Updated: November 2026
Saving a deposit is often one of the biggest barriers to buying a first home. The time required will depend on the property price, the deposit target, household income, regular expenses and whether the buyer is eligible for government or family assistance.
A 20% deposit may help a buyer avoid Lenders Mortgage Insurance (LMI), but it is not the only possible pathway. Some buyers may qualify for a home loan with a smaller deposit, the Australian Government 5% Deposit Scheme, the First Home Super Saver Scheme or an appropriately structured family guarantee.
If you are preparing to purchase your first property, our First Home Buyer home loan service explains how CBM Mortgages can help you assess your deposit, borrowing capacity and suitable home loan options.
How much deposit might you need?
The deposit required will depend on the lender, the property, the home loan and whether any government or family support applies.
| Example deposit | On a $700,000 property | Important consideration |
|---|---|---|
| 5% | $35,000 | LMI may apply unless the buyer qualifies for an eligible government-backed pathway. |
| 10% | $70,000 | LMI may still apply, but the home loan and LVR would be lower than with a 5% deposit. |
| 20% | $140,000 | A 20% deposit may avoid LMI, subject to the lender’s valuation and lending requirements. |
These figures cover the deposit only. Buyers also need to budget for purchase costs such as conveyancing, inspections, transfer duty where applicable, settlement adjustments, insurance and moving expenses.
Review our guide to the upfront costs of buying your first home in Sydney before setting your savings target.
How long could it take to save a deposit?
A useful estimate starts with three figures:
- the total deposit and purchase-cost target;
- the savings already available; and
- the amount that can be saved each month.
For example, suppose a buyer has:
- a total savings target of $60,000;
- $18,000 already saved; and
- the ability to save $1,500 each month.
The remaining target is $42,000. At $1,500 per month, it would take approximately 28 months to reach that target, before allowing for interest, changes in expenses or changes to the required property budget.
This calculation should be reviewed regularly. A change in property price, income, interest rates, debts or living expenses may alter both the deposit target and borrowing capacity.
1. Set a property budget before choosing a deposit target
A deposit goal is only useful when it relates to a realistic property and home loan budget.
Before deciding how much to save, consider:
- the locations and property types being considered;
- likely purchase prices;
- the borrowing capacity available under current lender policies;
- the repayments associated with the proposed home loan;
- existing debts and credit limits;
- the buyer’s regular living expenses;
- the desired financial buffer after settlement; and
- the upfront costs that must be paid in addition to the deposit.
The maximum amount a lender is willing to provide may be higher than the amount a buyer feels comfortable repaying. A sensible budget should allow room for changes in interest rates, expenses or income.
2. Build a dedicated savings plan
Once the target has been calculated, break it into a monthly or fortnightly amount.
Practical steps may include:
- using a separate high-interest savings account for the deposit;
- setting up an automatic transfer immediately after each pay;
- reviewing subscriptions and recurring expenses;
- directing tax refunds, bonuses or other irregular income towards the deposit;
- reducing unused credit-card limits where appropriate;
- avoiding new consumer debt before applying for a home loan; and
- keeping clear records of savings and account balances.
A consistent savings history may also help demonstrate genuine savings where a lender requires it. Genuine-savings rules vary across lenders and loan structures, so buyers should confirm what evidence will be required.
3. Consider buying with less than a 20% deposit
Some lenders may approve an eligible borrower with less than a 20% deposit.
When the loan-to-value ratio is above 80%, LMI will often apply. LMI protects the lender if the borrower cannot repay the loan. It does not protect the borrower.
Depending on the lender, LMI may be paid upfront or added to the home loan. Capitalising LMI increases the amount borrowed, which can increase both repayments and the total interest charged.
A smaller deposit may help a buyer purchase sooner, but it can also mean:
- a larger home loan;
- a higher LVR;
- higher repayments and total interest costs;
- less equity at the beginning;
- greater exposure if the property value falls; and
- less flexibility when refinancing.
The decision should be based on the full cost and risk, not only the time saved.
4. Check the Australian Government 5% Deposit Scheme
The Australian Government 5% Deposit Scheme may allow an eligible first home buyer to purchase with a minimum 5% deposit without paying LMI.
The Australian Government provides a guarantee to a participating lender. The guarantee is not a cash payment to the buyer and does not reduce the home loan amount.
The scheme currently has:
- no income caps;
- no annual place limit;
- no waiting list; and
- property-price caps that vary by location.
Buyers must still meet the scheme criteria and the participating lender’s lending and credit requirements. Eligibility for the scheme does not guarantee home loan approval.
Check the current requirements on the official Australian Government 5% Deposit Scheme website.
Read our guide to the Australian Government 5% Deposit Scheme for a detailed explanation of eligibility, benefits and risks.
