One of the first questions almost every prospective borrower asks is: "how much deposit do I actually need?" The honest answer is that it depends on the lender, the loan product, and your overall financial position — but there are some general principles that apply across most home loans in Australia.
The 20% benchmark
A 20% deposit is often treated as a benchmark because it's the point at which most lenders no longer require Lenders Mortgage Insurance (LMI). Below 20%, LMI is typically added to protect the lender if a borrower defaults — this is a real cost that can add thousands of dollars to your loan, either paid upfront or capitalised into the loan amount.
Lower-deposit options
Many lenders will still lend with deposits smaller than 20%, sometimes as low as 5–10%, particularly for owner-occupier borrowers with stable income and a clean credit history. The trade-off is usually LMI, a smaller pool of lenders to choose from, and potentially less favourable interest rates.
What counts as deposit
Lenders generally prefer to see "genuine savings" — funds you've accumulated over time, evidenced through bank statements — rather than a lump sum that appeared recently. Depending on the lender, deposits can also be supplemented by:
- Gifts from immediate family (usually requiring a signed gift statement)
- Existing equity in another property
- Eligible government grants or schemes, where applicable
Why deposit size matters beyond just "getting approved"
A larger deposit doesn't just improve your chances of approval — it can also reduce your loan-to-value ratio (LVR), which lenders use to price risk. A lower LVR can mean access to more competitive rates and a broader range of loan products.
Because deposit requirements and LMI thresholds vary between lenders, it's worth discussing your specific situation with a broker who can compare how different lenders would assess your deposit and circumstances.
VIP Finance operates as a Credit Representative (Number 565614) and holds ABN 59 323 956 021.
The information on this page is general in nature and doesn’t take into account your personal financial situation or objectives. It isn’t personal financial advice, and you should consider whether it’s appropriate for your circumstances before acting on it. Loan approval is always subject to the lender’s own credit assessment criteria.
