Do You Really Need a 20% Deposit to Buy a Home?
Many first home buyers delay buying because they believe a 20% deposit is mandatory. While a larger deposit can offer benefits, it isn’t always required to purchase a property. Understanding whether you really need a 20% deposit to buy a home can help you make informed decisions and avoid waiting longer than necessary.
Where the 20% Deposit Rule Comes From
The idea of a 20% deposit comes from avoiding lenders mortgage insurance (LMI). When you borrow more than 80% of a property’s value, lenders often charge LMI to protect themselves against risk.
It’s a cost consideration — not a legal requirement.
Buying With Less Than 20%
Many lenders allow borrowers to buy with deposits as low as 5% to 10%, depending on income, credit history, and overall financial strength.
Low-deposit options may include LMI or government-backed schemes.
What Happens If You Don’t Have 20%
Borrowing with a smaller deposit can involve trade-offs.
These may include:
- Paying lenders mortgage insurance
- Slightly higher interest rates
- Stricter servicing assessments
For many buyers, these costs are outweighed by entering the market sooner.
When Waiting for 20% Makes Sense
In some situations, waiting to reach a 20% deposit can be beneficial — particularly if saving quickly or aiming to minimise long-term loan costs.
This decision depends on income stability, property prices, and personal goals.
Why This Matters for Australian First Home Buyers
Australian lenders and government schemes offer a range of low-deposit options, but eligibility rules vary. Assuming you must have 20% can unnecessarily delay your plans.
How The Finance Brokers Can Help
The Finance Brokers help first home buyers compare low-deposit and standard loan options, explain the true cost of LMI, and identify lenders that suit your situation. They help you decide whether buying now or waiting makes more sense financially.
Not Sure If You Should Wait or Buy Now?
If you’re unsure whether to keep saving or move forward with a smaller deposit, getting tailored advice can help you make the right call.
Book a free consultation with The Finance Brokers
Final Thoughts
You don’t always need a 20% deposit to buy a home. Understanding lender rules, low-deposit options, and the real cost of waiting can help you choose the path that best suits your circumstances.
