How Much Deposit Do You Actually Need for Your First Home in 2026?
If you're saving for your first home in Sydney, chances are someone has told you that you need a 20% deposit before you can even think about buying. It's one of the most common things we hear from first home buyers walking through our door - and it's one of the biggest myths in property.
The truth is, you may be closer than you think. With the right combination of government support, lender options and a clear plan, many first home buyers are getting into the market with as little as 5% deposit.
Let's break it down properly - with real numbers, real costs, and no jargon.
Do You Actually Need 20%?
No. A 20% deposit is ideal because it means you avoid Lenders Mortgage Insurance (LMI), but it's not a requirement. Plenty of lenders will approve a loan with 10% or even 5% deposit, provided you meet their lending criteria.
The key is understanding what changes at each deposit level - and what it actually costs you.
What is Lenders Mortgage Insurance (LMI)?
LMI is a one-off cost that protects the lender (not you) when you borrow more than 80% of the property value - in other words, when your deposit is less than 20%.
LMI is calculated based on your Loan to Value Ratio (LVR), and premiums typically range from 1% to 5% of the purchase price. On a $900,000 property, that could mean an additional $32,000 or more added to your costs.
This is exactly why the government's 5% deposit scheme is such a significant saving. Under this scheme, eligible first home buyers are exempt from LMI entirely - the government effectively guarantees part of your loan, giving the lender the comfort they need without you wearing the cost.
Two Government Schemes Every First Home Buyer in NSW Should Know About
1. Australian Government 5% Deposit Scheme (No LMI)
This scheme allows eligible first home buyers to purchase with just a 5% deposit and no LMI, on properties up to $1,500,000 in value. The government guarantees the difference between your 5% deposit and the 20% threshold the lender would normally require.
Some of the key eligibility requirements:
- Australian citizen or permanent resident
- You must live in the property (owner-occupier)
- You must not have owned property before, or at least not in the past 10 years
2. First Home Buyers Assistance Scheme (NSW - Stamp Duty)
This scheme provides stamp duty relief for eligible first home buyers in NSW:
- Full stamp duty exemption on purchases up to $800,000
- Concessional (discounted) stamp duty on purchases between $800,001 and $1,000,000
- Full stamp duty applies above $1,000,000
When you combine both schemes, the savings are substantial - potentially tens of thousands of dollars that stay in your pocket instead of going to LMI premiums and stamp duty.
So What Does It Actually Cost? The Real Numbers.
Here's where it gets useful. Below is a breakdown of what you'd actually need to save at five different price points, assuming you're eligible for the 5% deposit scheme and the NSW stamp duty concessions.
Purchase Price: $800,000
- Home Loan: $760,000
- Deposit (5%): $40,000
- Stamp Duty: $0 (saving of $30,000)
- LMI: $0 (saving of $28,000)
- Other Costs: ~$8,000
- Your Savings Target: $48,000
Purchase Price: $900,000
- Home Loan: $855,000
- Deposit (5%): $45,000
- Stamp Duty: $20,000 (saving of $15,000)
- LMI: $0 (saving of $32,000)
- Other Costs: ~$8,000
- Your Savings Target: $73,000
Purchase Price: $1,000,000
- Home Loan: $950,000
- Deposit (5%): $50,000
- Stamp Duty: $40,000 (no saving at this level)
- LMI: $0 (saving of $35,000)
- Other Costs: ~$8,000
- Your Savings Target: $98,000
Purchase Price: $1,250,000
- Home Loan: $1,187,500
- Deposit (5%): $62,500
- Stamp Duty: $52,000 (no saving at this level)
- LMI: $0 (saving of $45,000)
- Other Costs: ~$8,000
- Your Savings Target: $122,500
Purchase Price: $1,500,000
- Home Loan: $1,425,000
- Deposit (5%): $75,000
- Stamp Duty: $65,000 (no saving at this level)
- LMI: $0 (saving of $55,000)
- Other Costs: ~$8,000
- Your Savings Target: $148,000
Other costs to budget for include conveyancing (~$3,000), settlement adjustments such as council rates, water and strata (~$3,000), and government registration, lender setup and miscellaneous fees (~$2,000).
Your Next Step: Understand Your Borrowing Power
Once you know what you need to save, your next step - which is equally important - is understanding how much you can actually borrow. That determines which price bracket you're shopping in, and from there we can put the full plan together with you.
Think of it this way:
Borrowing Power → Savings Target → Purchase Price
Get clear on those three numbers and the whole picture falls into place.
Does HECS/HELP Debt Affect My Home Loan?
Yes. Your HECS/HELP balance is treated as a liability in your loan assessment, and it will reduce your borrowing power. That said, there are a small number of lenders who will exclude HECS from the assessment entirely if the balance is under $20,000 - so it's worth having the conversation before you assume it rules you out.
Frequently Asked Questions
How much deposit do I need to buy a house in Sydney in 2026?
A minimum 5% deposit is required for eligible first home buyers under the government scheme, on purchases up to $1,500,000. Stamp duty is exempt up to $800,000, with concessional rates between $800,001 and $1,000,000, and full stamp duty above $1,000,000.
Can I buy a house with a 5% deposit?
Yes. You can purchase with a 5% deposit, provided you qualify for a home loan to cover the remaining balance and meet the eligibility criteria for the government's deposit scheme.
What is LMI and how much does it cost?
LMI is a one-off insurance premium that protects the lender when your deposit is less than 20%. Premiums typically range from 1% to 5% of the purchase price, depending on your Loan to Value Ratio. Under the 5% deposit scheme, eligible buyers avoid LMI entirely.
What government schemes are available for first home buyers in NSW?
The two most popular are the Australian Government 5% Deposit Scheme (no LMI, purchases up to $1,500,000) and the First Home Buyers Assistance Scheme in NSW (stamp duty exemption up to $800,000, concessional rates up to $1,000,000).
Does HECS/HELP affect my borrowing capacity?
Yes, HECS is treated as a liability and will impact your borrowing power. However, some lenders will exclude HECS balances under $20,000 from the assessment.
Not Sure Where You Stand?
The numbers in this blog are a starting point - your situation will be specific to you. The best thing you can do is have a conversation early, even if you're 6 or 12 months away from buying.
We'll walk you through your borrowing power, your savings target, and exactly what you'd need to do to get into the market. No pressure, no jargon - just a clear plan.
Call Stu on 0401 641 773 or reach out through our website.
About the author: Stuart Sutherland is the founder of Sutherland Mortgage Group, with over 30 years' experience in banking and lending. Based in the Sutherland Shire, Stu and his team help first home buyers, refinancers and investors make confident lending decisions through clear advice and long-term relationships.
