How Much Deposit Do I Need for a Home Loan?

Looking at Canberra's soaring property prices, many aspiring homeowners ask themselves: "How much deposit do I need for a home loan?" Understanding your required deposit is crucial - it shapes your borrowing power, determines your monthly repayments, and influences whether you'll need Lenders Mortgage Insurance. 

Here at Home Loan Broker Canberra, we understand these complexities and work with multiple lenders to identify your ideal deposit size based on your unique financial situation. Our brokers will match you with lenders offering favourable terms while guiding you through paperwork and applications, saving you time and stress. 

Let's break down everything you need to know about home loan deposits. 

How Much Deposit Do I Need for a Home Loan?

The deposit required for a home loan depends on the lender, property value, and loan type. Generally, a 20% deposit is ideal, as it eliminates lender’s mortgage insurance (LMI) and provides better interest rates. 

However, many buyers enter the market with a 10% or even 5% deposit, though LMI may apply. Some lenders also offer low-deposit home loans with government assistance for eligible buyers. Understanding how different deposit amounts impact loan costs helps you plan your finances effectively.

Deposit Amounts Required for Different Property Values

Your deposit size directly affects how much you need upfront and whether additional costs like LMI apply. Below is a breakdown of estimated deposit amounts based on different property values.

• $800,000 property
• 20% deposit: $160,000 (No LMI)
• 10% deposit: $80,000 (LMI may apply)
• 5% deposit: $40,000 (LMI may apply)

• $900,000 property
• 20% deposit: $180,000 (No LMI)
• 10% deposit: $90,000 (LMI may apply)
• 5% deposit: $45,000 (LMI may apply)

• $1,000,000 property
• 20% deposit: $200,000 (No LMI)
• 10% deposit: $100,000 (LMI may apply)
• 5% deposit: $50,000 (LMI may apply)

A lower deposit means higher loan repayments and potential LMI costs, so it's essential to weigh your options carefully. A mortgage broker can help assess the best deposit strategy for your financial situation.

Why Is a Deposit Important for a Home Loan?

The deposit plays a crucial role in determining your loan options, interest rates, and overall borrowing costs. A higher deposit reduces financial risk for lenders and can save you thousands over the life of your loan. 

Here’s why your deposit matters:

1. Reduces Loan Amount: A larger deposit means borrowing less, lowering your repayment obligations and total loan costs. This can help you secure better loan terms with lower annual percentage rates.
2. Avoids or Lowers LMI Costs: Deposits below 20% often require lender’s mortgage insurance (LMI), which adds to the cost of credit. A higher deposit eliminates or significantly reduces this expense.
3. Improves Loan Approval Chances: Lenders assess deposit size as part of their responsible lending practices. A solid deposit shows financial stability and strengthens your application.
4. Results in Better Interest Rates: A larger deposit reduces the lender’s risk, making you eligible for lower interest rates. This can significantly cut down your total repayment amount over time.
5. Increases Home Equity from the Start: A bigger deposit gives you immediate equity in your property. This can help when refinancing or applying for an equity loan in the future.

A well-planned deposit can make your home loan more affordable and improve your financial position in the long run.

How Much Deposit Do You Need with a Guarantor?

If you have a guarantor, you may not need a deposit at all. A guarantor—usually a parent or close family member—uses their property as security, reducing the lender’s risk. This allows some buyers to access 100% of the property value without needing a traditional deposit. 

However, lenders still assess financial activities, responsible lending practices, and repayment capacity before approval. While this option helps avoid lender’s mortgage insurance (LMI) and lowers the cost of credit, it comes with risks for the guarantor. 

If the borrower cannot meet their payment obligations, the guarantor may become responsible for repayment. A mortgage broker can help determine if a guarantor loan is the right fit for your situation.

How Much Deposit Do You Need When Using Equity to Buy Another Property?

When using equity to buy another property, you may not need a cash deposit. Equity is the difference between your property’s market value and the remaining loan balance, and lenders may allow you to borrow against it. 

Typically, you can access up to 80% of your property’s equity without needing lender’s mortgage insurance (LMI). If borrowing more than this, LMI may apply, increasing the overall cost of credit. Using equity can help expand your investment portfolio or fund a new home without upfront savings. 

However, lenders assess your financial position, repayment ability, and loan types before approving an equity loan. A mortgage broker can guide you through responsible lending practices and ensure you get the best option.

Government Support Programs in ACT

First-home buyers in Canberra can access several government grants and concessions to reduce deposit requirements and upfront costs. These programs help lower stamp duty, avoid lender’s mortgage insurance (LMI), and make homeownership more affordable. 

