If you’ve been thinking about buying your first home, chances are you’ve heard the same thing over and over. You need a 20% deposit. For a lot of people in Bendigo and across Victoria, that number can feel out of reach.
The reality is more flexible than that. A first home buyer deposit can look very different depending on your situation, your loan, and what support you’re eligible for. Understanding your options early can make the whole process feel far more achievable.
The traditional 20% deposit explained
The 20% deposit has long been considered the benchmark. It simply means saving 20% of the property’s purchase price upfront.
For example:
- Buying at $500,000 = $100,000 deposit
- Buying at $600,000 = $120,000 deposit
The main advantage of a 20% deposit is that you avoid paying Lenders Mortgage Insurance, often called LMI. This is a one-off cost that protects the lender, not you, if your deposit is below 20%.
Having a larger deposit can also improve your borrowing power and give you more loan options. But it’s not the only path into the market.
Can you buy with less than 20%?
Yes, and many first home buyers do.
It’s possible to purchase a property with a deposit as low as 5%, depending on your financial position and the type of loan you choose.
Here’s how it typically works:
- 5% deposit: Entry-level option, often supported by government schemes
- 10% deposit: More flexibility, but LMI usually applies, unless using scheme
- 15% deposit: Lower LMI costs and stronger loan position, unless using scheme
- 20% deposit: No LMI and broader lender choice
While a smaller deposit can get you into the market sooner, it’s important to understand the trade-offs. LMI can add thousands to your loan, and your repayments may be higher.
That said, waiting years to reach 20% can sometimes cost more if property prices continue to rise. This is where strategy matters.
Government support can reduce your deposit
One of the biggest shifts in recent years is the range of government support available to first home buyers.
Schemes like the First Home Guarantee allow eligible buyers to purchase with as little as a 5% deposit without paying LMI. This can significantly reduce the upfront savings required.
There are also grants and stamp duty concessions available in Victoria, depending on the property price and whether you’re buying or building.
These programs can make a meaningful difference, but they come with eligibility criteria and limits. Understanding how they apply to your situation is key.
What counts as a first home buyer deposit?
Your deposit doesn’t have to come from just one place. Lenders may accept a mix of:
- Savings in your bank account
- A gifted deposit from family
- Proceeds from sale of asset or shares
Most lenders like to see a portion of your deposit as “genuine savings,” meaning money you’ve consistently saved yourself. This shows financial discipline and can strengthen your application.
If you’re relying on a gift or support from family, it’s still possible to move forward. You just need the right structure and documentation.
Extra costs to plan for
Your deposit is only part of the picture. First home buyers also need to budget for additional upfront costs, which can include:
- Stamp duty, if applicable
- Conveyancing and legal fees
- Building and pest inspections
- Loan application or settlement costs
Some of these can be reduced or avoided through first home buyer concessions, but it’s important to factor them in early so there are no surprises.
A common mistake is focusing only on the deposit without considering the full cost of getting into the property.
Should you buy sooner or wait?
This is one of the biggest questions first home buyers face.
On one hand, saving a larger deposit can reduce your loan size and avoid LMI. On the other, waiting longer means you could be chasing rising property prices.
There’s no one-size-fits-all answer. It depends on:
- Your income and borrowing capacity
- Your savings rate
- Local property market conditions
- Your long-term plans
In many cases, getting into the market earlier with a smaller deposit can make sense, especially if you’re financially comfortable with the repayments.
This is where personalised advice becomes valuable. A strategy that works for one buyer might not suit another.
How to build your deposit faster
If you’re still in the saving phase, there are practical ways to move forward sooner:
- Set a clear savings target based on realistic property prices
- Automate your savings so it happens consistently
- Reduce high-interest debts to improve borrowing power
- Review your spending habits and redirect surplus cash
Even small changes can add up over time. The key is having a plan and sticking to it.
Why guidance makes a difference
A first home buyer deposit isn’t just about hitting a number. It’s about structuring your finances in a way that puts you in the strongest position to buy.
This includes:
- Choosing the right loan for your deposit size
- Understanding whether LMI applies and how to manage it
- Checking eligibility for government schemes
- Making sure your application meets lender expectations
Getting this right early can save you money and help you avoid delays or setbacks.
Taking the next step
If you’re unsure how much deposit you need, or whether you’re closer than you think, it’s worth having a conversation.
Many first home buyers are surprised to learn they can enter the market sooner than expected with the right approach.
At Bendigo Mortgage Brokers, the focus is on helping you understand your options clearly and building a plan that suits your situation. Whether you’ve saved 5%, 10%, or you’re just getting started, there’s usually a pathway forward.
Common questions about a first home buyer deposit
Do I really need a 20% deposit?
No. While 20% has benefits, many first home buyers purchase with less, especially with government support.
Is Lenders Mortgage Insurance always a bad thing?
Not necessarily. It can be a useful tool that allows you to buy sooner rather than waiting years to save a larger deposit.
Can I use a gift as my deposit?
Yes, many lenders accept gifted deposits, although requirements vary.
How do I know how much I can borrow?
Your borrowing capacity depends on your income, expenses, debts, and deposit. A broker can help you get a clear figure.
