The number one question we hear from first home buyers at Centria Finance is some version of this: “We’ve been saving for years — do we have enough yet?”
And almost every time, the answer surprises them.
The old rule — save 20% or don’t bother — has been dismantled by a combination of government policy, rising property prices, and a fundamentally changed lending landscape. In 2026, you can buy a home in Australia with as little as 2% deposit under the right circumstances, or 5% deposit without paying a dollar in Lenders Mortgage Insurance.
But “how much deposit” is really the wrong question. The better question is: what deposit strategy makes the most sense for your financial situation, your income, and your long-term wealth goals?
That’s what this guide is here to answer.
First, Let’s Address the 20% Myth
For decades, 20% was the gold standard. It made sense when property prices were lower, wages grew faster, and the cost of entering the market young was relatively modest.
Fast forward to 2026, and Sydney’s median house price sits at approximately $1.6 million, with the combined dwelling median (including apartments) at $1.29 million. Saving 20% of $1.29 million means accumulating $258,000 in cash — before you’ve paid a cent in stamp duty, legal fees, or building inspections.
For the average Sydney household, that’s not just a challenge. It’s a structural impossibility that takes nearly a decade of disciplined saving. And while you’re saving, property prices keep moving. It’s a treadmill many buyers never get off.
That’s why, as of 2025, 70% of first home buyers in Australia are purchasing with less than a 20% deposit. The market has adapted. The smart question is no longer “have I saved enough?” — it’s “what is the most strategically intelligent way for me to enter the market?”
The Real Deposit Landscape in 2026
Here’s a plain-English breakdown of your actual options:
Option 1: 5% Deposit — The First Home Guarantee (No LMI Required)
The single biggest change to Australia’s home ownership landscape in recent years is the First Home Guarantee, now operating under the expanded Australian Government 5% Deposit Scheme.
From 1 October 2025, the scheme was significantly overhauled:
- No income caps — previously, singles were capped at $125,000 and couples at $200,000. Those limits are now gone entirely. Any first home buyer can apply, regardless of income.
- No annual place limit — there’s no longer a fixed number of spots. Places are now unlimited.
- Higher property price caps — in NSW, the cap was raised to $1,500,000, a meaningful increase that opens up far more of the Sydney market to scheme-eligible buyers.
- Returning buyers welcome — if you haven’t owned residential property in Australia in the past 10 years, you’re eligible even if you’ve owned before.
How it works: The federal government guarantees up to 15% of your property’s value to the lender, allowing you to buy with just a 5% deposit while avoiding Lenders Mortgage Insurance (LMI). You own 100% of the property from day one — the government’s role is purely as a guarantor, not a co-owner.
Eligibility basics:
- Australian citizen or permanent resident, aged 18+
- First home buyer (or no property ownership in the past 10 years)
- Purchasing as owner-occupier (not investment)
- Property price at or below the regional cap
- Must apply through a participating lender
A note from our team: The scheme sounds straightforward, but the devil is in the detail. The participating lender list matters enormously — it affects your rate, your features, and your long-term flexibility. As mortgage brokers with access to 40+ lenders, we help you identify which participating lender is the right fit for your specific circumstances, not just the first one on the list.
Option 2: 2% Deposit — Help to Buy (Shared Equity Scheme)
Launched in December 2025, Help to Buy is the federal government’s shared equity scheme — a fundamentally different arrangement from the First Home Guarantee.
Under Help to Buy:
- The government contributes up to 40% of the purchase price for a new home, or up to 30% for an existing property
- You only need a 2% deposit
- Your loan size is dramatically reduced, meaning lower monthly repayments
- Currently available in NSW, Victoria, Queensland, South Australia, ACT, the Northern Territory, and Western Australia (WA joined early 2026)
Real numbers: If you’re buying an $800,000 new home with Help to Buy:
- Your deposit: $16,000 (2%)
- Government contribution (40%): $320,000
- Your loan: $464,000
Compare that to a standard loan on the same property (5% deposit): your loan would be $760,000. The repayment difference is substantial.
