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How Much Deposit Do You Actually Need for a Home Loan in Australia?
Most buyers assume they need a 20% deposit before a lender will even look at them. That number gets repeated so often it starts to feel like a rule. It isn’t. It’s a benchmark lenders use to decide whether you need Lenders Mortgage Insurance, not a hard requirement to buy a home.
In reality, plenty of borrowers get into the market with far less than 20% saved, and some skip the deposit hurdle entirely. Here’s how the deposit side of a home loan actually works, and what options exist if your savings don’t stretch to that magic number.
Where the 20% Figure Comes From
Lenders calculate your deposit against something called the Loan to Value Ratio, or LVR. This is simply the loan amount as a percentage of the property’s value. If you borrow $720,000 against an $900,000 property, your LVR sits at 80%, and your deposit covers the remaining 20%.
Lenders treat 80% LVR as a comfort threshold. Below that line, you carry less risk for them, and they lend without extra insurance. Above it, they ask you to cover the gap through Lenders Mortgage Insurance, or LMI.
This threshold doesn’t determine whether you can buy a home. It determines whether LMI applies and how a lender prices your loan.
Borrowing Above 80% LVR with LMI
LMI lets you borrow more than 80% of a property’s value without saving the full 20% deposit yourself. The insurance protects the lender if you default and the sale of the property doesn’t cover the outstanding loan. It doesn’t protect you, but it does open the door to home ownership years earlier than waiting to save a full deposit would.
Most lenders allow LVRs up to 90% or 95% with LMI, depending on the lender, your income, and the type of property. The premium gets added to your loan amount or paid upfront, and it varies based on your LVR and loan size. A higher LVR means a higher premium, since the lender is taking on more risk. Some lenders will go as high as 98% LVR including LMI.
Some borrowers avoid LMI on principle, assuming it’s dead money. For many first home buyers, though, the alternative is years of extra rent while house prices keep climbing. Running the numbers properly, factoring in both the LMI cost and the opportunity cost of waiting, usually settles the question quickly.
Skipping the Deposit Altogether: Family Guarantees
A family guarantee, sometimes called a guarantor loan, removes the deposit requirement entirely in many cases. Instead of you contributing a cash deposit, a family member, usually a parent, offers equity in their own property as additional security for your loan.
The lender combines the guarantor’s equity with the property you’re purchasing, which can bring your effective LVR back under 80%. That means no deposit, and often no LMI either, even though you haven’t saved a cent toward the purchase price.
This option suits buyers whose income comfortably covers loan repayments but whose savings haven’t caught up with property prices, which describes a large share of the current first home buyer market. The guarantor isn’t handing over cash. They’re using the equity already sitting in their home as security, and most lenders allow that guarantee to be removed later once you’ve built enough equity or paid the loan down.
It’s a serious commitment for the guarantor, since their property sits on the line alongside yours. Anyone considering this route should talk through the structure, the exit strategy, and the risks with their broker and their family before signing anything.
LMI Waivers: Borrowing High with No Insurance Cost
A smaller but growing group of borrowers can access something even better than standard LMI: a waiver. Certain lenders waive LMI entirely for people working in specific professions, even when borrowing above 80% LVR, sometimes up to 90% or higher.
These waivers typically apply to medical professionals, legal professionals, accountants, and some other recognised occupations, based on the idea that these careers carry stable, high incomes and lower default risk. Eligibility, the LVR cap, and the professions covered all vary by lender, and not every lender offers this at all.
If your profession sits on one of these lists, it’s worth checking before assuming LMI is unavoidable. The savings can run into the tens of thousands of dollars on a typical purchase.
Self-Insurance Alternatives to Standard LMI
A handful of lenders skip traditional LMI altogether and build their own structure to cover the same risk. Some charge a risk fee in place of LMI on eligible loans. Others go further again, using a primary and secondary loan structure that replaces LMI completely for loans up to 98% LVR, without requiring a guarantor at all.
These structures aren’t priced through the major LMI insurers that set premiums for most of the market, so the cost to you can sit well below a standard LMI premium for the same LVR, sometimes by a significant margin. That doesn’t make them automatically cheaper in every case. The savings on the upfront premium can show up elsewhere, in the interest rate or the loan structure, so the full cost comparison matters more than the headline fee.
Government Schemes that Remove LMI Entirely
For eligible buyers, government schemes solve the deposit problem in a different way again. Instead of discounting LMI, they remove it from the equation altogether. The First Home Guarantee lets eligible first home buyers purchase with just a 5% deposit while the government guarantees the remaining gap up to 20%, with no LMI charged at all. Recent changes have removed the income caps and the annual cap on places, and lifted property price caps significantly across most capital cities and regional centres.
Two related schemes extend the same approach to specific groups of buyers. The Family Home Guarantee supports eligible single parents and legal guardians with a deposit as low as 2%, again with no LMI. The First Home Guarantee applies the same 5% deposit, no-LMI structure to eligible first home buyers. Only some lenders participate in these schemes, and eligibility comes down to factors like prior property ownership, residency status, and the property price against the relevant cap for your area, so it’s worth checking both before assuming a scheme will apply.
Choosing the Right Path
Every option here solves the same problem in a different way:
A standard 20% deposit avoids LMI but takes the longest to save. Borrowing above 80% LVR with LMI gets you into the market sooner, at a cost that’s usually smaller than people expect. A family guarantee removes the deposit requirement entirely, provided a family member is willing and able to help. An LMI waiver gives eligible professionals the best of both worlds: a high LVR loan with no insurance cost. A self-insurance or risk fee structure can deliver a high LVR loan at a discount to standard LMI, without needing a guarantor. A government scheme can remove LMI altogether for eligible first home buyers, single parents, or regional buyers.
The right path depends on your savings, your income, your family situation, and your eligibility for a particular scheme or product. None of these options work in isolation from the others, and the maths changes depending on the lender.
If you’re trying to work out which approach gets you into a property fastest, without paying more than you need to, that’s exactly the kind of comparison a broker handles every day. Ingram Financial works with dozens of lenders across Australia and can run the numbers on each scenario, including LMI costs, guarantor structures, self-insurance options, waiver eligibility, and government scheme caps, so you can see the real difference before you commit to any of them.
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