Buying a home in Australia means bringing more cash to settlement than most people expect. The deposit is only one piece of the puzzle. When you add stamp duty, conveyancing fees, building inspections, and Lenders Mortgage Insurance, the total upfront cash can reach 23% to 25% of the purchase price. On a $700,000 property, that works out to roughly $165,000 to $175,000 in cash needed at settlement — far more than the $140,000 you might have planned for a 20% deposit alone.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
The gap between what buyers think they need and what they actually need is where most of the confusion lives. Government schemes like the First Home Guarantee let eligible buyers enter with a 5% deposit and zero LMI, but those schemes don’t cover stamp duty, conveyancing, or inspections. State-based first home buyer concessions can slash stamp duty — sometimes to zero — but only if you buy within the price caps. In NSW, for example, properties under $800,000 are fully exempt from stamp duty for first home buyers. In Victoria, the exemption applies to new homes under $600,000. The rules change the moment you cross a threshold or buy in a different postcode. That’s why calculating your down payment means running the numbers for your specific state, your eligibility, and the property you’re actually looking at. Here’s what you actually need to know.
The central concept here is Lenders Mortgage Insurance — the one-off premium that protects the lender, not you, when your deposit is under 20%. It’s the single biggest hidden cost in low-deposit buying, and it’s also the cost that government schemes are designed to eliminate.
What I tend to notice is that most first-time buyers fixate on the deposit percentage and forget that LMI, stamp duty, and fees are real cash that needs to be in the bank on settlement day. Getting the full picture early saves a lot of stress later. If you’re unsure about timing, it’s worth reading about current housing market cycles before locking in your numbers.
What your total cash requirement actually looks like
The table below shows how the deposit tier you choose affects both your LMI cost and the total cash you need to bring to settlement. These figures use a $600,000 purchase price as a baseline, with stamp duty calculated at roughly 4% for a buyer who doesn’t qualify for a full exemption.
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| Deposit tier | Deposit amount | LMI cost (approx) | Total cash at settlement |
|---|---|---|---|
| 5% (with First Home Guarantee) | $30,000 | $0 | ~$39,000–$45,000 |
| 5% (no scheme) | $30,000 | $20,000–$25,000 | ~$64,000–$70,000 |
| 10% (no scheme) | $60,000 | $10,000–$13,000 | ~$79,000–$85,000 |
| 20% (no scheme) | $120,000 | $0 | ~$138,000–$145,000 |
The difference between the 5% with-scheme row and the 5% without-scheme row is roughly $25,000 — that’s the LMI you either pay or avoid. The jump from 5% with scheme to 20% is about $100,000 more in cash, but you get a smaller loan, lower monthly repayments, and no LMI. Which path makes sense depends on how much cash you have available and what your monthly budget can handle.
Beyond the deposit and LMI, the other costs add up faster than most people realise. Stamp duty alone can run 4% to 5% of the purchase price in states like NSW if you don’t qualify for an exemption. Conveyancing fees sit between $1,500 and $3,000. Building and pest inspections cost $500 to $1,000. Loan application and valuation fees add another few hundred. If you’re buying a strata property, a strata report can cost $200 to $400. Moving costs, utility connections, and your first insurance premium all need to be in the budget too. For a detailed breakdown of these items, the unseen costs every Aussie buyer needs to know covers exactly what to expect.
Where buyers get the numbers wrong
Treating the deposit as the only number that matters
The most common mistake is thinking a 5% deposit means you only need 5% of the purchase price in cash. On a $600,000 property, a 5% deposit is $30,000. But if you’re not using a government scheme, LMI adds $20,000 to $25,000. Stamp duty adds another $24,000 if you don’t qualify for an exemption. Conveyancing and inspections add $2,000 to $4,000. Suddenly the $30,000 target becomes $76,000 to $83,000. That’s not a small difference — it’s more than double what most people budget for.
Assuming LMI is just a minor fee
LMI isn’t a small add-on. On a $600,000 loan with a 5% deposit, LMI can run $20,000 to $31,000. Capitalising it into the loan means you pay interest on that amount for 30 years. At 6.35% over 30 years, capitalising $25,000 in LMI adds roughly $155 a month to your repayments and costs about $31,000 in total interest over the life of the loan. That’s the same as paying the LMI twice. The bridging loan requirements article explains how financing choices like this affect your overall position.
