How Much Deposit To Buy A House In South East Melbourne, What Lenders Actually Check
The 20% deposit rule gets repeated so often that most buyers treat it as law. It isn't. What lenders actually care about is your loan-to-value ratio, and there are several legitimate ways to reach a manageable one without saving for years longer than you need to.
In South East Melbourne, where house medians run from around $1,280,000 in Moorabbin and Cheltenham through to well above $3,000,000 in Toorak and Brighton, the deposit question looks different depending on which suburb you're targeting and what type of property you're buying. A unit in Oakleigh at a $580,000 median sits in completely different deposit territory from a house in Sandringham at $2,430,000.
Our team helps buyers across South East Melbourne work out where they actually stand before they start a property search, comparing options across 60+ lenders. The home loan structure you choose matters as much as the deposit amount, and understanding both early saves a lot of false starts.
Key takeaways
- Every South East Melbourne house median sits above the $950,000 scheme cap.
- A 5% deposit is possible; LMI adds tens of thousands at higher LVRs.
- Unit buyers in 22 of 28 suburbs have a median under the $950,000 cap.
How much deposit do you actually need to buy in South East Melbourne?
The minimum deposit most lenders will accept is 5% of the purchase price, though lender's mortgage insurance applies above 80% LVR. On a $1,300,000 home, that's a 5% deposit of $65,000, but the LMI premium at that level adds roughly $41,500 to the loan. At 10% the premium drops to around $19,500, and at 20% there's no LMI at all. The deposit tier you reach changes the total cost of the purchase materially, which is why the choice isn't just about what you can save.
What does lender's mortgage insurance actually cost South East Melbourne buyers?
LMI is a one-off premium that protects the lender, not you, when your deposit is under 20%. It's calculated as a percentage of the loan amount and rises steeply at higher loan-to-value ratios. Most buyers roll it into the loan rather than paying it upfront, which means it compounds over the loan term.
Approximate LMI premiums at common purchase prices:
- › $700,000 at 5% deposit (95% LVR): approximately $21,000
- › $800,000 at 5% deposit (95% LVR): approximately $27,000
- › $1,000,000 at 5% deposit (95% LVR): approximately $41,500
- › $700,000 at 10% deposit (90% LVR): approximately $14,000
- › $900,000 at 10% deposit (90% LVR): approximately $19,500
Source: industry LMI premium schedules.
"Most buyers come in assuming 20% is the line and anything less is settling. What we often find is that a 12% deposit with a clean serviceability profile gets a better outcome than a 20% deposit reached by stripping the emergency fund to zero. The number on the page isn't the whole story."
Evelyn Clark · Director, Mortgage & Finance Broker · Chat to Evelyn →
What government schemes can reduce your deposit in South East Melbourne?
Two federal guarantees let eligible buyers enter with less than 20% and avoid LMI entirely. The catch for South East Melbourne buyers is the $950,000 price cap: every house median in the area sits above it, so these schemes work for unit buyers, not house buyers, across all 28 approved suburbs.
The two live pathways:
- › First Home Guarantee (5% Deposit Scheme): 5% deposit · no LMI · no income cap · $950,000 price cap · first home buyers only
- › Family Home Guarantee: 2% deposit · no LMI · single parents · $950,000 cap · not limited to first home buyers
- › Help to Buy (federal shared equity): 2% deposit · government co-owns up to 30% of an existing home · income cap $103,000 single / $165,000 joint · $950,000 cap
Victoria's state shared-equity scheme, the Victorian Homebuyer Fund, is currently closed to new participants. The only shared-equity pathway open to South East Melbourne buyers right now is the federal Help to Buy scheme.
Source: Housing Australia; State Revenue Office Victoria.
How does your deposit level affect how much you can borrow in South East Melbourne?
Your deposit determines your LVR, and your LVR determines which lenders will consider your application and on what terms. At 95% LVR the lender pool narrows to those with LMI partnerships; at 90% it widens; at 80% nearly every lender on a full panel is available. That difference in panel access can shift your borrowing limit and your rate, sometimes by more than the LMI premium itself.
The APRA serviceability buffer of 3.0% is added to your actual rate when lenders assess your capacity. At today's rates that means most buyers are assessed at approximately 9%. That assessment rate applies regardless of your deposit size, so a larger deposit doesn't directly lift your borrowing capacity, but it does lift your LVR position and widen the lender options available to you.
CoreLogic data shows house medians in the area range from $1,280,000 in Moorabbin to $2,430,000 in Sandringham and $4,960,000 in Toorak. A 10% deposit on the cheapest house median here is $128,000; a 20% deposit is $256,000. The borrowing-capacity question and the deposit question are therefore inseparable for most buyers in this market.
Source: CoreLogic (via YIP, June 2026); APRA.
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What are your deposit options when you don't have 20%?
There are four realistic routes to entering the market without a full 20% deposit. Each works differently and suits a different buyer position.
