24 Jul 2025 How Much Deposit Do I Need for a Home Loan? What Every Buyer Should Know
Melbourne’s property market continues to challenge and excite home buyers. With prices creeping back up and competition staying strong in popular suburbs, it’s no wonder many first home buyers feel overwhelmed.
Whether you’re eyeing an inner-city apartment or a family home in the outer suburbs, it’s important to know how much to set aside for a home loan deposit.
A deposit affects everything from how much you can borrow to whether you’ll need to pay Lenders Mortgage Insurance, and even what kind of interest rate you might be offered. Yet, for many, the exact amount needed feels like a moving target.
In this guide, we’ll break down what a deposit actually is, how much you might need in Melbourne, and what factors can influence it.
Let’s start by understanding the basics.
Not sure how much deposit you really need? Speak with a Melbourne mortgage broker at EverLend to get a personalised home loan deposit estimate based on your goals and financial situation. Call 03 7036 3356 or visit www.everlend.com.au to schedule a free consultation.
What Is a Home Loan Deposit?
A home loan deposit is the initial lump sum you contribute towards the purchase price of a property when you’re buying a home. Think of it as your personal investment in the property, while the rest of the amount is covered by the home loan you apply for from a lender.
For example, if you’re buying a house worth $700,000 and you have $70,000 saved, that’s a 10% home deposit.
Why Lenders Require a Deposit
Lenders ask for a deposit because it reduces their risk. When you put some of your own money into the deal, it shows that you’re financially committed and can save.
It also means the loan amount they need to give you is lower, which lowers their exposure if something goes wrong and the loan isn’t repaid. This is especially important for first-time home buyers who may not yet have a long credit history.
How It Impacts Loan Approval and Interest Rates
The size of your deposit directly affects your chances of loan approval and the kind of interest rate you’re offered. A larger deposit usually means:
- You’re seen as a lower-risk borrower
- You’re more likely to get approved
- You could be offered better interest rates
- You may avoid paying Lenders Mortgage Insurance (LMI)
If your deposit is under 20%, lenders may still approve your home loan, but you’ll likely pay LMI and face a higher interest rate. A higher Loan to Value Ratio (LVR) means the lender takes on more risk.
Don’t guess your deposit. Get expert advice that fits your goals. Chat with a Melbourne mortgage broker from EverLend and find out exactly what lenders look for in a deposit for a home loan. Call today at 03 7036 3356 or visit everlend.com.au to learn more.
How Much Deposit Do I Need for a Home Loan in Australia?
So, what’s the magic number? Well, it depends on your financial situation, the lender’s policies, and whether you qualify for any government support.
Here’s a general guide to what lenders usually expect when it comes to your home deposit:
Standard Deposit Amounts
In Australia, these are the most common deposit thresholds:
- 5% deposit – This is typically the bare minimum and can be difficult to qualify for. You’ll need to meet strict credit requirements, show genuine savings, and often rely on a participating lender under a government scheme like the First Home Guarantee.
- 10% deposit – More common and accessible if you have a solid credit score, steady income, and low debt levels. But keep in mind, LMI is usually required.
- 20% deposit – This is the sweet spot. With 20% or more, you usually won’t need LMI, and you’re more likely to get a better interest rate and more favourable loan terms.
Example: A 20% deposit on a $700,000 home in Melbourne equals $140,000.
Buying With vs. Without LMI
If your deposit is under 20%, most lenders will require you to pay Lenders Mortgage Insurance. This doesn’t protect you; it protects the lender if you can’t repay the loan. The cost of LMI varies depending on your loan amount and Loan to Value Ratio (LVR), but it can run into the thousands.
Let’s break it down with a quick example:
- Home Price: $700,000
- Deposit (10%): $70,000
- Loan Amount: $630,000
- LMI Estimate: Anywhere from $10,000 to $15,000 (usually added to your loan)
This is why many first home buyers aim for the 20% mark; it can save you a lot in the long run.
Melbourne Property Prices and Deposit Examples
Melbourne’s median property price (as of mid-2025) sits around $790,000. Based on that, here’s what different deposit percentages look like:
- 5% deposit: $39,500 – LMI required
- 10% deposit: $79,000 – LMI still required
- 20% deposit: $158,000 – No LMI needed
Keep in mind, your deposit isn’t the only upfront cost. You’ll also need to budget for things like stamp duty, loan establishment fees, building insurance, pest and building inspections, legal and conveyancing fees, and even your moving costs.
First-time buyer? You don’t have to figure it out alone. Let a qualified Melbourne mortgage broker from EverLend guide you through home loan deposit planning, government schemes, and lender rules. Book a free consultation by calling us at 03 7036 3356 or visit everlend.com.au.
Can I Buy a House with a Small Deposit?