Overlooking the genuine savings rule
Most lenders want to see at least 5% of the purchase price held as genuine savings for three months or more. A gift from family or an inheritance often doesn’t count unless it’s been sitting in your account long enough to show a pattern. Some lenders accept a clean rental ledger as proof of saving discipline, but not all. If you’re planning to use a gift, you’ll need a signed gift letter, and the lender may still require you to show some genuine savings of your own. This rule catches a lot of buyers off guard right when they think they’re ready to apply.
How to calculate your actual cash requirement
Choose your deposit tier and check scheme eligibility
Start with how much cash you actually have saved. If you have at least 5% of your target property price and you’re a first home buyer, check whether you qualify for the First Home Guarantee. The scheme has no income cap as of October 2025, but property price caps still apply by region. In Sydney and regional NSW, the cap is $1.5 million for capital city areas and $800,000 for other regions. In Melbourne and regional Victoria, it’s $950,000 and $650,000 respectively. If you’re a single parent, the Family Home Guarantee lets you buy with a 2% deposit. If you don’t qualify for any scheme, a 20% deposit saves you the most in the long run because you avoid LMI and get better interest rates.
Calculate your upfront costs by state
Stamp duty is the biggest variable. Use your state revenue office’s online calculator to get an exact figure for the property price you’re targeting. For first home buyers, NSW offers a full exemption under $800,000 and a partial concession up to $1,000,000. Victoria offers a full exemption for new homes under $600,000. Queensland offers a full exemption under $700,000. Western Australia offers a full exemption under $450,000. If you’re buying above those thresholds, budget 4% to 5% of the purchase price for stamp duty. Add $1,500 to $3,000 for conveyancing, $500 to $1,000 for building and pest inspections, and $800 to $3,000 for moving costs. Together, these add 3% to 5% to your total cash requirement.
Factor in LMI if you’re below 20%
If you’re buying without a government scheme and your deposit is under 20%, LMI is unavoidable. The cost scales with your loan amount and deposit size. On a $600,000 loan, expect roughly $20,000 to $25,000 in LMI at a 5% deposit, $10,000 to $13,000 at 10%, and $5,000 to $7,000 at 15%. You can pay it upfront or capitalise it into the loan. Capitalising reduces your upfront cash but increases your loan balance and monthly repayments. Run the numbers both ways before deciding.
Use the First Home Super Saver Scheme to accelerate savings
The FHSS lets you make voluntary contributions to your superannuation of up to $15,000 per financial year, with a total cap of $50,000 per person. Those contributions are taxed at 15% inside super instead of your marginal rate, which can save you $5,000 to $15,000 in tax over the accumulation period. You can withdraw the contributions plus deemed earnings for your deposit, but processing takes about 25 business days, so plan ahead. Couples can each use the scheme, effectively doubling the benefit to $100,000 total. If you’re in the 32.5% tax bracket or higher, this is the single most effective way to grow your deposit faster.
Frequently asked questions
Can I buy with a 2% deposit in Australia in 2026? ▾
Does the First Home Guarantee cover stamp duty? ▾
What counts as genuine savings for a home loan application? ▾
Is it better to pay LMI upfront or capitalise it into the loan? ▾
Can I use the FHSS and the First Home Guarantee together? ▾
What happens if the property valuation comes in below the contract price? ▾
The real cost of waiting for a 20% deposit
Delaying your purchase to save a 20% deposit can cost you more than paying LMI today. If property prices in your target suburb rise 5% to 7% per year while you’re saving, the price growth can outpace your savings rate. On a $600,000 property, a 6% price increase adds $36,000 to the purchase price — more than the LMI you’d pay with a 5% deposit. The government schemes available in 2026 make low-deposit entry more accessible than ever, but they don’t eliminate the need for a realistic budget that includes all the upfront costs. Run your numbers state by state, check your scheme eligibility early, and factor in the genuine savings timeline before you start looking at properties.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Understanding Property Ownership Rights in Australia.
Sources and Further Reading
Beyond the Deposit: Unseen Costs Every Aussie Home Buyer Needs to Know — A full breakdown of the fees and charges that sit outside the deposit figure, with state-by-state examples.
Understanding Cooling-Off Periods When Buying Property — What happens after you sign the contract and how the cooling-off rules differ by state.
Housing Australia (2026). Home Guarantee Scheme. 🔗
ASIC Moneysmart (2026). First home buyer deposit. 🔗
Your Property Guide (2026). How much deposit to buy a house. 🔗
RealEstateCalc (2026). Five Percent Deposit Scheme Australia 2026. 🔗
