In 2026, some eligible first home buyers can purchase with just a 5% deposit, without paying expensive Lenders Mortgage Insurance (LMI).
So, how much do you actually need to save?
Buying with a 5% deposit – without paying LMI
One of the biggest opportunities for first home buyers in 2026 is the Australian Government 5% Deposit Scheme.
Eligible first home buyers can purchase a home with a deposit of as little as 5%, with the Australian Government providing a guarantee to the participating lender.
One of the biggest benefits is that you don’t have to pay Lenders Mortgage Insurance (LMI).
Normally, when you borrow more than 80% of a property’s value, the lender may require LMI. Depending on your loan size and deposit, this can cost thousands or even tens of thousands of dollars.
Under the 5% Deposit Scheme, eligible buyers can potentially borrow up to 95% without this additional expense.
The scheme was expanded from 1 October 2025, including no income caps, no waiting list and higher property price caps. Eligibility criteria and participating lender credit requirements still apply.
What first home buyer benefits are available in Victoria?
Your deposit isn’t the only thing to consider. If you’re buying your first home in Victoria, there are several benefits that could reduce the amount you need upfront.
Stamp duty exemption or concession
If you’re an eligible first home buyer purchasing a property that will be your principal place of residence, you may receive:
Property up to $600,000: Full stamp duty exemption.
Property from $600,001 to $750,000: A first home buyer stamp duty concession applies.
The benefit can apply to established homes as well as new homes, provided the eligibility requirements are met.
$10,000 First Home Owner Grant
If you’re buying or building a new home, you may also be eligible for Victoria’s $10,000 First Home Owner Grant.
The home generally needs to have a value of $750,000 or less and must meet the definition of a new home.
The grant doesn’t generally apply when purchasing an established property.
A real-life example: buying a $690,000 first home in Hughesdale
Here’s a real example that shows why it’s important to look beyond the 5% deposit figure.
A first home buyer was purchasing a property in Hughesdale, Victoria for $690,000. Because the purchase price was above $600,000 but below $750,000, they were eligible for the Victorian first home buyer stamp duty concession rather than the full exemption.
Their estimated stamp duty after the concession was $21,882.
Using the Australian Government 5% Deposit Scheme, they were able to structure the purchase with a 95% home loan of $655,500.
Here’s what their numbers looked like:
|
Amount |
|
|
Purchase price |
$690,000 |
|
5% property deposit |
$34,500 |
|
Stamp duty |
$21,882 |
|
Mortgage registration fee |
$129.20 |
|
Transfer fee |
$1,719 |
|
Legal fees |
$2,000 |
|
Lender upfront fees |
$500 |
|
Other estimated costs |
$2,000 |
|
Approx. total cash contribution |
$62,731 |
|
Home loan |
$655,500 |
|
LVR |
95% |
The proposed loan was a 30-year principal-and-interest loan at 6.14% p.a., with estimated initial repayments of approximately $3,989 per month.
Here’s the important part…
The buyer’s 5% deposit was only $34,500.
But they actually needed approximately $62,731 in available funds to complete the purchase once stamp duty and other purchasing costs were included.
Compare that with waiting until they had a traditional 20% deposit.
A 20% deposit on the same $690,000 property would be:
$138,000
And that’s before allowing for purchasing costs.
For an eligible buyer, being able to purchase with a 5% deposit and avoid LMI can therefore make a significant difference to how long they need to save before getting into their first home.
Don’t forget about the costs on top of your deposit
This is one of the biggest misconceptions I see with first home buyers.
Having your 5% deposit doesn’t necessarily mean you’re ready to buy.
Depending on the property and your circumstances, you’ll also need to allow for things such as stamp duty, conveyancing or solicitor fees, building and pest inspections, government transfer and registration fees, lender fees, settlement adjustments and moving costs.
I also generally like to see buyers retain some money as a buffer rather than using every last dollar they have to complete the purchase.
So, how much should I save?
There’s no single answer because it depends on the property price, where you’re buying and which first home buyer benefits you’re eligible for.
If you’re hoping to use the Australian Government 5% Deposit Scheme, a good starting point is:
5% deposit + purchasing costs + a sensible cash buffer
For example:
$600,000 home → 5% deposit = $30,000
$700,000 home → 5% deposit = $35,000
$800,000 home → 5% deposit = $40,000
But these figures are only the property deposit. Your actual cash requirement may be higher once we calculate stamp duty and the other costs associated with your particular purchase.
Your borrowing capacity matters too
Saving the deposit is only half of the equation.
The lender still needs to determine how much you can comfortably borrow.
They’ll generally consider your income, employment, existing loans, credit card limits, HECS/HELP debt, living expenses, dependants, credit history and proposed home loan repayments.
I’ve seen first home buyers who have plenty of savings but can’t quite borrow enough for the property they want.
I’ve also seen the opposite — buyers who have the income and borrowing capacity but assume they’re years away from purchasing because they think they need a 20% deposit.
That’s why it’s worth finding out where you actually stand before automatically deciding you need to keep saving.
You might be closer to buying your first home than you think
If buying your first home is on your radar in 2026, don’t automatically assume you need a 20% deposit.
Depending on your circumstances, you could potentially benefit from:
✓ Buying with as little as a 5% deposit
✓ No Lenders Mortgage Insurance under the Australian Government 5% Deposit Scheme
✓ Victorian first home buyer stamp duty exemption or concession
✓ A $10,000 First Home Owner Grant if you’re buying or building an eligible new home
The best place to start is to work out three numbers:
How much can I borrow?
How much cash will I actually need?
What purchase price can I comfortably afford?
Once you know those numbers, buying your first home can suddenly feel a lot more achievable.
Want to know how much you’d need?
If you’re thinking about buying your first home, get in touch with The Lending Society.
We can look at your income, savings and current commitments, work out your borrowing capacity and calculate how much you’d actually need in the bank to purchase at different price points.
We can also check which first home buyer schemes and concessions you may be eligible for and compare suitable options across our panel of lenders.
Sometimes you’re closer to buying than you think.
This information is general in nature and does not take into account your individual objectives, financial situation or needs. Eligibility criteria apply to government schemes, grants and stamp duty concessions. Lending criteria, fees and charges also vary between lenders.