First home buyer deposit options
This guide covers every pathway to building your first home deposit, from personal savings and family gifts to government schemes, guarantor loans, and equity release. Understanding your options helps you enter the property market sooner with the right strategy for your circumstances. For an overview of all available support, read our pathways to home ownership guide.
Quick summary: The main deposit options are personal savings, family gifts, the Home Guarantee Scheme (5% deposit, no LMI), the Help to Buy Scheme (2% deposit, government equity), the First Home Owner Grant ($10,000 on new homes), the FHSSS (save up to $50,000 through super), guarantor loans, low deposit loans with LMI, and equity release from existing property. Many of these can be combined.
Why your home deposit matters
Your deposit size directly impacts how much you can borrow and the types of properties you can afford. Larger deposits typically result in better interest rates and more flexible loan features because lenders view you as lower risk. A deposit of 20% or more means you avoid LMI entirely, lowering your monthly repayments. A substantial deposit also demonstrates financial discipline to lenders, making you a more attractive borrower, and gives you an immediate equity buffer that provides security if property values fluctuate.
Understanding your Loan to Value Ratio (LVR) is essential because it determines which of these factors apply to you. Use our property deposit calculator to see how different deposit amounts change your borrowing picture.
Building your deposit through savings
The most common way to accumulate a deposit is through disciplined savings. Set up a dedicated high-interest savings account exclusively for your deposit and automate regular transfers from your main account on each payday. Create a realistic budget to find areas where you can cut back and redirect money toward your deposit. Reduce discretionary spending where possible and look for opportunities to boost your income through additional work or overtime. Allocate any windfalls such as bonuses, tax returns, or gifts directly to your deposit fund.
Time is your friend when saving. Compound interest means your money earns returns not only on your original deposits but also on the interest previously earned. Saving $500 monthly at 3% interest would result in approximately $6,083 after one year, $32,323 after five years, and $69,871 after ten years. Most lenders require your savings to meet genuine savings requirements, typically funds held for at least 3 months with evidence of regular accumulation.
Gifted deposits from family members
With property prices rising, many first home buyers are turning to family assistance. A gifted deposit involves a family member (often parents) providing funds as a genuine gift that does not need to be repaid. The key requirement is that the money is a gift, not a loan.
When using a gifted deposit, lenders generally require a signed gift letter or statutory declaration confirming the funds are a gift and not a loan, evidence that the gift has been transferred to your account (usually with a history of at least 3 months), and confirmation that the gift provider has no claim or legal interest in the property. Most lenders also require that you have saved some portion of the deposit yourself to demonstrate financial commitment. Requirements vary between lenders, so working with a broker who knows each lender's policy ensures a smooth process. Both you and the gift provider should ensure clear documentation to avoid any future misunderstandings.
Government schemes for first home buyers
Home Guarantee Scheme (5% deposit, no LMI)
The Home Guarantee Scheme allows eligible first home buyers to purchase with just a 5% deposit without paying LMI. The government guarantees up to 15% of the property value to your lender. This can save you $10,000 to $65,000+ in LMI depending on the property price. Property price caps apply ($1,500,000 for Sydney). Read about the benefits and risks and check the genuine savings requirements.
Help to Buy Scheme (2% deposit, government equity)
The Help to Buy Scheme (formerly the Shared Equity Scheme) is now live and allows eligible buyers to purchase with just a 2% deposit. The government contributes up to 40% equity on new homes or 30% on existing homes, dramatically reducing your loan amount and monthly repayments. No LMI is payable. Income caps of $100,000 (single) or $160,000 (couple) apply. NSW property price caps are $1,300,000 for Sydney and regional centres.
NSW stamp duty concessions
Stamp duty concessions are not directly a deposit option, but they significantly reduce your upfront costs. Full exemption applies for properties up to $800,000, with concessional rates up to $1,000,000. This can save you up to $30,529, freeing up funds for your deposit or other purchase costs.
First Home Owner Grant ($10,000)
The First Home Owner Grant provides $10,000 to eligible first home buyers purchasing or building new properties valued up to $600,000 (or land and construction up to $750,000). When combined with your savings, the FHOG can make a significant difference in reaching your deposit goal.
First Home Super Saver Scheme
The FHSSS allows you to save up to $50,000 through your superannuation with tax advantages. Voluntary contributions are taxed at just 15% instead of your marginal rate, and the ATO applies an earnings rate typically higher than standard savings accounts. FHSSS withdrawals are widely accepted as genuine savings by lenders.
Which deposit option is right for you?
We help first home buyers compare all available deposit pathways and find the best combination from 35+ lenders at $0 cost to you.
Guarantor loans
A guarantor loan allows a family member (typically a parent) to use their property equity as security for a portion of your home loan. The guarantor does not provide cash upfront. Instead, their property serves as collateral against a portion of your loan, reducing the lender's risk and enabling you to borrow with a smaller deposit or even no deposit at all. The guarantor is only responsible for the guaranteed portion, not the entire loan amount.
The key benefits are that you can enter the market sooner without waiting years to save, you may avoid LMI entirely, and you can access better loan terms. As you build equity through repayments or property value increases, the guarantee can be removed. However, guarantors are legally responsible if you cannot make repayments, their property is at risk if the loan defaults, and their own borrowing capacity may be limited while the guarantee is in place. Both parties should seek independent financial and legal advice before proceeding.
