions — both of which could help you buy your first home faster, or for less.

4. Take advantage of the First Home Saver Super Scheme

Want to fast-track your savings? Eligible first home buyers can sacrifice a portion of their salary into their super and then withdraw it (up to $50,000 from July 1, 2022) down the track for the purpose of buying their first home. The benefit? You’ll pay less tax. Now this won’t be for everybody and there are quite a few details involved, so check out our First Home Super Saver Scheme guide for a full run-through.

5. Avoid LMI with the First Home Loan Deposit Scheme

Determined to purchase your first property as soon as possible? Well if you’re an eligible first home buyer with a minimum 5% deposit then you may be able to purchase a property without having to fork out lenders mortgage insurance by making use of the government's First Home Loan Deposit Scheme.

6. Consider asking a family member to go guarantor

Alternatively, it may be worth considering getting a parent or family member to act as a guarantor to your home loan. Not only will this help you get in the door sooner, but you’ll also avoid the cost of lenders mortgage insurance if you don’t have a 20% deposit. For more information, check out our guide on the things parents need to know about going guarantor on a mortgage.

Do you have more home loan questions? Head on over to our dedicated first home buyers hub for more handy tips, tricks, and guides. 

If you're looking for your first home loan, you can check out some of the lowest rate deals in our databse in the table below, or visit the Mozo's home loan comparison tables to compare even more loan options from a range of Australian lenders. 

Home Loan Comparison Table - last updated 27 May 2024

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure
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Tom Watson
Tom Watson
Finance journalist

Tom has over five years experience as a finance journalist covering everything from property and fintech to consumer banking.

Evlin DuBose
Evlin DuBose
RG146
Senior Money Writer

Evlin, RG146 Generic Knowledge certified and a UTS Communications graduate, is a leading voice in finance news. As Mozo's go-to writer for RBA and interest rates, her work regularly features in Google's Top Stories and major publications like News.com.au.

* 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.

^See information about the Mozo Experts Choice Home Loan Awards

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