5. Explore the First Home Super Saver Scheme
The First Home Super Saver Scheme may help eligible buyers save for a deposit by making voluntary contributions to superannuation and later applying to release eligible contributions and associated earnings.
Current contribution limits include:
- up to $15,000 of eligible voluntary contributions in one financial year; and
- up to $50,000 of eligible voluntary contributions across all years.
The amount available for release is not necessarily the full amount contributed. The release calculation depends on whether contributions were concessional or non-concessional, applicable tax and the associated earnings calculated under the scheme.
Employer super guarantee contributions do not count as eligible voluntary First Home Super Saver contributions.
Timing is important. A buyer should request a First Home Super Saver determination before ownership of a property transfers and understand the release process before settlement.
Check the current rules on the Australian Taxation Office First Home Super Saver Scheme page.
Consider obtaining registered tax or financial advice before making voluntary super contributions for this purpose.
6. Consider whether a family guarantee is appropriate
A family guarantee may allow an eligible borrower to use part of a close family member’s property equity as additional security for a home loan.
Depending on the lender and structure, this may reduce the cash deposit required or help avoid LMI. However, a guarantee creates significant financial and legal risks for the guarantor.
If the borrower cannot repay the home loan, the guarantor may be required to repay the guaranteed debt. An asset used as security, including the guarantor’s home, may be at risk.
A guarantee may also affect the guarantor’s ability to borrow for other purposes.
Before entering a guarantee:
- the borrower and guarantor should understand the proposed limit and duration;
- the guarantor should obtain independent legal advice;
- the guarantor should consider independent financial advice;
- the parties should discuss when and how the guarantee may be released; and
- no family member should agree because of pressure or incomplete information.
Read the MoneySmart guidance on going guarantor before considering this option.
7. Review existing debts and credit limits
A larger deposit does not automatically produce sufficient borrowing capacity.
Lenders ordinarily assess existing commitments such as:
- credit-card limits, even when the card balance is low or nil;
- personal and car loans;
- buy now, pay later facilities;
- HELP debt;
- ongoing child-support commitments;
- other home loans or guarantees; and
- regular household and discretionary expenses.
Reducing unnecessary debts or limits may improve borrowing capacity, but closing or refinancing debts can have costs or consequences. Review the position before making changes solely for a home loan application.
8. Allow for changing property prices and savings goals
A savings plan should not assume property prices will move in one direction.
Instead, review the target every three to six months against:
- recent prices for suitable properties;
- the deposit percentage being targeted;
- current government-scheme rules;
- estimated purchase costs;
- borrowing capacity; and
- the repayments associated with the likely home loan.
This keeps the goal connected to the buyer’s actual market rather than a national average that may not reflect Sydney or the buyer’s preferred suburb.
Choosing the appropriate deposit pathway
| Pathway | Potential advantage | Main trade-off |
|---|---|---|
| Save a 20% deposit | May avoid LMI and reduce the home loan required. | May take longer and delay the purchase. |
| Buy with a smaller deposit and pay LMI | May allow an earlier purchase. | LMI and a larger home loan can increase costs. |
| Use the 5% Deposit Scheme | An eligible buyer may purchase with 5% and avoid LMI. | Scheme, property and participating-lender requirements apply. |
| Use a family guarantee | May reduce the cash deposit or LMI requirement. | The guarantor accepts significant legal and financial risk. |
| Use eligible First Home Super Saver amounts | May provide a tax-effective way to build part of a deposit. | Contribution, release, timing and tax rules apply. |
The quickest pathway is not always the safest or most affordable. Compare the likely repayments, total borrowing, purchase costs and long-term flexibility before deciding.
How CBM Mortgages can help
CBM Mortgages can help you turn a broad savings goal into a practical home-buying plan.
We can help you:
- estimate the deposit and purchase costs required;
- assess your likely borrowing capacity;
- compare smaller-deposit and 20% deposit scenarios;
- review participating-lender options for the 5% Deposit Scheme;
- discuss lender requirements for genuine savings;
- understand how existing debts may affect the application; and
- prepare for pre-approval when the deposit and finances are ready.
Government agencies determine scheme eligibility, and lenders make their own credit decisions. CBM Mortgages can help you understand the lending requirements and compare suitable home loan options.
Building your first-home deposit? Visit our First Home Buyer home loan service or contact CBM Mortgages to discuss your savings target, borrowing position and possible pathways.
Frequently asked questions
Disclaimer: This article provides general information only and does not constitute personal financial, legal, tax or credit advice. Government schemes, lender policies, contribution limits and eligibility requirements can change. Check current official information and consider obtaining advice appropriate to your circumstances before acting.
