You may not always need a 20% deposit to buy your first home. For the right buyer, 5% can be enough to get moving. But there’s more to it than just the deposit number. Here’s what you should know before you start looking.
Let’s get the big one out of the way early. No, you may not need to save 20% before you can buy a home.
A lot of first home buyers believe that, and it’s one of the main reasons people put off buying for years longer than they need to. Between rent, bills and rising property prices, saving $120,000 on a $600,000 property can feel almost impossible. So people wait. And while they wait, prices keep moving.
Plenty of buyers get into their first home with a 5% deposit. That’s $30,000 on a $600,000 property. Still a solid chunk of money, but a very different target to hit.
Buying with a smaller deposit isn’t as simple as just having the cash, though. There are lending rules, upfront costs and practical trade-offs you need to understand. The goal isn’t just getting into the market. It’s doing it in a way you can actually sustain.
Who does a 5% deposit actually suit?
This approach tends to work well for buyers who are financially stable but haven’t been able to stack up a massive deposit while also paying rent and living their life.
Think steady job, consistent savings pattern, good handle on their budget, solid repayment track record. But they’ve been watching property prices creep further away while they try to hit that 20% number.
If that sounds familiar, it’s worth having the conversation. But it’s not the right move for everyone. If a smaller deposit means you’re stretched to breaking point, have no safety net left over, or you’re pushing into a property you can’t comfortably hold, then waiting and building a stronger position is the smarter call.
The Australian Government 5% Deposit Scheme
If you haven’t heard of this one, it’s good to know about. The Australian Government 5% Deposit Scheme (previously called the Home Guarantee Scheme) is designed to help eligible buyers purchase with a lower deposit and avoid paying Lenders Mortgage Insurance.
Since October 2025, the scheme has had no income caps and no waitlists, which opened it up to a lot more people.
There’s also a separate pathway for eligible single parents or legal guardians, where the minimum deposit drops to just 2%.
It’s a useful option for the right buyer, but eligibility rules, property price caps and participating lender requirements still apply. And scheme eligibility doesn’t guarantee loan approval. They’re two separate things. Always check the latest details on the official Housing Australia website before building your plans around it.
What’s the deal with Lenders Mortgage Insurance?
This one catches a lot of first home buyers off guard.
Lenders Mortgage Insurance (LMI) is a cost that typically kicks in when you’re borrowing more than 80% of the property’s value. In other words, when your deposit is less than 20%. It protects the lender, not you, but you’re the one who pays for it. And it can add thousands to your upfront costs.
The good news is there may be ways to avoid it. The government scheme mentioned above is one. Some lender-specific policies or profession-based waivers are another. How your loan is structured can make a real difference here, which is exactly where broker guidance earns its keep.
Two buyers with similar savings and income can end up in very different positions depending on which lender they go with and how the application is put together. That’s not a scare tactic. It’s just how lending works.
The other costs to plan for
The deposit gets all the attention, but it’s not the only cost involved in buying a property. A lot of first home buyers are so focused on hitting that savings target that the other expenses catch them off guard.
Depending on your purchase, you might also need to cover:
- Conveyancing or solicitor fees
- Building and pest inspections
- Loan setup and settlement costs
- Stamp duty (where applicable, as first home buyer exemptions vary by state)
- Moving costs and the inevitable trip to Bunnings once you get the keys
None of these are huge surprises once you know about them, but they do add up. It’s worth mapping out the full cost picture early so there are no last-minute scrambles.
Mistakes I see first home buyers make
After years working in banking and lending, a few patterns come up again and again.
Focusing on borrowing power instead of comfort. Just because a lender says you can borrow $650,000 doesn’t mean you should. What matters more is how the repayments feel alongside everything else in your life. Not just on paper, but week to week.
Assuming all lenders are the same. They’re not. Different lenders assess income, expenses, savings and property types differently. The right lender for your situation might not be the one with the flashiest rate.
Moving too fast before understanding the real budget. Falling in love with a property before knowing what you can actually afford is a recipe for frustration. Get your numbers clear first, then start looking.
How do you know if you’re ready?
Being ready to buy isn’t just about the deposit balance. It’s about knowing your cash flow, understanding what repayments you can handle without stress, having a buffer for the unexpected, and being realistic about the type of property and price range that makes sense right now. Not just what you’d like in an ideal world.
If some of that picture is still fuzzy, it doesn’t necessarily mean you’re not ready. It might just mean you need a clearer strategy before taking the next step.
Where to from here
Buying your first home with a 5% deposit may be a real option for the right buyer. But the best outcomes come from understanding the whole picture. Not just the deposit, but the costs, how lenders actually assess you, and how it all fits with your income and your life.
At Dreamlend Finance, we help first home buyers work through all of this with clear advice and a proper plan. No jargon overload, no pressure. Just a straight conversation about what’s realistic and how to get there.
Thinking about buying your first home?
Dreamlend Finance can help you figure out where you stand and what your next move looks like. Book a chat and let’s talk it through.
