How much deposit do you need to buy a home in Sydney?
You need 5% of the purchase price if you qualify for the Australian Government’s 5% Deposit Scheme, or 20% to avoid Lenders Mortgage Insurance. On a $1.2 million Sydney purchase, that is the gap between $60,000 and $240,000, and which figure applies to you depends on your eligibility and your strategy, not just your savings.
That gap, $60,000 to $240,000 on the same property, is where most of the confusion about deposits actually lives. Not in the percentage. In which one applies to you.
The real minimum, and why “5%” and “20%” are answering different questions
Twenty per cent has been the industry’s default answer for so long that most buyers assume it is a rule. It is not. It is the deposit size at which lenders stop requiring Lenders Mortgage Insurance, because at that point they are lending 80% of the property’s value or less, which is where they consider their own risk comfortable. Below that threshold, most lenders will still approve you. They will just ask you or the insurer to cover the difference.
Five per cent is the other number worth knowing, and it is not a lender’s rule at all. It is the minimum most banks require in genuine savings, held in your own account for at least three months, before they will take an application seriously. If you are eligible for the Australian Government’s 5% Deposit Scheme (the current name for what used to be the First Home Guarantee), the government guarantees up to 15% of the loan, which lets you buy with 5% down and skip Lenders Mortgage Insurance entirely, something that is normally only possible above the 20% mark.
So the honest answer to “how much deposit do I need” is: it depends which of those two paths you are on, and that depends on whether you are eligible for government support, whether you are buying your first home or your fourth, and how comfortable you are trading a bigger insurance cost for getting into the market sooner rather than later.
What genuine savings actually means, and why a gift alone will not always cut it
Lenders do not just check the total sitting in your account. They check where it came from. Genuine savings, in lending terms, is money you have accumulated yourself and held for a minimum of three consecutive months, and most lenders want to see at least 5% of the purchase price in that category specifically, even if the rest of your deposit is coming from a family gift or an inheritance.
This trips up more buyers than the deposit size itself. A parent can gift you $100,000 toward a purchase, and most lenders will accept it happily with a signed gift letter confirming it is not repayable, but if you have never held a meaningful savings pattern of your own, some lenders will still hesitate. This is one of the clearest examples of why the same deposit figure can produce a very different outcome depending on how it is structured, and it is exactly the kind of detail a good broker checks before you fall for a property, not after.
What Lenders Mortgage Insurance actually costs, and when paying it is still the right call
Lenders Mortgage Insurance is not small. On a $700,000 property with a 5% deposit, the premium can run to $20,000 to $25,000, and it is usually added to your loan rather than paid upfront, which means you pay interest on it for the life of the loan. It is easy to look at that number and treat LMI purely as a cost to avoid.
That is not always the right read. If the Sydney market you are buying into is moving faster than you can save, the cost of waiting two more years to reach 20% (in lost time, and in a property that has likely gone up in value in the meantime) can outweigh the LMI premium comfortably. This is a genuine trade-off, not a trap, and it is worth running the actual numbers on your situation rather than defaulting to “avoid LMI at all costs” as a rule of thumb.
If you are not a first home buyer, the deposit conversation changes
Most of what gets written about deposits assumes a first home buyer. If you are upgrading or investing, the numbers move.
Investment lending generally asks for a larger deposit, typically 10% to 20%, and the Australian Government 5% Deposit Scheme does not apply, since it exists specifically to help owner-occupiers into the market, not to fund a portfolio. Upgraders, on the other hand, are often not starting from zero. If you already own a home, the equity in it can function as some or all of the deposit on your next purchase, which changes the question from “how much cash do I need saved” to “how much of my existing equity can I actually put to work,” a very different (and often more favourable) calculation.
The stamp duty trap that changes the real number
Here is what most deposit guides leave out: your deposit is not the only cash you need at settlement. In NSW, first home buyers get a full stamp duty exemption on properties up to $800,000, with a sliding concession up to $1,000,000. Above that, stamp duty is a separate, substantial cost on top of your deposit, and in Sydney, where the median house price sits well north of $1.5 million, a large share of buyers are paying full stamp duty regardless of how they’ve structured their deposit.
This is the number that catches people out. Someone who has carefully saved a 10% deposit and budgeted for LMI can still be short at settlement if they have not separately budgeted for stamp duty, conveyancing, and building or pest inspections. The deposit is the headline number. It is rarely the only number that matters.
RK’s take
“The question I get asked is always ‘how much deposit do I need,’ but the question that actually matters is ‘what’s the cheapest way for me, specifically, to get into this property.’ Those aren’t the same question. Sometimes the cheapest path is 20% and no LMI. Sometimes it’s 5% under the government scheme and getting in before the market moves again. I’ve seen buyers over-save for two extra years chasing 20%, on a property that grew faster than their savings did. The number on its own tells you nothing. What it’s attached to tells you everything.”
The bottom line
There is no single correct deposit size. There is a correct deposit size for your situation: whether you are a first home buyer, an upgrader with equity to use, or an investor; what you are eligible for under current government schemes; and how the cost of Lenders Mortgage Insurance compares to the cost of waiting. Getting that calculation right, before you are under contract and against the clock, is most of what a good broker actually does.
Current as at August 2026. Deposit rules, scheme thresholds and LMI costs change and should be verified against your lender and Housing Australia at the time you apply.
Frequently asked questions
What is the minimum deposit to buy a home in Sydney?
Most lenders will consider a deposit as low as 5%, provided you can show genuine savings and are prepared to pay Lenders Mortgage Insurance. If you’re an eligible first home buyer, the Australian Government 5% Deposit Scheme lets you buy with 5% down and no LMI on Sydney properties up to $1.5 million.
Do first home buyers really need a 20% deposit?
No. Under the Australian Government 5% Deposit Scheme, eligible first home buyers can purchase with a 5% deposit and skip Lenders Mortgage Insurance entirely. There’s no income cap and no limit on places. The trade-off is a strict property price cap, $1.5 million for Sydney and NSW regional centres.
What counts as “genuine savings” for a home loan?
Genuine savings is money you’ve held in your own account for at least three consecutive months. Most lenders want to see at least 5% of the purchase price in this category, even if a gift or inheritance is covering the rest of your deposit.
Can I use a gifted deposit from family?
Yes, with a signed gift letter confirming the funds are not repayable. Most lenders will still expect you to show some genuine savings of your own alongside the gift, so a 100% gifted deposit can be harder to get approved than a mixed one.
How much deposit do I need for an investment property?
Investment lending generally requires a larger deposit than an owner-occupied purchase, typically 10% to 20%. The Australian Government 5% Deposit Scheme doesn’t apply to investment properties, since it’s designed specifically to help owner-occupiers into the market.
Is it better to pay LMI or wait and save a 20% deposit?
It depends on how fast the market you’re buying into is moving. LMI is a real cost, often $20,000 to $25,000 on a $700,000 property at 5% deposit, but if prices are rising faster than you can save, waiting for 20% can end up costing more than the premium itself. It’s worth running the actual numbers on your situation rather than defaulting to “avoid LMI at all costs.”
