5% vs 20% deposit: what actually changes
The conventional wisdom is that you need 20% to buy a home. That is not true. You can buy with 5% through the 5% Deposit Scheme, or even 2% through Help to Buy.
But a smaller deposit does cost more over time. You borrow more, you pay more interest, and unless you use a government scheme, you pay lenders mortgage insurance (LMI). The question is whether that cost is worth it compared to waiting years to save more.
The tool below shows the exact numbers. Adjust the property price and interest rate to match your situation.
5% vs 10% vs 15% vs 20% deposit
Same property, four deposit sizes. See what changes.
| 5% | 10% | 15% | 20% | |
|---|---|---|---|---|
| Deposit | $35,000 | $70,000 | $105,000 | $140,000 |
| Stamp duty (VIC) | $24,713 | $24,713 | $24,713 | $24,713 |
| Cash needed upfront | $59,713 | $94,713 | $129,713 | $164,713 |
| LVR | 95% | 90% | 85% | 80% |
| LMI | $24,605 | $13,860 | $7,140 | $0 |
| Loan (+ LMI) | $689,605 | $643,860 | $602,140 | $560,000 |
| Monthly | $4,359 | $4,070 | $3,806 | $3,540 |
| Total interest (30yr) | $879,635 | $821,340 | $768,020 | $714,400 |
Monthly repayment
The trade-off
A 20% deposit costs $105,000 more upfront than 5%, but saves $819/mo on repayments and $165,235 in total interest over 30 years. At 5%, you also pay $24,605 in LMI. At 20%, LMI is $0.
With the 5% Deposit Scheme, you can avoid LMI at 5%. That changes the maths.
A guide, not a quote. Lenders can refuse loans above 90% LVR for some properties (off-the-plan apartments, regional postcodes, single-bedroom units). Banks also stress-test your repayments at your rate plus 3%, so qualifying for the loan is a separate question from affording it on paper. Talk to a mortgage broker about your specific situation.
What is LMI and why does it matter?
Lenders mortgage insurance protects the bank if you default. You pay for it, not them. It applies when your deposit is less than 20%. The cost depends on your loan size and LVR (loan to value ratio).
On a $700,000 property with a 5% deposit, LMI can be $24,000 or more. Most buyers add it to the loan (capitalise it), which means you pay interest on the LMI too.
The 5% Deposit Scheme waives LMI entirely. If you qualify, the 5% path becomes much cheaper.
The waiting game
Saving from 5% to 20% on a $700,000 property means finding an extra $105,000. At $2,000 a month in savings, that takes roughly 4 to 5 years.
In those years, property prices may rise. In a scenario where the market grows 5% a year, that $700,000 property is $850,000 in 4 years. Your 20% target just moved from $140,000 to $170,000. Growth varies by location and period, and some markets have stayed flat or declined over similar periods. But the risk of a moving target is real.
This is not a reason to rush. It is a reason to run the numbers with a deposit tracker and talk to a broker.
What a broker would say
Most brokers will tell you that 20% is ideal but not essential. What matters more is whether you can comfortably afford the repayments. Use the borrowing power tool to see what affects how much you can borrow, then the cost calculator to see what it costs as a percentage of your take-home pay.
As a general guide, if repayments are under 30% of your gross income, most lenders consider that manageable. Between 30% and 35% of gross is tighter. Rules vary by lender, and they also factor in your other debts and living expenses.
The three paths
- 5% with the scheme. No LMI. Lower deposit. Higher repayments. Get in sooner. Places uncapped since October 2025. Property price caps apply by location.
- 10-15% without the scheme. Some LMI (less than at 5%). A middle ground. Many buyers land here.
- 20% outright. No LMI. Lower repayments. Takes the longest to save. Best total cost if you can get there without prices running away.
There is no universally right answer. The right deposit size depends on your savings, your income, how fast the market is moving, and how long you are comfortable renting.
Related tools
Deposit tracker. See timelines for 5%, 10%, and 20% with FHSS and government schemes.
Eligibility checker. Check if you qualify for the 5% Deposit Scheme (no LMI).
Cost calculator. Monthly cost as a percentage of take-home pay.
Important: This is general information only. It does not take into account your individual objectives, financial situation, or needs. It does not constitute financial advice, legal advice, credit assistance, or a recommendation of any financial product. Figures are estimates based on simplified published schedules and may not reflect current rules.
housematch.com.au does not hold an Australian Credit Licence (ACL) or an Australian Financial Services Licence (AFSL) and is not authorised to provide credit assistance under the National Consumer Credit Protection Act 2009.
housematch.com.au does not receive referral fees or commissions from any broker, lender, conveyancer, agent, or other party as at March 2026.
Before making any financial decisions, speak to a licensed mortgage broker, financial advisor, or accountant who can assess your specific circumstances. For independent guidance, visit moneysmart.gov.au.
Last reviewed: March 2026.
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