By James Gregors

For many Australians, saving a first home owner deposit feels like the biggest barrier to home ownership. Rising property prices, changing government schemes and the cost of living can make it difficult to know how much you actually need and where to start.

The good news is that buying your first home doesn’t necessarily require a 20% deposit. With the right information, realistic planning and an understanding of how lenders assess borrowers, some first home buyers are able to enter the property market sooner than they expect.

This guide from The Property Education Company explains how a first home owner deposit works in Australia, the different deposit options available (including 5% deposit schemes), how government guarantees fit in, and practical steps to help you save.

Note:

This article provides general information only. Scheme rules, caps and eligibility can change, which is why up-to-date guidance matters.

First home owner deposit in short:

• The amount you need will depend on factors including your income, debt and the home you want to buy
• You may be eligible for the 5% deposit scheme, but conditions apply
• Having a clear, structured plan will help you achieve your goal sooner
• A gift from your parents can help, but you will still need to prove financial stability
• A mortgage broker from The Property Education Company can help you figure out how much deposit you need to buy your first home
  

What is a First Home Owner Deposit?

A first home owner deposit is the amount of money you contribute upfront when purchasing your first home. It is paid alongside borrowed funds from a lender and directly affects:

• How much you can borrow
• Whether lenders mortgage insurance (LMI) applies
• Which lenders and loan options you can access
  

Banks require a deposit because it shows you have the ability to save and manage money over time, which reduces the lender’s risk. A deposit also means you’re contributing your own funds to the purchase, giving the bank a buffer if property values change or if they have to sell the property quickly.

Traditionally, lenders preferred a 20% deposit. However, many home buyers now purchase with a lower deposit, depending on eligibility criteria, income and government support.

Deposit vs total funds needed to buy a home

One of the most common misunderstandings among first home buyers is confusing the deposit with the total funds required.

Your deposit is:

• A percentage of the property price (for example, 5%, 10%, or 20%)

Your total funds usually include:

• Your deposit
• Stamp duty (if applicable)
• Conveyancing or legal fees (between $2k and $3k)
• Building and pest inspections (usually around $600-$800 per inspection)
• Loan application or valuation fees
• Moving costs
• A financial buffer for emergencies
  

This means that even with a 5 per cent deposit, you’ll still need additional savings to complete the purchase.

Here are a couple of examples of the kind of funds you need in the bank to buy an $850,000 home:

With a 20% deposit:

A 20% deposit on an $850,000 property is $170,000. This will save you from needing to pay for Lenders Mortgage Insurance.

In addition to your deposit, you’ll usually need extra funds to cover upfront purchase costs. In practice, this means many buyers aim to have around $180,000–$190,000 available, depending on their state, eligibility for concessions, and personal situation.

With a 5% deposit:

A 5% deposit on an $850,000 property is $42,500. This means a buyer using a 5% deposit may still need closer to $50,000–$60,000 in total savings, depending on their circumstances.

It’s important to note: It’s important to note that having more savings doesn’t always improve eligibility for a 5% deposit scheme. For example, if you have $90,000 in the bank instead of the minimum $42,500 required for an $850,000 home, you may no longer meet the scheme criteria.

First Home Owner Deposit Options (Including 5% Deposits)

1. Standard Deposits (10–20%)

A larger deposit can:

• Reduce or remove the need to pay LMI, which adds to the cost of your loan
• Provide access to more lenders
• Improve interest rate options

However, saving a higher deposit isn’t always practical for renters or first home buyers trying to enter a competitive property market.

2. 5% Deposit Options and Government Schemes

Many first home buyers now access 5% deposit options through government-backed schemes.

The Home Guarantee Scheme (HGS)

The Home Guarantee Scheme allows eligible buyers to purchase a home with as little as a 5 per cent deposit without paying LMI. It is administered by Housing Australia on behalf of the Australian Government.

The scheme includes:

• First Home Guarantee
• Regional First Home Buyer Guarantee
• Family Home Guarantee (for eligible single parents and legal guardians)

These schemes are sometimes referred to as a 5 deposit scheme, home guarantee scheme, or buy scheme, and aim to help more Australians achieve home ownership sooner.

Key points to understand:

• Income caps apply and vary depending on whether you’re single or a couple
• Property price caps vary depending on location and whether the property is new or existing
• Places are limited for some schemes
• You must be an Australian citizen or permanent resident to take advantage of a home buying incentive
• The property must be your own home to live in, not an investment
  

At The Property Education Company, we will explain the ins and outs of schemes and incentives, and help figure out if you are eligible to only pay a 5% deposit.

