How much deposit do you actually need
The common assumption is that you need a 20% deposit to buy property in NSW. This is not strictly accurate. A 20% deposit means you avoid Lenders Mortgage Insurance, which reduces your upfront costs. But buyers can and do purchase with deposits as low as 5%, particularly through government guarantee schemes.
The deposit amount affects three key things: whether you pay LMI, what interest rate you are offered (higher LVR often means a slightly higher rate), and which lenders are willing to approve your application. Understanding these trade-offs is more useful than a fixed number.
The real minimum
For most borrowers without access to a guarantee scheme, 5% is the practical floor. Some lenders will consider 2% to 3% but the LMI cost and rate premium at those levels is significant. First home buyers using the First Home Guarantee can purchase with as little as 5% and avoid LMI entirely.
How Lenders Mortgage Insurance works in NSW
Lenders Mortgage Insurance protects the lender, not the borrower, in the event of default. Despite this, it is the borrower who pays the premium. LMI is required when the loan-to-value ratio (LVR) exceeds 80%, meaning the loan amount is more than 80% of the property's value.
LMI is calculated as a percentage of the loan amount and increases as the LVR rises. On a $700,000 property with a 10% deposit, the LMI premium is typically between $12,000 and $18,000 depending on the lender and insurer. Most borrowers capitalise this into the loan rather than paying it upfront, which means it accrues interest over the life of the loan.
LMI is not transferable between lenders. If you later refinance to a new lender and your LVR is still above 80%, you may be required to pay LMI again. This is one of the most commonly misunderstood aspects of refinancing with a smaller deposit.
| LVR | Deposit on $700k property | Approx. LMI cost |
|---|---|---|
| 95% LVR (5% deposit) | $35,000 | $22,000 to $28,000 |
| 90% LVR (10% deposit) | $70,000 | $12,000 to $18,000 |
| 85% LVR (15% deposit) | $105,000 | $5,000 to $9,000 |
| 80% LVR (20% deposit) | $140,000 | Nil |
Government schemes available to NSW buyers
Several federal and NSW state government schemes reduce the deposit barrier for eligible buyers. These schemes do not provide cash but instead reduce or eliminate the need for LMI, effectively allowing buyers to purchase with a smaller deposit at no additional cost.
First Home Guarantee (federal)
The First Home Guarantee allows eligible first home buyers to purchase with a 5% deposit without paying LMI. The government guarantees up to 15% of the purchase price to the lender. There are property price caps that vary by location, and 35,000 places are available nationally per financial year. Income caps apply: $125,000 for individuals and $200,000 for couples.
Family Home Guarantee (federal)
The Family Home Guarantee is available to single parents with at least one dependent child. It allows purchase with a 2% deposit without LMI, with the government guaranteeing 18% of the purchase price.
First Home Buyer Assistance Scheme (NSW)
NSW offers stamp duty exemptions and concessions for first home buyers. As of 2024, first home buyers purchasing an existing home under $800,000 pay no stamp duty. Between $800,000 and $1,000,000, a concessional rate applies. For new homes and vacant land, different thresholds apply. See our stamp duty guide for current figures.
Genuine savings requirements
Most lenders require evidence of genuine savings when the deposit is below 20%. Genuine savings means funds that have been accumulated over time through your own efforts, typically demonstrated by a savings account showing consistent deposits over at least three months. Some lenders require six months of savings history.
Funds that are not typically accepted as genuine savings include gifts from family (without additional evidence), tax refunds deposited in a lump sum, and proceeds from the sale of assets without a savings history following the sale. First home buyer grants and government scheme guarantees are also not counted as genuine savings by most lenders.
Common mistake
Many buyers receive a financial gift from parents and assume this covers the deposit entirely. Most lenders require at least 5% in genuine savings on top of any gifted funds. Planning this early avoids delays at application stage.
Strategies to build your deposit faster
Beyond straightforward saving, several approaches can accelerate deposit accumulation. Using a high-interest savings account specifically designated for the deposit and automating weekly transfers removes friction. The First Home Super Saver Scheme allows voluntary superannuation contributions to be withdrawn for a first home purchase, with the tax advantages of super applying to the savings period. First home buyers can access up to $50,000 under this scheme.
Rentvesting, where buyers purchase an investment property in a more affordable area while continuing to rent in their preferred location, allows some buyers to enter the market sooner and build equity, then use that equity later toward an owner-occupied purchase. For buyers in this position, specialist investment lending advice is worth seeking before proceeding. For NSW buyers exploring this path, Lend & Loan work with both first home buyers and investors across the state.