The important trade-off: The government becomes a co-owner of your property. When you sell or refinance, the government receives its proportionate share of the current market value — not the original amount it contributed. If property values rise (as they tend to in Sydney), you’ll be paying back a larger sum to buy out their equity.
For buyers prioritising the lowest possible entry cost and monthly repayments, Help to Buy is compelling. For buyers who expect strong capital growth and want to keep 100% of it, the 5% Deposit Scheme is likely the better fit.
This is exactly the kind of decision where having both a mortgage broker and an accountant in your corner makes a tangible difference — understanding the long-term tax and wealth implications of shared equity vs. full ownership isn’t just financial advice, it’s strategic life planning.
Note: You cannot use Help to Buy and the First Home Guarantee simultaneously. You must choose one.
Option 3: 20% Deposit — The Traditional Route (Still Has Merits)
The 20% deposit route isn’t obsolete — it’s just no longer the only path, or even the most sensible one for every buyer.
Why 20% still makes sense in some situations:
- No LMI, ever — the moment you cross 80% loan-to-value ratio (LVR), you avoid LMI entirely, saving tens of thousands of dollars
- More lender choice — a larger deposit opens every lender on the market, not just scheme participants
- Better rates — lower LVR typically translates to more competitive interest rates and stronger negotiating power
- Investment properties — government schemes only apply to owner-occupiers. Investors building a portfolio will need at least 20% (often more) to avoid LMI on investment loans
- Income flexibility — if your income is irregular, self-employed, or complex, a larger deposit provides a buffer when lenders assess serviceability
When 20% may not be the right call:
- If saving the extra 15% takes 5+ more years in Sydney’s market, every year of delay costs you capital growth
- If you’re eligible for government schemes that eliminate LMI at 5% anyway
- If the investment opportunity cost of that capital locked up in a deposit is higher than the LMI premium
Option 4: The Guarantor Loan (Bank of Mum and Dad)
A guarantor loan allows a family member — usually a parent — to use the equity in their own home as additional security for your loan. In many cases, this allows you to borrow up to 100% of the purchase price, covering both the deposit and upfront costs, without LMI.
This structure has grown significantly in popularity as Sydney prices have climbed out of reach for many first-generation home buyers.
Advantages:
- Little to no cash deposit required
- No LMI
- Can enter the market immediately
Considerations:
- Your guarantor’s property is at risk if you default
- Requires rigorous legal advice for all parties
- Not all lenders offer this structure
- It needs careful documentation and planning from both a mortgage and tax perspective
If you’re exploring a guarantor arrangement, this is not a DIY situation. Structured correctly, it’s an excellent path to home ownership. Structured poorly, it can damage family relationships and financial security. We help families navigate this arrangement carefully, ensuring everyone understands their obligations before signing anything.
What is LMI — and What Does It Actually Cost in Sydney?
Lenders Mortgage Insurance (LMI) is an insurance premium charged by lenders when you borrow more than 80% of a property’s value. Despite the name, it protects the lender — not you — against the risk of default.
This is the cost many buyers try to avoid by either reaching 20% or using government schemes. And for good reason: LMI costs are significant.
| Property Value | 10% Deposit (90% LVR) | 5% Deposit (95% LVR) |
|---|---|---|
| $600,000 | ~$10,400 | ~$25,000 |
| $750,000 | ~$14,400 | ~$32,000 |
| $1,000,000 | ~$20,000+ | ~$45,000+ |
In Sydney, where the median house price exceeds $1 million, LMI at 95% LVR can surpass $45,000 — an amount that dwarfs the 5% deposit itself on many properties.
This is precisely why the First Home Guarantee scheme (which eliminates LMI at 5% deposit) is so powerful for eligible buyers.
Two ways to avoid LMI:
- Save a 20% deposit
- Use the First Home Guarantee, Help to Buy, Family Home Guarantee, or a guarantor loan
One more path: professional waivers. Certain lenders offer LMI waivers for specific professions — doctors, lawyers, accountants, engineers, and others — at up to 90% LVR. If you’re in an eligible profession, this can save you $10,000–$20,000 in a single step. Ask us about this at your consultation.
