How Much Deposit Do You Need for a House in Australia 2026?

14 March 2026|6 min read

Find out exactly how much deposit you need to buy a house in Australia in 2026. Covers 20% vs 5% deposits, LMI costs, government schemes, and saving strategies by capital city.

20% deposit vs 5% deposit: understanding LMI implications

The traditional advice is to save a 20% deposit before buying a home, and there is a very good reason for that — it lets you avoid paying Lenders Mortgage Insurance (LMI). LMI is a one-off premium that protects the lender (not you) if you default on the loan. It is charged whenever your deposit is less than 20% of the property value. On a $600,000 property with a 10% deposit, LMI can cost $8,000 to $12,000, and with a 5% deposit it can balloon to $15,000 to $25,000. That cost is typically capitalised onto your loan, meaning you pay interest on it for the entire loan term. However, waiting years to save 20% in a rising market can cost you more in missed capital growth than the LMI itself. For example, if Sydney property prices rise 5% in a year, a $1 million home becomes $1.05 million — a $50,000 increase that dwarfs most LMI premiums. Run the numbers for your situation using our LMI calculator before assuming 20% is always the best strategy.

Deposit required by city: Sydney, Melbourne, Brisbane and beyond

The deposit you need varies enormously depending on where you buy. Based on median house prices in early 2026, a 20% deposit for a house in Sydney requires approximately $200,000 (median around $1 million for units, $1.6 million for houses in metro areas). Melbourne is slightly more accessible at around $140,000 for a 20% deposit on a median-priced house of $700,000. Brisbane has become more expensive due to interstate migration, with a 20% deposit on a median house of $850,000 sitting at around $170,000 — though inner-city units remain considerably cheaper. Adelaide and Perth have seen strong price growth and now require deposits of $120,000 to $140,000 for a typical house. Hobart, Canberra, and Darwin round out the capitals with varying medians. If you are targeting a 5% deposit instead, divide these figures by four — so roughly $50,000 for a Sydney unit, $35,000 for a Melbourne apartment, and $30,000 for a Brisbane unit. Remember that your deposit is only part of the upfront costs — you also need to budget for stamp duty, conveyancing, building inspections, and moving costs.

Government schemes that reduce your deposit: FHGS and Help to Buy

The Australian Government runs several schemes designed to help first home buyers enter the market with a smaller deposit. The First Home Guarantee Scheme (FHGS) allows eligible buyers to purchase with as little as a 5% deposit without paying LMI, because the government guarantees the remaining 15% to the lender. Income caps apply — $125,000 for singles and $200,000 for couples — and there are property price caps by region. The Regional First Home Buyer Guarantee operates on the same principle but targets regional areas. The Family Home Guarantee helps single parents buy with as little as 2% deposit. The Help to Buy scheme (if legislated) would see the government contribute up to 40% of a new home's price (30% for existing homes) as a shared equity arrangement, dramatically reducing the deposit and mortgage size. State-level grants like the First Home Owner Grant (typically $10,000 to $30,000 for new builds) can also be put towards your deposit or purchase costs. Check our First Home Buyer Grant Calculator to see exactly what you are eligible for.

Guarantor loans: using family equity to avoid LMI

A guarantor loan — sometimes called a family guarantee — allows a family member (usually a parent) to use equity in their own property as additional security for your home loan. This can let you borrow up to 100% of the property value, or even slightly more to cover stamp duty and other costs, without paying LMI. The guarantor does not give you cash and does not need to make any repayments — they simply pledge a portion of their home equity as security. Most lenders limit the guarantee to 20% of the purchase price, so if you default, the guarantor's exposure is capped. Once you have built up enough equity in your property (typically 20%), the guarantee can be released and your parents' property is no longer at risk. This is an increasingly common strategy, particularly in expensive markets like Sydney and Melbourne where saving a full deposit can take a decade. However, it is crucial that all parties understand the risks — if you cannot make repayments and the property is sold at a loss, the guarantor may need to cover the shortfall from their own equity.

Practical strategies for saving your deposit faster

Saving a house deposit is the single biggest financial challenge most young Australians face. The most effective strategies combine increasing your savings rate with maximising returns on what you have saved. First, set up a dedicated high-interest savings account (currently offering 5.0% to 5.5% on balances up to $250,000) and automate transfers on payday so the money never hits your spending account. Second, consider the First Home Super Saver Scheme (FHSSS), which lets you salary-sacrifice up to $15,000 per year (and $50,000 in total) into super and withdraw it for a home deposit. Because super contributions are taxed at 15% instead of your marginal rate, a person earning $90,000 could save around $3,000 in tax over two years using FHSSS. Third, reduce your biggest expenses — if you are renting alone, consider share housing to save $200 to $400 per week. Fourth, pick up side income through freelancing, overtime, or selling unused items. Finally, use our Budget Planner to track exactly where your money goes and identify leaks. Even saving an extra $500 per week adds $26,000 per year to your deposit fund.

How long will it take? Realistic deposit saving timelines

The timeline for saving a house deposit depends on your income, expenses, savings rate, and target property price. For a couple earning a combined $150,000 after tax and saving aggressively at 30% of their income ($45,000 per year), a 20% deposit on a $700,000 Melbourne property ($140,000) would take just over three years, assuming 5% interest on savings. A single person earning $80,000 after tax saving 25% ($20,000 per year) would need seven years for the same target — which is why many singles target units or consider guarantor loans. Reducing your target to a 10% deposit halves the timeline but introduces LMI costs of $8,000 to $15,000. Using the FHGS to buy with 5% deposit ($35,000 on a $700,000 property) could bring the timeline down to under two years for a disciplined couple. Keep in mind that property prices may rise while you save, potentially extending your timeline — a phenomenon sometimes called the deposit gap treadmill. The key is to set a realistic target, choose the right strategy (20%, 10% with LMI, 5% with FHGS, or guarantor), and start as early as possible. Use our Mortgage Calculator to model different scenarios and see how your deposit size affects your repayments.