It's the first question almost every first home buyer asks me: "How much do I actually need saved before I can buy?" And the honest answer is — it depends on which path you take. The good news is that in 2026 there are three very different deposit levels that can get you into your first home, and the smallest one is a lot lower than most people think.
Let's walk through all three, using a $700,000 first home as a round example.
The short answer
You can buy with as little as 5% if you qualify for a government scheme, around 10% if you're comfortable paying Lenders Mortgage Insurance, and 20% if you want to avoid LMI entirely. Each comes with trade-offs — so the "right" deposit is the one that fits your situation, not a one-size number.
Option 1 — A 5% deposit with the Home Guarantee Scheme
Under the federal Home Guarantee Scheme, eligible first home buyers can purchase with just a 5% deposit and pay no Lenders Mortgage Insurance, because the government guarantees the gap a lender would normally insure against.
On a $700,000 home, that's a deposit of around $35,000 instead of $140,000. And it got a lot more generous: since 1 October 2025 the scheme has no income caps and no place limits, with higher property price caps ($1.5M in Sydney). The main test now is the property price cap for your area — for the right buyer it's the single biggest shortcut into the market.
Option 2 — A 10% deposit with LMI
If you don't qualify for a scheme, you can still buy with a smaller deposit by paying Lenders Mortgage Insurance (LMI) — a one-off cost that protects the lender (not you) when you borrow more than 80% of the property value.
With a 10% deposit (about $70,000 on our example), LMI might add a few thousand dollars, which most lenders let you add on top of the loan rather than pay upfront. LMI gets a bad rap, but sometimes paying it and buying 12 months earlier beats waiting two years to save a bigger deposit while prices move.
Option 3 — A 20% deposit, no LMI
The classic benchmark. With 20% down ($140,000 on a $700,000 home) you borrow 80% of the value, avoid LMI completely, and tend to access the sharpest interest rates. It's the cleanest path — it just takes the longest to save.
Key takeaways
5% → possible via the Home Guarantee Scheme, no LMI, subject to eligibility and caps.
10% → buy sooner, pay LMI (often added to the loan).
20% → no LMI, best rates, longest to save.
Don't forget the costs beyond the deposit
Your deposit isn't the only cash you'll need. Budget for:
- Stamp duty — though as a NSW first home buyer you may pay no stamp duty (or a reduced rate) under the First Home Buyers Assistance Scheme, depending on the price.
- Conveyancing / legal fees — typically $1,500–$3,000.
- Building & pest inspection, loan application or settlement fees, and a small buffer for moving and the first few repayments.
This is exactly where first home buyer grants and exemptions can swing things in your favour — saving you tens of thousands that you'd otherwise need on top of the deposit.
The right deposit isn't the biggest one you can scrape together — it's the one that gets you into the right property, at a repayment you're comfortable with, without draining every dollar of savings.
So what should you actually aim for?
If buying soon matters and you qualify, the scheme route (5%) is hard to beat. If you're close to 20%, it's often worth the final push to avoid LMI and unlock better rates. And the 10%-plus-LMI middle ground is the right call more often than people expect — especially in a rising market.
The only way to know your number is to run it against your real income, your savings rate, and the suburbs you're looking in. That's a 20-minute conversation, and it'll save you guessing. While you're here, see the first home buyer hub for grants and scheme eligibility, estimate your stamp duty, and model repayments.