Here are the key programs available in 2025:

First Home Buyer Stamp Duty Exemption (Home Buyer Concession Scheme – ACT)

Eligible first-home buyers in Canberra pay zero stamp duty on new or existing properties valued up to $1,000,000. Buyers must live in the home for at least 1 year and meet income thresholds.

First Home Guarantee (FHG)

Under this scheme, first-home buyers can purchase a property with just a 5% deposit and no LMI. The government guarantees up to 15% of the loan, helping buyers secure better loan terms. (Available for new and existing homes.)

Regional First Home Buyer Guarantee (RFHBG)

First-home buyers purchasing a home in regional ACT areas, such as Queanbeyan, may qualify for a 5% deposit home loan with no LMI, similar to the First Home Guarantee.

Family Home Guarantee (FHG)

Single parents with dependent children can buy a home with just a 2% deposit and no LMI, even if they have previously owned property. The government guarantees up to 18% of the loan.

First Home Super Saver Scheme (FHSSS)

First-home buyers can withdraw up to $50,000 in voluntary superannuation contributions (plus earnings) to use toward their home deposit. This allows for tax-effective savings.

These programs help first-home buyers reduce upfront costs and deposit requirements, making it easier to enter the Canberra property market. A mortgage broker can help determine eligibility and find the best loan options for your situation.

Other Upfront Costs to Consider When Buying a House

Beyond the deposit, there are several other upfront costs that buyers in Canberra need to budget for. These expenses can impact your total home loan amount and affect your financial planning. Here are the key costs to consider:

• Stamp Duty: Stamp duty is a major expense and varies based on property value and eligibility for concessions. First-home buyers in ACT may qualify for exemptions under the Home Buyer Concession Scheme.

• Lender’s Mortgage Insurance (LMI): If your deposit is less than 20%, you may need to pay LMI, which protects the lender. This cost can range from a few thousand dollars to tens of thousands, depending on loan size.

• Legal and Conveyancing Fees: Hiring a solicitor or conveyancer to handle contracts and property transfers typically costs between $1,500 – $3,000. This ensures all legal aspects of the purchase are properly managed.

• Building and Pest Inspections: A professional inspection costs around $500 – $1,000 and helps identify any structural issues. This can save you from unexpected repair costs down the line.

• Loan Application and Bank Fees: Some lenders charge fees for loan processing, valuation, and settlement, which can add up to $500 – $1,000. A mortgage broker can help find lenders that waive these fees.

• Moving and Utility Connection Costs: Costs for moving services, utility connections, and basic home setup can add another $1,000 – $3,000. Planning for these ensures a smooth transition into your new home.

While these costs can add up, planning ahead and working with a mortgage broker can help manage expenses and find ways to reduce upfront payments.

FAQs

What is the minimum house deposit for a home loan in Canberra?

The minimum house deposit is 5% of the property purchase price, but most buyers aim for 10–20% to reduce costs like LMI and secure better loan rates.

Can I buy a home with no house deposit?

Some loan lenders offer no-deposit loans, but these are rare and usually require a guarantor or additional financial backing from financial institutions.

What grants are available for first-home buyers in Canberra?

Eligible first-home buyers may access stamp duty concessions and government grants, which help reduce the house deposit required for a property purchase price up to the scheme’s limits.

How does LMI work, and why is it required?

Lender’s Mortgage Insurance (LMI) is required when a deposit is less than 20% of the contract of sale price. It protects the lender if the borrower defaults but does not benefit the buyer.

Are there home loans tailored for nurses and healthcare workers?

Yes, some loan lenders offer specialised loan deals for nurses and healthcare workers, allowing for low house deposits and flexible terms. These loans help essential workers get onto the property ladder sooner.

Does a larger house deposit mean better loan rates?

Yes, a larger loan deposit typically results in lower loan rates, reduced LMI costs, and access to better loan deals from financial institutions.

How long does pre-approval take for a home loan?

Pre-approval usually takes 1–5 business days, depending on the loan expert, your credit score, and the lender’s assessment of your genuine savings and savings plan.

What are deposit bonds, and how do they help?

A deposit bond acts as a guarantee in place of a term deposit, allowing buyers to secure a home while they work toward their savings goal for settlement. A loan expert can guide you through the best options to match your savings plan, financial situation, and property goals.

Final Thoughts

Understanding how much deposit you need for a home loan in Canberra is essential for planning your property purchase in 2025. A well-prepared savings plan and the right loan strategy can help you step onto the property ladder with confidence. 

Whether you're aiming for a 5%, 10%, or 20% house deposit, expert guidance can make a big difference in finding the best loan deals and avoiding unnecessary costs. If you're ready to explore your options, our loan experts can provide a free consultation to help you find the best loan lenders, grants, and deposit strategies tailored to your needs. Call 02 6173 6399 or visit Home Loan Broker Canberra to get started today!