How Much Deposit Does an Essential Worker Need?

The short answer

Twenty percent of the purchase price is the figure that avoids Lenders Mortgage Insurance. Below that, insurance usually applies unless a government scheme or a lender's occupation-based waiver removes it. With the Australian Government 5 percent Deposit Scheme, an eligible first home buyer can buy with 5%, and an eligible single parent or legal guardian with 2%, without LMI.

So the honest answer to "how much deposit do I need" is: somewhere between 2% and 20%, depending on which of those paths you qualify for, and on whether the property you want falls inside the scheme's price cap.

What each level actually means

• 20% or more. No LMI on a standard loan, the widest choice of lenders, and the strongest position on rate. For many Essential Workers this is the target, not the starting point.
• 10% to 20%. LMI normally applies. The premium depends on the loan size and LVR, and is often capitalised into the loan, which means you pay interest on it for the life of the loan.
• 5% to 10%. Either LMI applies, or you use a guarantee scheme, or you use a lender's occupation-based waiver. Those three are not interchangeable: a guarantee scheme has price caps and eligibility rules, while a waiver depends on your profession appearing on that lender's published list.
• Under 5%. Generally only through the 2% pathway for eligible single parents or legal guardians under the 5 percent Deposit Scheme, or a shared-equity arrangement such as Help to Buy, which requires a minimum 2% deposit.

The deposit is not the only cash you need

Budget for the costs that sit alongside it:

1. Transfer duty, unless a concession or exemption applies. It varies sharply by state and by price.
2. Legal and conveyancing costs.
3. Building and pest inspections.
4. Lender fees, including any application or valuation fee.
5. Lenders Mortgage Insurance, if it applies.
6. Moving costs and immediate works.
7. A buffer — genuinely separate money, not the last of your savings.

A household that puts every dollar into the deposit and none into a buffer is exposed the first time a hot water system fails.

Where the deposit can come from

• Genuine savings. Most lenders want to see a pattern of accumulation, usually three months or more.
• A gift. Usually acceptable with a statutory declaration confirming it is not a loan. Ask the lender what evidence it wants.
• First Home Super Saver. Eligible voluntary contributions of up to $15,000 per financial year and $50,000 in total can be released towards a first home, subject to ATO rules and tax treatment. Confirm timing before you rely on it, because releases are not instant.
• A guarantor. A family guarantee can reduce or remove the LMI requirement without a larger deposit. It carries real risk for the guarantor, and both parties should take advice.
• Sale proceeds, if you are moving from another property, which usually means first home buyer schemes are closed to you.

Working backwards from the numbers

Take the price you can realistically afford, add duty and costs, then subtract the deposit you can actually assemble. If the gap is large, the answer is either a cheaper property, a longer saving period, or a scheme you qualify for. It is rarely a bigger loan.

Work out borrowing capacity before you fix a target, because the deposit percentage interacts with the loan size the lender will approve. Building a realistic deposit and finance plan sets out the calculation, and can you buy a home with a 5% deposit covers that pathway in detail.

EWH is a private service, separate from government programs. We will look at your deposit position honestly and tell you what is realistic.