How Much Deposit Do You Need to Buy a Home in Melbourne?

Key Takeaways

• Most lenders want a 20% deposit to avoid Lenders Mortgage Insurance (LMI).
• Eligible first home buyers can get in with just 5% through the 5% Deposit Scheme (formerly the First Home Guarantee), or 2% through Help to Buy.
• Victorian stamp duty is $0 on homes up to $600,000, with a sliding concession up to $750,000.
• On a working example of $920,000 (Melbourne’s median sits roughly between $900,000–$950,000 depending on the source), a 20% deposit is around $184,000; government schemes may reduce that to $46,000 or less.
• A home loan broker in Melbourne can help you compare your deposit options, government schemes and lender requirements.

How Much Deposit Do You Actually Need?

There’s no single answer, because it depends on which path you take. The traditional benchmark is 20% of the purchase price. Below that, most lenders charge Lenders Mortgage Insurance (LMI), a one-off cost that protects the lender, not you. 

A 20% deposit can help you avoid that cost, but it isn’t always necessary, and it isn’t always the best use of your money; keeping some funds available for costs, emergencies or future expenses can matter just as much as hitting that number.

Loan-to-value ratio (LVR) is the amount you borrow compared with the property’s value, expressed as a percentage. For example, if you buy a $600,000 property with a $120,000 deposit, your $480,000 loan represents an 80% LVR.

Government schemes now let eligible first home buyers enter the market with a 5% or even 2% deposit, without paying LMI at all. How much minimum deposit you need is only one part of the picture, though. We also look at your borrowing capacity, purchasing costs, lender policy and what the repayments will look like after settlement. Having enough saved for the deposit doesn’t automatically mean the purchase is affordable, or that the loan will be approved.

What Is Lenders Mortgage Insurance (LMI) and How Do You Avoid It?

Lenders Mortgage Insurance (LMI) is an insurance policy that protects the lender if a borrower cannot repay the loan. It may apply when you borrow more than 80% of a property’s value, although lender requirements vary.

LMI protects your lender, not you. It’s a one-off premium, and it can add anywhere from a few thousand to well over $20,000 to your costs on a typical Melbourne purchase, depending on your loan size and deposit. 

You may be able to avoid LMI altogether by saving a 20% deposit, using an eligible guarantor arrangement, or qualifying for a government scheme such as the 5% Deposit Scheme (formerly the First Home Guarantee). A guarantor loan allows an eligible family member to provide additional security for the loan, which may help you buy with a smaller deposit, however, the guarantor takes on obligations under the arrangement, so it needs to be considered carefully.

LMI is an additional cost, but it shouldn’t automatically be viewed as something you must always avoid. For some buyers, paying LMI means purchasing sooner rather than spending several more years trying to reach a 20% deposit. The right decision depends on the numbers and your circumstances.

Can You Buy a Home With a 5% Deposit?

Eligible first home buyers may be able to buy with a 5% deposit through the 5% Deposit Scheme. Since October 2025, the scheme has had no income cap or annual place limit, though you still need to buy at or below the property price cap for Melbourne, which is currently at $950,000. 

For eligible buyers, a 5% deposit can bring a purchase forward considerably. On a $700,000 purchase, that’s around $35,000, with no LMI attached. The important part is understanding the price cap, your borrowing capacity, and whether the repayments stay comfortable once the loan is in place.

Can You Buy a Home With a 2% Deposit?

This is Help to Buy, the federal shared equity scheme that launched in December 2025. The government contributes part of your purchase price (up to 30% for an existing home, or up to 40% for a new build) and becomes a part-owner in the property alongside you.

Help to Buy can substantially reduce the amount you need to borrow, but it works differently to a traditional home loan because the government holds an ownership share. It’s worth understanding both the immediate benefit and the longer-term implications, such as what happens when you sell or refinance, before deciding whether it suits you.

Current income limits are $103,000 for individuals and $165,000 for couples or single parents (these are indexed each July, so worth reconfirming close to your purchase date), and the same $950,000 Melbourne price cap applies

You can’t combine Help to Buy with the 5% Deposit Scheme on the same purchase. It’s worth comparing both options against your circumstances before deciding which, if either, suits you.

How Much Deposit for a Median-Priced Melbourne Home?

Melbourne median house prices vary depending on the data provider and how recently the figure was updated, generally sitting somewhere between roughly $900,000 and $950,000. We’re using $920,000 below purely as a working example, not as a confirmed current median.

For a home loan deposit in Melbourne, our How Much to Deposit Calculator can run these numbers against your actual budget and show what each scenario means for your loan size and repayments.

Stamp Duty and Other Upfront Costs to Budget For

Deposit isn’t the only upfront cost. In Victoria, eligible first home buyers pay $0 stamp duty on properties valued at $600,000 or less, with a sliding concession up to $750,000. Above that, standard rates apply. 

New homes under $750,000 may also qualify for the $10,000 First Home Owner Grant. Beyond stamp duty, consider the budget for conveyancing (roughly $1,200 to $2,500), building and pest inspections, loan establishment fees, and moving costs. 

The total varies significantly depending on the property price and whether you qualify for a stamp duty concession, so it’s worth getting a precise figure for your specific purchase rather than relying on a single percentage rule of thumb.

Our Stamp Duty Calculator can give you a precise figure for a specific property.

Tips for Saving Your Deposit Faster

• Open a dedicated high-interest savings account, separate from everyday spending.
• Automate a fixed transfer every payday, before you can spend it elsewhere.
• Track your spending for one month, then identify areas where you can reduce unnecessary expenses.
• Look into the First Home Super Saver Scheme, which lets you make voluntary super contributions taxed at 15% instead of your marginal rate, then withdraw them toward a deposit.
• Consider pre-approval early so you have a clearer idea of your purchasing budget.

How a Home Loan Broker Can Help You Decide?

Working out whether the 5% path, the 2% path, or straight saving toward 20% suits you isn’t just a maths problem. It depends on your income, your timeline, how much of the home you want to own outright, and which lenders will accept your situation.

At What If We Finance, we don’t simply calculate how much deposit you have. We look at the full purchasing position, including borrowing capacity, government schemes, lender policy, LMI, stamp duty, purchasing costs and the repayments after settlement. That helps us work out what your realistic purchasing range actually looks like.

Genuine savings are funds you’ve saved or held over time, such as regular savings from your income. Some lenders require evidence of genuine savings when assessing a home loan, although requirements vary between lenders.

Speak to a Melbourne Home Loan Broker

We’ve been helping Melbourne home buyers understand their deposit and borrowing options since 2008. Whether you have 2%, 5%, 10% or 20% saved, we can help you work through what that means for your borrowing capacity, purchasing range and loan options. 

Book a free 30-minute meeting with What If We Finance, or call 03 8804 1354.

Frequently Asked Questions