Low deposit loans with LMI
If you have a deposit between 5% and 20% and do not qualify for government schemes, you can still purchase by paying Lenders Mortgage Insurance. LMI is a one-time premium (typically $5,000 to $25,000+ depending on your loan amount and deposit size) that can be paid upfront or added to your loan amount.
While LMI adds to your overall costs, it allows you to enter the property market sooner, capture potential property value increases while you would otherwise be saving, and start building equity instead of paying rent. Use our property deposit calculator to compare how different deposit amounts affect your borrowing capacity, and our mortgage repayment calculator to see the monthly impact.
Using equity from existing property
If you or your co-borrower already own property with significant equity, you can use that equity as a deposit for your next purchase. Equity is the difference between your property's current value and what you owe. For example, if your property is worth $800,000 and you owe $400,000, you have $400,000 in equity. Lenders typically allow you to access up to 80% of your property's value minus what you owe.
You can access equity through refinancing your existing loan to a higher amount, taking out a line of credit against your property, or using cross-collateralisation. While this means no additional cash deposit is needed, it does increase your overall debt, so you need to ensure you can manage the additional repayments. Our home equity calculator helps you determine how much equity you can access.
Choosing the right property with your deposit
Once you have your deposit strategy in place, the type and price of property you target should align with your financial position. Consider a freestanding house for full land ownership, a strata apartment or townhouse for a lower entry point in a better location, or vacant land to build for customisation and FHOG eligibility.
Our guide on how to buy the right property helps you compare options, and our location, condition, and vibes guide evaluates suburbs beyond price. Whether you buy through private treaty, auction, or off the plan, our property purchase and valuation guide explains the process. The bank valuation confirms the property meets lender requirements, and pre-approval gives you confidence to make competitive offers. Our choosing the right finance guide compares loan types and features, and our settlement guide walks you through the final stages.
Frequently asked questions
How much deposit do I need to buy my first home?
This depends on your pathway. The Help to Buy Scheme requires just 2%. The Home Guarantee Scheme requires 5% with no LMI. Low deposit loans with LMI allow 5 to 10%. Guarantor loans may allow minimal or no deposit. And 20% avoids LMI entirely. The ideal deposit size depends on your financial situation and eligibility for various schemes.
Can I use multiple deposit sources together?
Yes. It is common for first home buyers to combine personal savings with a family gift, savings with the First Home Owner Grant, FHSSS withdrawals with personal savings, or guarantor support with a personal contribution. Policies vary between lenders on combining deposit sources, so working with a broker ensures you find a lender whose rules accommodate your situation.
Do I need genuine savings for a home deposit?
Many lenders require genuine savings, typically funds saved over at least 3 months. However, some lenders have more flexible policies, certain government schemes may have different requirements, guarantor loans often have more flexible approaches, and a consistent rent payment history can sometimes substitute. A broker can find lenders with requirements that match your deposit situation.
How long does it take to save a home deposit?
The timeline depends on your income, expenses, target property price, saving rate, and whether you use government schemes. On average, first home buyers take 4 to 5 years to save a 20% deposit, but this can be significantly shortened by using the Home Guarantee Scheme (5% deposit), Help to Buy (2% deposit), or the FHSSS to accelerate savings.
Can I use my superannuation for a home deposit?
Through the FHSSS, you can make voluntary contributions to your superannuation (up to $15,000 per year, $50,000 in total) and withdraw these contributions plus associated earnings for your first home deposit. This is not the same as accessing your existing super balance. The FHSSS provides tax advantages that make your savings grow faster than in a regular bank account.
What happens if property values fall after I buy with a small deposit?
If property values decline, you could end up in negative equity, where you owe more than your property is worth. This primarily becomes an issue if you need to sell. To reduce this risk, research the property market carefully, choose areas with long-term growth potential (our location guide helps), plan to hold the property through market cycles, and make additional repayments to build equity faster. Read the benefits and risks of low deposit buying for a full picture.
How does a guarantor arrangement get released?
A guarantor arrangement can be released once you have built enough equity through repayments or property value increases and your LVR has reduced to 80% or lower. The process involves requesting a property valuation, applying to the lender for guarantor release, and refinancing to a standard loan without the guarantee.
Is it better to pay LMI or wait to save 20%?
This depends on your circumstances. Paying LMI and buying sooner may make sense if property prices are rising, your rent is high, you have stable income, or you qualify for time-sensitive schemes. Waiting might be better if the market is stable, your employment is uncertain, or you are close to 20%. Use our mortgage repayment calculator to compare both scenarios for your specific numbers.
Take the next step
Understanding your deposit options is the foundation for entering the property market with confidence. Start by reviewing your budget, then explore which government schemes you are eligible for through our first home buyers journey guide. Use our property deposit calculator, home equity calculator, and mortgage repayment calculator to plan your numbers.
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Related resources for first home buyers
Continue building your knowledge with our Home Guarantee Scheme guide for 5% deposit purchases with no LMI, our genuine savings requirements guide to understand what lenders expect, our budgeting guide to assess your financial position, our LMI guide to understand what the cost of a smaller deposit, and our pathways to home ownership for a complete overview of all available support.
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