Sydney Numbers: What Does Each Deposit Scenario Actually Look Like?
Let’s put real Sydney figures to this. We’ll use a $900,000 property — a realistic price for many apartments and entry-level houses in the city’s middle ring.
| Deposit % | Cash Required | LMI Payable | Loan Amount |
|---|---|---|---|
| 2% (Help to Buy) | $18,000 | $0 | ~$522,000* |
| 5% (First Home Guarantee) | $45,000 | $0 | $855,000 |
| 10% (standard) | $90,000 | ~$18,000 | $810,000 |
| 20% (standard) | $180,000 | $0 | $720,000 |
*With 30% government equity contribution on an existing home
Critical point: These figures cover only the deposit. You still need to budget separately for upfront costs — see below.
NSW First Home Buyer Grants & Schemes in 2026
Federal schemes aren’t the only support available. NSW has its own layer of incentives that can be stacked with federal programs.
First Home Owner Grant (FHOG) — $10,000 Cash Grant
NSW offers a one-off, tax-free $10,000 cash grant to eligible first home buyers purchasing or building a brand-new home. This must be a genuinely new dwelling — never previously occupied.
- No income limit
- Must be used as your principal place of residence for at least 12 months
- Available for new homes, off-the-plan purchases, and substantially renovated properties
First Home Buyer Assistance Scheme — Stamp Duty Exemption
Stamp duty on a standard $900,000 property purchase in NSW would normally be approximately $35,835. Under the First Home Buyer Assistance Scheme, eligible buyers can receive a full exemption or significant concession.
- Full exemption on homes up to $800,000
- Concessions on homes up to $1,000,000
- Applies to both new and established homes
Trap to watch: If your partner has ever owned property anywhere in Australia — even if they’re not going on the title — you may lose this concession entirely. This is one of the most common and costly mistakes we see first home buyers make. Always verify eligibility before you sign.
First Home Super Saver Scheme (FHSS) — Save Inside Super
The FHSS allows you to make voluntary contributions into your superannuation fund and later withdraw them for a home deposit. You can withdraw up to $50,000 in total ($15,000 per financial year), and because super contributions are taxed at a maximum of 15% rather than your marginal rate, the tax saving can be substantial.
On a $100,000 salary, this saves roughly $5,100 in tax per year compared to saving in a standard bank account. Over 3–4 years of saving, the compounding benefit becomes very meaningful.
This is precisely where having an accountant involved in your home buying journey adds real value. The FHSS isn’t just a mortgage decision — it’s a tax planning decision. Our team can help you assess whether maximising FHSS contributions makes sense given your timeline, income, and super balance.
The Costs Buyers Forget — Don’t Be Caught Short
Here’s the number one mistake we see from buyers who’ve correctly saved their deposit: they forget the upfront costs, and suddenly find themselves $30,000 short at settlement.
Aside from your deposit, budget for:
Stamp Duty Unless you’re exempt as a first home buyer, stamp duty in NSW ranges from roughly 3–5% of the property’s value. On a $900,000 property, that’s up to $35,835. Even with a partial concession, the bill is significant.
Conveyancing / Legal Fees You’ll need a solicitor or licensed conveyancer to handle the legal transfer of the property. Budget approximately $1,500–$3,000.
Building and Pest Inspection Essential before purchasing any established property. Budget $400–$800, though for older homes or complex properties this can be higher.
Loan Application and Establishment Fees Some lenders charge upfront fees, though many competitive products now waive these. Your broker will identify options that minimise these costs.
Moving Costs and Immediate Repairs Often overlooked entirely. Budget at least $2,000–$5,000 for moving, immediate repairs, and settling in.
Lenders Mortgage Insurance (if applicable) As covered above — if you’re paying LMI rather than using a scheme, factor this in.
As a rule of thumb, budget an additional 3–5% of the property’s purchase price on top of your deposit to cover all upfront costs. For a $900,000 property, that’s $27,000–$45,000.
First Home Buyer vs. Investor: The Deposit Rules Are Different
Everything above applies to owner-occupiers — buyers purchasing a home to live in. If you’re an investor, the landscape changes significantly.
