How Much Deposit Do You Really Need?
If you are asking how much deposit do I need, you are usually really asking two things at once – how little can I get away with, and how much would put me in a stronger position.
Both matter. A smaller deposit may get you into the market sooner, but it can mean higher costs and fewer loan options. A bigger deposit can improve your borrowing position, lower your monthly payment, and reduce lender risk, but it may take longer to save.
For most buyers, the practical answer is this: many lenders like to see at least 20% of the purchase price, but some loans are available with as little as 5% depending on your income, credit profile, and the type of property you are buying. The right target depends on your full situation, not just a percentage on paper.
How much deposit do I need for a home loan?
A deposit is the amount you contribute toward the property purchase from your own funds or eligible equity. If you are buying a $700,000 home, a 20% deposit would be $140,000. A 10% deposit would be $70,000, and a 5% deposit would be $35,000.
That sounds simple, but deposit strategy is rarely just about the minimum. Lenders also look at your income, debts, living expenses, employment type, credit history, and whether you have enough left over for closing costs and a buffer after settlement.
In broad terms, here is how deposit ranges are usually viewed:
A 20% deposit is often the strongest position. It usually gives you access to more lenders, avoids mortgage insurance in many cases, and can improve your interest rate options.
A 10% deposit can still be workable and fairly common, especially for buyers with stable income and clean credit. The trade-off is that borrowing costs may be higher because lender risk is higher.
A 5% deposit may also be possible, particularly for first-time buyers, but approval tends to be more sensitive to the rest of the application. Your file needs to be well presented, and extra costs become even more important.
Why 20% is often the benchmark
The reason 20% comes up so often is simple. Once you borrow more than 80% of a property’s value, many lenders will require mortgage insurance or apply tighter rules. That can add a meaningful upfront cost or reduce the number of lenders willing to approve the loan.
This does not mean you must wait until you have 20%. In higher-priced markets, that can delay a purchase by years. For some buyers, paying mortgage insurance or accepting a tighter structure is worth it if it means entering the market earlier. For others, it makes more sense to keep saving and strengthen the application.
There is no one-size-fits-all answer. The better question is whether buying now with a smaller deposit leaves you financially comfortable after settlement.
The deposit is not the only cash you need
One of the biggest mistakes buyers make is focusing only on the down payment and forgetting the other upfront costs. Even if your lender is comfortable with your deposit, you still need enough cash to cover the rest of the transaction.
Depending on the purchase, this may include stamp duty, legal or conveyancing fees, building and pest inspections, loan application or settlement costs, and moving expenses. In some cases, first-time buyer programs or concessions can reduce part of that burden, but you should never assume every cost is financed into the loan.
This is why a buyer with a 10% deposit saved may still not be ready, while another buyer with 8% plus strong savings habits and lower fixed costs may be in a better position overall.
How lenders assess your deposit
Lenders are not only looking at how much money you have. They are also looking at where it came from and what it says about your financial behavior.
Genuine savings can be important in some scenarios. This usually means money you have built up over time and held consistently, rather than funds that appeared in the account just before applying. A gifted deposit may still be acceptable with some lenders, but the rules vary. If you are using equity from another property instead of cash, that can also work, but it needs to be structured properly.
This is where tailored advice matters. Two borrowers can have the same deposit amount and end up with very different loan outcomes depending on how the application is packaged.
How much deposit do I need as a first-time buyer?
First-time buyers often assume they need a perfect 20% deposit before speaking to anyone. In reality, many can act earlier.
If you are buying your first home, a lower deposit may still be enough if your income is stable, your credit file is clean, and the property meets lender policy. Some buyers may also qualify for grants, concessions, or first-home buyer support programs that reduce the amount of cash needed upfront.
The key is to avoid stretching too far just to get in sooner. A lower deposit can help you buy earlier, but if it leaves you with no savings buffer, the first unexpected repair or rate increase can create pressure. A good loan structure should help you buy, but it should also leave room for real life.
Buying with less than 20%: what is the trade-off?
A smaller deposit is not automatically a bad move. In some markets, waiting can mean rising prices outpace your savings. But there are trade-offs, and they should be weighed carefully.
You may pay mortgage insurance. Your loan options may be narrower. Your monthly payment may be higher because you are borrowing more. You may also need a stronger overall profile to get approved.
On the other hand, if rents are rising and your income is strong, buying with a smaller deposit may still make financial sense. What matters is the full picture – not just the deposit percentage.
Can you use equity instead of cash?
Yes, if you already own property, equity can sometimes be used in place of a cash deposit. This is common for buyers upgrading to a new home or investors purchasing another property.
For example, if your current home has increased in value and your existing loan balance is relatively low, part of that available equity may be used to support the next purchase. This can reduce the need to save a large cash deposit from scratch.
That said, using equity increases your total debt exposure, so the structure needs to be considered carefully. It can be a smart strategy, but only if the repayments remain comfortable and the loan setup matches your longer-term plans.
What can improve your position besides a bigger deposit?
A larger deposit helps, but it is not the only way to strengthen an application. Reducing credit card limits, paying down personal debt, keeping account conduct clean, and showing stable employment can all make a difference.
So can choosing the right lender. Not all lenders assess income the same way, and not all treat overtime, bonuses, self-employment income, or casual work equally. This is one reason many borrowers speak with a broker before they commit to a savings target. You may already be closer than you think, or you may be better off making a few strategic changes first.
At Credific Finance, this is often where the process becomes much clearer for buyers. Instead of guessing at a deposit target, borrowers can understand what they are likely to qualify for now, what costs to plan for, and what steps would improve their position if they want a stronger result.
A smarter way to think about your target
Rather than asking only how much deposit do I need, ask this: what deposit puts me in a position to buy confidently, cover upfront costs, and still have a buffer afterward?
For some buyers, that number is 5%. For others, 10% is the more realistic sweet spot. And for those who want broader lender choice and lower risk, 20% may still be the ideal target.
The best deposit amount is not simply the lowest number a lender will accept. It is the amount that supports approval, keeps costs manageable, and helps you move forward without unnecessary financial stress.
If you are early in the process, getting clear guidance before you keep saving can save time. Sometimes the fastest path to buying is not years of extra saving – it is understanding your options properly and making the next move with confidence.