Yes, it’s possible to buy a home with a small house deposit, especially if you’re a first home buyer. Some lenders accept as little as 5% of the property value, though you’ll usually need to go through a stricter home loan application process and meet tighter eligibility rules.
The Home Guarantee Scheme, supported by the Australian Government, helps eligible buyers purchase a property with a smaller deposit, without needing to pay LMI. You may also be eligible for the First Home Owner Grant, which can help boost your savings and cover some of the upfront costs.
With a low deposit, your loan application will be closely assessed. Use tools like a borrowing power calculator, repayment calculator, and check against the contract of sale for a clear picture.
Every property purchase comes with its own steps, so understanding the home loan application process early makes a big difference.
Tips to Save for a Home Loan Deposit Faster
Saving for a home loan deposit might feel like a marathon, but a few smart moves can help you reach the finish line faster. Here are six practical tips to build your deposit and prepare for the whole property purchase journey:
- Create a detailed budget that includes hidden costs: Factor in future expenses like council rates, strata fees, and other fees and costs so you’re not caught off guard. Using a free mortgage calculator can help you understand how different savings targets affect your loan.
- Use government schemes to your advantage: Explore support options like the Family Home Guarantee and Housing Australia’s initiatives that allow eligible buyers to purchase with smaller deposits and no LMI.
- Boost savings with tax-effective strategies: Consider contributing to your super under the First Home Super Saver Scheme and check with the Australian Taxation Office for any tax advantages you might qualify for.
- Limit financial red flags: Keep your credit report clean by avoiding new debts, reducing credit card limits, and staying away from risky products like interest-only loans unless advised by a mortgage broker.
- Get guidance from professionals: Speak with a trusted mortgage broker or real estate agents early. They can walk you through expected costs, guide your loan application, and even help with timing around your settlement date.
- Plan and track everything: The more prepared you are, the easier the application process becomes. Create a checklist, track your progress weekly, and refine your savings goals using tools like a mortgage calculator.
By sticking to these tips, you’ll be in a much stronger position when it’s time to submit your home loan application and work toward owning your own slice of real estate.
Want to maximise your home loan deposit without draining your savings? EverLend’s Melbourne mortgage brokers help you balance upfront costs and long-term affordability, all without guesswork. Find out how by calling us at 03 7036 3356 or visit everlend.com.au to book a free consultation.
Frequently Asked Questions (FAQs)
How much of a deposit do you need for a $500,000 house?
Typically, you’d need at least 5% of the purchase price, which is $25,000 for a $500,000 home. However, most lenders prefer a 20% deposit ($100,000) to avoid Lenders Mortgage Insurance (LMI). Your exact deposit will depend on the lender and market conditions at the time.
Can I buy a house with an $80,000 deposit?
Yes, an $80,000 deposit can be enough depending on the property value and loan structure. If you’re buying a home around $400,000, that’s a 20% deposit, which may help you avoid LMI.
Is $50,000 enough for a house deposit?
It can be, especially for homes priced around $300,000–$400,000 or if you qualify for schemes like the First Home Guarantee. Keep in mind, you’ll also need money for building and pest inspection, home insurance, and other upfront costs involved in the home buying process.
Can I buy a house in Melbourne with just a 5% deposit?
Yes, but it’s challenging. You’ll need to meet strict lender criteria, show genuine savings, and may have to pay LMI. The Home Guarantee Scheme can help eligible buyers purchase with just 5%, depending on market conditions.
What’s the best way to save for a house deposit?
Start by creating a realistic budget and using tools like a mortgage calculator. Consider salary sacrifice into super through the First Home Super Saver Scheme, and cut unnecessary expenses. Don’t forget to plan for extra costs like home insurance, building inspections, and legal fees during the home buying process.
What is the Loan to Value Ratio (LVR)?
The Loan to Value Ratio (LVR) is the portion of the property value you borrow compared to your deposit. A 90% LVR means you’re putting in 10%. Lower LVRs are preferred by lenders, especially in changing market conditions.
Are there extra costs on top of the deposit?
Yes, absolutely. Aside from your house deposit, you’ll also need to budget for stamp duty, building and pest inspection, home insurance, loan establishment fees, and conveyancing costs. These can add up quickly and are an essential part of the full home buying process.
Takeaway
Understanding how much deposit you need for a home loan isn’t just about hitting a number; it’s about setting yourself up for a smoother, more confident home buying process.
If you’re ready to begin your homebuying journey, our Melbourne mortgage brokers at EverLend can help! We’re based in St Kilda, serving the wider Melbourne region, assisting homebuyers throughout the home loan process, from pre-approval to settlement, including choosing a suitable loan deposit scheme.
Book a free consultation with us by calling 03 7036 3356 or visit everlend.com.au to get started.