Read More: First home buyer grants and concessions in Victoria

What About Lenders Mortgage Insurance (LMI)?

If you buy with a smaller deposit outside of a government guarantee, lenders may require lenders mortgage insurance.

LMI:

• Protects the lender, not the borrower, in the event of you failing to repay your loan as per your agreement
• Is added to your loan or paid upfront
• Varies depending on loan size and deposit amount
  

Government guarantees allow eligible borrowers to avoid LMI even with a lower deposit, but not everyone will qualify. Again, when you contact The Property Education Company, we will explain LMI and help you make a decision about whether to continue saving until you have the full 20% deposit.

Parental gifts and family support

Many first home buyers rely on family support to reach their deposit goal. There’s nothing wrong with this, but you can’t simply accept a gift and use it as a down payment on a home.

How parental gifts are treated:

• Most lenders allow gifted funds
• Gifts usually require a signed declaration confirming the money is non-repayable
• The funds must be genuine savings or held for a minimum period, depending on the lender
• A gift alone isn’t enough. Lenders will usually also want evidence of good financial habits and at least some savings.
  

Your mortgage broker from The Property Education company can help clarify which lenders accept gifted funds and under what conditions, so you can put a gift to good use.

Steps to save your first home owner deposit

Saving a deposit is less about perfection and more about consistency.

Practical steps to save:

1. Create a realistic budget – Track your expenses and identify where money can be redirected to savings instead of being spent each month.
2. Review your spending regularly – Lenders assess behaviour, not just balances. Take steps to cut back your spending and reduce your debt where possible.
3. Set a clear savings goal – Base this on realistic purchase prices and scheme limits.
4. Use lump sums wisely – Direct tax returns, bonuses or other lump sum money straight into your savings.
   
5. Keep savings separate – A dedicated savings account helps demonstrate discipline. If possible, avoid having a card attached to it so you’re not tempted to dip in when you’re out shopping.
   
6. Contribute consistently – Even small, regular contributions matter over time.

Why your income and debt levels matter

Your ability to save is only one part of the picture. When you apply for a home loan, lenders also assess:

• Income stability
• Ongoing expenses
• Existing debts (credit cards, personal loans, car finance)
• Your ability to service a loan at higher interest rates
  

Even with a strong deposit, high levels of debt can limit your borrowing power. Understanding this early helps you avoid disappointment later.

Read More: How mortgage payments are calculated

Vacant land and building options

If you’re purchasing vacant land or building a new home, deposit requirements and timing can differ.

Some schemes apply to:

• Land and construction packages
• New builds only
• Specific property price limits
  

This is another area where guidance from a professional matters, as rules vary depending on the lender, scheme and state.

Why Many First Home Buyers Choose The Property Education Company

Understanding your first home owner deposit, scheme eligibility, and borrowing limits can feel complex. The Property Education Company works with first home buyers to explain:

• Deposit options and scheme access
• How lenders assess applications
• What you need to change before applying
• How to structure savings and preparation

Read More: Why Choose The Property Education Company

Saving a first home owner deposit is a major step toward your dream of home ownership. While the process can feel overwhelming, understanding your options, from 5% deposit schemes to family support and government guarantees, can make the journey clearer.

With the right information, preparation, and support, more Australians are finding ways to buy a home sooner than they expected.

If you’re starting to plan your first home purchase, speaking with an experienced mortgage broker can help you understand your options and move forward with confidence.

Want to know how much deposit you need to buy a home? Reach out for a no-obligation discussion today.

Frequently Asked Questions:

First Home Owner Deposit

How much deposit do I need as a first home buyer?

This varies depending on the property price, lender, and whether you access a government guarantee. Some buyers purchase with as little as a 5% deposit, while others choose to save more.

Do banks treat gifted deposits differently when you buy a home

Most lenders accept gifted deposits, but documentation is required. Policies vary, which is why guidance from a mortgage broker can help.

Do property price caps change?

Yes. Caps vary depending on location and are subject to government review and legislation updates.

When should I speak to a broker?

Many buyers speak with a broker months before they’re ready to buy. Early conversations help clarify deposit targets, scheme access, and next steps.

About the author:

As an MFAA-certified finance broker, James Gregors has been helping first home buyers and other investors to build their property portfolio for many years. He is especially dedicated to helping first time buyers experience the excitement of buying their first home.

James loves learning about property opportunities then sharing what he has learnt with his clients. He has a natural flair for figures, which makes him a whiz at working out the most advantageous borrowing opportunities.

Disclaimer: This page provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Add licensing statement.

Your full financial situation would need to be reviewed prior to acceptance of any offer or product.

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