What is the minimum deposit for first home buyers?

The 20 per cent figure is out of date

Ask most people what deposit you need for a first home and they'll say 20 per cent. That number is out of date. The real minimum for an eligible first home buyer is 5 per cent — and for eligible single parents and legal guardians, 2 per cent.

The 20 per cent figure was never really about the minimum. It was about avoiding lenders mortgage insurance. Under the Australian Government's 5% Deposit Scheme, that trade-off has largely disappeared for buyers within the price caps.

How the 5% Deposit Scheme works

Under the scheme, the government guarantees part of your loan so that a participating lender can accept a 5 per cent deposit without charging lenders mortgage insurance — LMI, the one-off premium that normally applies when you borrow more than 80 per cent of a property's value. It's worth being clear about what LMI is: an insurance that protects the lender if you can't repay, not you. Avoiding it can save a five-figure sum on a typical first purchase.

The scheme was expanded from 1 October 2025, and the expansion changed who can use it:

• No income caps — the previous thresholds that excluded many dual-income couples are gone.
• Unlimited places — no annual quota, no waiting list.
• Higher price caps — in Victoria, $950,000 for Melbourne and regional centres, and $650,000 elsewhere in the state.

Other eligibility rules still apply — broadly, you need to be an eligible first home buyer (or not have owned property recently), be buying as an owner-occupier, and meet citizenship or permanent residency requirements. Your lender assesses all of this as part of the application, and a participating lender may still require a higher deposit based on your circumstances.

What 5 per cent looks like in dollars

On a $700,000 Melbourne purchase, a 5 per cent deposit is $35,000. A 20 per cent deposit on the same property is $140,000. For many buyers, that difference is measured in years of saving — years in which prices and rents don't wait.

Two cautions belong beside that arithmetic. First, a smaller deposit means a larger loan, larger repayments and more interest over the life of the loan — buying earlier isn't automatically buying better, and the right answer depends on your circumstances. Second, the deposit isn't the whole upfront cost: stamp duty, conveyancing and other costs sit on top, although first home buyers may qualify for stamp duty concessions depending on the price and state — worth checking before you set your savings target.

Remember too that most lenders must assess your repayments at 3 percentage points above the actual rate, under APRA's serviceability buffer. A 5 per cent deposit gets you in the door; servicing still decides how much you can borrow.

If the scheme doesn't fit

Not every buyer or property fits the scheme. Alternatives exist. A guarantor or family-pledge loan — where a parent offers part of their own property's equity as security — may allow a low-deposit purchase outside the scheme. Or a deposit between 5 and 20 per cent with LMI can still be the right move where the numbers stack up. Which path suits you is exactly the comparison a broker is for.

Common questions about deposits

The bottom line

If the 20 per cent figure has been the reason you haven't started, it may be time to re-run your numbers. The minimum is lower than most people think, the income caps are gone, and spring stock is about to arrive.