When it comes to buying property, one of the most common questions people ask is, “How much deposit do I really need?” The answer is not as straightforward as you’d think—it depends on various factors, including your financial position, property type, and the lender’s policies.
Here’s a breakdown based on insights from my interview with Adam Stevenson, an experienced mortgage broker, Founder and Director at FutureSett Mortgage Broking.
The Deposit Myth: Do You Always Need 20%?
A common misconception is that you need a 20% deposit to purchase property. While having a 20% deposit often results in better interest rates and avoids Lenders Mortgage Insurance (LMI), it’s not the only option. Here’s how deposit requirements can vary:
- 20% Deposit: This is the standard for most buyers, but not always necessary.
- 10% Deposit: Many lenders allow for smaller deposits, though this typically incurs higher interest rates and LMI costs.
- 5% or Less: For owner-occupiers, some lenders accept deposits as low as 5%, and specific schemes even let first-home buyers avoid LMI.
- Guarantor Loans: With support from a family member offering their property as security, you may even buy with no deposit.
What Determines Your Deposit Size?
The deposit you’ll need depends on the following:
- Financial Situation: Your income, expenses, existing liabilities, and savings.
- Property Type: Lenders sometimes require higher deposits for investment properties than owner-occupied homes.
- Government Schemes: First-home buyer grants and federal schemes can lower your deposit requirement significantly if you meet the eligibility criteria.
Why Your Lender Matters
Different banks and lenders have varying policies. Some might allow a higher Loan-to-Value Ratio (LVR), like 95% or 98%, while others cap loans at 80% or 90% LVR. Working with an experienced mortgage broker ensures you can access lenders that align with your unique needs and goals.
Planning is Key
Buying property without a plan often leads to roadblocks. Adam emphasized the importance of preparing early:
- Unpack Your Financials: Understand your cash flow, liabilities, and borrowing capacity.
- Assess Options: Explore lenders and deposit options well before starting your property search.
- Seek Independent Advice: Avoid relying solely on brokers tied to agencies selling properties. Independent advice ensures your personal interests are prioritized and you’re not just lined up to buy what some ‘advisor’ is putting in front of you.
Beyond the Transaction
A good broker does more than secure your loan—they guide you through the process and offer ongoing support. From finding ways to improve cash flow to navigating post-settlement strategies like equity access or rate reviews, the right team can make your property journey smoother and more successful.
Final Thoughts
Your deposit can range anywhere from 20% to 0%, depending on your situation. Depending on your circumstances, you should try to use as little of your own cash as possible so remaining funds can be put into an offset account tied to your loan.
The key is preparation—start conversations with a trusted mortgage broker early, even three to six months before you’re ready to buy.
By planning ahead, you’ll have the clarity and confidence to make informed decisions, no matter where you are in your property journey.
For tailored guidance, reach out to professionals who can help you demystify the process and set you on the path to property ownership.
Watch the full interview here.
About the author
Debra Beck-Mewing is the Editor of the Property Portfolio Magazine and CEO of The Property Frontline. She has more than 20 years’ experience in buying property Australia-wide and has extensive experience in helping buyers use a range of strategies including renovating, granny flats, sub-division and development. Debra is a skilled property strategist, and a master in identifying tailored opportunities, homes and sourcing properties that have multiple uses. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business. As a passionate advocate for increasing transparency in the property and wealth industries, Debra is a popular speaker on these topics. She is also an author, podcast host, and participates on numerous committees including the Property Owners’ Association.
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Disclaimer – This information is of a general nature only and does not constitute professional advice. We strongly recommend you seek your own professional advice in relation to your particular circumstances.