The options worth weighing:
- › Pay the LMI premium: 5% to 10% deposit · LMI added to the loan · no income test · purchase price above $950,000 allowed
- › First Home Guarantee (no LMI): 5% deposit · LMI waived entirely · purchase price capped at $950,000 · first home buyers only
- › Guarantor loan: uses equity in a family member's home · no LMI · no price cap · guarantor assessed at loan maturity age
- › Help to Buy (shared equity): 2% deposit · government co-owns a share · income capped at $103,000 single / $165,000 joint · $950,000 price cap
For most buyers targeting a house in South East Melbourne, the $950,000 cap removes the First Home Guarantee and Help to Buy from the equation. A guarantor structure or paying LMI and targeting a higher LVR lender become the primary paths.
When does a guarantor loan make sense here?
A guarantor loan uses a family member's existing property as additional security. The lender takes a limited mortgage over the guarantor's home covering only the gap between your deposit and a 20% position, not the whole loan amount. No LMI is charged and there's no price cap, which makes it one of the few tools that genuinely works at house price levels above $1,000,000 in this market.
The guarantor's equity position is what lenders focus on. Their property needs to stay comfortably under 80% LVR after the guarantee is added, and the guarantee is typically capped at no more than 50% of their property's value. Independent legal advice is mandatory under most lender policies before a guarantee is signed.
If the property is genuinely out of reach on your own deposit, a guarantor arrangement with a parent who has paid down their own mortgage is often the cleaner option in South East Melbourne's price environment. Once your LVR falls to 80%, usually three to seven years in, the guarantee can be released without selling or refinancing the whole loan.
"When a buyer asks me about a guarantor loan, the first conversation is always with the guarantor's situation, not the buyer's. A parent who has two-thirds equity in a Brighton or Bentleigh home can often support a guarantee without any real risk to themselves. The ones where I'd pause are where the guarantor's own property is close to 60% LVR already, because the math gets tight."
Evelyn Clark · Director, Mortgage & Finance Broker · Chat to Evelyn →
What approval challenges do deposit-stage buyers face?
The deposit figure itself is rarely what slows an application. These are the hurdles that do.
Where buyers lose ground:
- › Genuine savings test: most lenders want at least 5% of the purchase price held in savings for three months or more. A gift from family counts toward the deposit but doesn't satisfy this test on its own at every lender.
- › Credit card limits: lenders assess credit card limits as fully drawn commitments, at roughly 3% to 3.8% of the limit per month. A $20,000 card limit that's never used still reduces your borrowing capacity.
- › Stamp duty not counted: buyers often calculate their deposit without accounting for stamp duty. In Victoria, duty on a $1,300,000 purchase adds significantly to upfront costs, and most lenders won't lend that amount on top of the loan.
- › APRA's DTI cap: from February 2026, lenders can write no more than 20% of new lending at a debt-to-income ratio of 6x or higher. A buyer with a large existing debt or high income multiple may find some lenders at capacity even with a 20% deposit ready.
Source: APRA.
Frequently Asked Questions
Can I buy a house in South East Melbourne with a 5% deposit?
Yes, most lenders accept a 5% deposit, though LMI will apply at that level. Because every house median in the area sits above $950,000, the no-LMI First Home Guarantee is not available for house purchases here.
Does the First Home Guarantee apply to properties in South East Melbourne?
It applies to properties under $950,000, which covers units in most suburbs but no houses in the area. Twenty-two of the 28 approved South East Melbourne suburbs have unit medians under that cap.
Is a guarantor loan better than paying LMI for a South East Melbourne buyer?
A guarantor loan avoids the LMI premium entirely and carries no price cap, which makes it the stronger option at house prices above $950,000. It depends on whether a family member has sufficient equity and is willing to act as guarantor.
Does stamp duty count as part of my deposit in Victoria?
No, stamp duty is a separate upfront cost and is not included in your deposit calculation. You need the deposit amount plus stamp duty plus conveyancing costs as separate funds available at settlement.
Is a mortgage broker or a bank better for working out your deposit position?
A mortgage broker, every time. A bank will only show you what their own products allow; a broker compares LMI thresholds, genuine-savings rules and guarantor policies across a full panel of lenders to find the structure that suits your specific position.
Your Next Steps
Working out your deposit position in South East Melbourne is a different calculation from most markets. The price cap that governs the federal schemes sits below every house median in the area, which means the right entry strategy depends entirely on what you're buying, what equity or family support you have access to, and how your income profile looks to a lender. Getting that assessment done before you start searching puts you in a much stronger position at auction or private sale.
Ready to find out which deposit structure makes sense for your situation? Contact the EverLend team or call 03 7036 3356. We'll canvas our 60+ lender panel and find the most suitable options for your circumstances.
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External Resources
EverLend · South East Melbourne · Ever Lend Pty Ltd (ACN 625 080 515), authorised under Australian Credit Licence 517192 · General information only - this article does not constitute financial advice. Please consider your own circumstances and seek professional advice before making any financial decisions.
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