Government schemes (First Home Guarantee, Help to Buy, Family Home Guarantee) are all strictly for owner-occupiers. You cannot use these to purchase an investment property.
For investment purchases, you’re looking at:
- A minimum 10% deposit for most lenders (though 20% is far more common)
- LMI applicable on any loan above 80% LVR, at higher rates than owner-occupied loans (typically 15–25% more)
- Stricter serviceability assessment under APRA’s updated DTI caps (effective February 2026)
- No stamp duty concessions (unless your state specifically provides them for investors, which is rare)
The flip side: investment properties come with significant tax advantages that owner-occupied homes don’t — negative gearing, depreciation claims, CGT discounts, and deductible interest. These don’t show up in your deposit calculation, but they substantially affect the real cost of holding a property.
This is why the Centria Finance model — mortgage broker and accountant under the same roof — exists. An investment property decision isn’t just a financing decision. It’s a tax strategy, a cash flow calculation, and a long-term wealth structure.
How Much Deposit Do You Really Need? The Honest Answer
There’s no universal answer, but here’s a practical framework:
Buy now with 5% if:
- You’re eligible for the First Home Guarantee
- The property is within the NSW price cap ($1,500,000)
- You haven’t owned property in the past 10 years
- You have stable employment and serviceability
- Property prices in your target suburb are likely to outpace your savings rate
Consider Help to Buy (2%) if:
- You have a smaller savings base
- You prioritise the lowest possible repayments
- You’re comfortable with shared equity and understand the buyout mechanism
- You’re buying in a participating state
Wait for 20% if:
- You’re close to 20% and the extra 6–12 months won’t cost you significant capital growth
- You’re purchasing an investment property
- You want maximum lender choice, best rates, and full flexibility
- You don’t qualify for any government scheme
Explore a guarantor loan if:
- Your parents or close family have sufficient home equity
- You have good income but minimal savings
- All parties are fully informed and have independent legal advice
The Centria Finance Difference: Mortgage + Accounting in One Place
Most buyers get mortgage advice from a broker and tax advice from an accountant — separately, months apart, with no conversation between the two. The result is decisions that make sense in isolation but create problems together: a loan structure that complicates your tax position, a deposit strategy that costs you FHSS savings, or a property purchase that triggers avoidable CGT later.
At Centria Finance, our dual expertise in mortgage broking and accounting means your home loan decision and your tax strategy are developed in parallel, by a team that talks to each other.
Here’s what that looks like in practice:
- Before you buy: We map your full financial picture — income, tax situation, super balance, existing liabilities — and identify every scheme, grant, and savings strategy you’re entitled to
- During your purchase: We secure the right loan from the right lender at the right rate, negotiate terms, and manage the application through to settlement
- After you move in: We help you structure ongoing tax returns, identify deductible expenses if applicable, and plan your path to your next property
Our clients have access to 40+ leading lenders, including all participating lenders in the First Home Guarantee and Help to Buy schemes. We do the comparison work so you don’t have to.
Your Next Step: A Free Financial Health Check
Saving for a deposit is only part of the picture. Knowing how to deploy that deposit strategically — using every scheme, grant, and tax tool available to you — is where the real difference is made.
Book your free consultation with Centria Finance and receive a complimentary Financial Health Check tailored to your goals. We’ll review your current savings position, assess your eligibility for government schemes, map out the upfront costs for your target price range, and tell you clearly: what you have, what you need, and what your fastest path to the front door looks like.
No obligation. No jargon. Just clear, honest advice from a team that understands both the mortgage and the money side of buying a home in Sydney.
📞 Call us on 0433 566 199 📧 Email info@centriafinance.com.au 🌐 Book your free consultation at centriafinance.com.au
Centria Finance is a Sydney-based mortgage broker and accounting firm specialising in first home buyers, property investors, and wealth-building through property. This article is general in nature and does not constitute financial advice. Your individual circumstances will affect which strategies and schemes apply to you. Please speak with a qualified adviser before making any financial decisions.
