Most people assume you need a 20% deposit to buy a home, full stop. That number is real, but it is only one part of the story. How much deposit do you need for a home loan? The real answer depends on which lender you use, what type of property you are buying, and whether you qualify for any of the first home buyer schemes currently running in WA. At PPF Mortgage Brokers, we work through this exact question with Perth buyers every week, from first home buyers in Fremantle and Cottesloe to investors adding to their portfolio further out. Here is what the deposit conversation actually looks like once you sit down with a broker.
How Much Deposit Do You Need for a Home Loan? The 20% Rule Explained
The figure most people have heard is 20%, and it is not a myth. Most lenders use an 80% loan-to-value ratio (LVR) as their benchmark, meaning they will lend up to 80% of the property’s value and expect the borrower to cover the remaining 20% as a home loan deposit. Stay under that 80% LVR and you generally get access to a lender’s full range of rates without the added cost of insurance.
When we put together a full application for a client, checking the LVR is one of the first things we do, because it decides which lenders on our panel will even consider the file, not just what rate gets offered. A house deposit of 20% is the cleanest path through the process, but it is far from the only one, and plenty of Perth buyers get into the market with less.
What Happens If Your Deposit Is Smaller Than 20%?
If your deposit sits below 20% of the purchase price (an LVR above 80%), most lenders will require Lenders Mortgage Insurance, or LMI. This is a one-off premium, either paid upfront or added to your loan, that protects the lender if you default on the loan. It is not insurance for you as the borrower, and it does not reduce what you owe.
LMI catches a lot of first home buyers off guard because it can add a meaningful amount onto the loan amount itself. Where a broker earns their keep is in knowing which lenders on their panel price LMI more competitively, and which ones will waive or discount it altogether for certain professions, doctors, some allied health workers and select public sector roles are common examples we see accepted. We negotiate that before the file goes anywhere near formal approval, not after. You can read more about how Lenders Mortgage Insurance works on ASIC’s MoneySmart site.
What LMI Actually Protects, According to ASIC
Worth being clear about this upfront, since it’s one of the most misunderstood parts of a low-deposit home loan.
“Lenders mortgage insurance (LMI) protects a credit provider if borrowers are unable to repay their loan. LMI is usually a one-off cost to a home loan borrower, payable when the amount borrowed exceeds 80% of the value of the property. LMI does not benefit the borrower, it only protects the lender.”
— Moneysmart, Australian Securities and Investments Commission (ASIC)
Low-Deposit and No-Deposit Paths: Guarantor Loans and Lender Flexibility
Plenty of lenders on our panel will still approve low deposit home loans of 5% to 10%, with LMI simply factored into the overall cost rather than treated as a dealbreaker. Which lender makes sense depends on your income, the property type, and whether you are buying as an owner-occupier or investor, and the approach differs whether you need a straightforward first home buyer loan or something structured for an existing homeowner.
For buyers with no cash deposit at all, a guarantor loan is often the way in. A family member offers equity in their own property as additional security, which can let you borrow the full purchase price (plus costs) without saving a deposit, and in some structures without paying LMI either. It is a serious commitment for the guarantor, so we always walk both parties through exactly what it means before anyone signs anything. For a deeper breakdown of every low-deposit pathway available right now, see our guide to low-deposit home loan options.
Government Help for Perth First Home Buyers
WA has more support on offer than most first home buyers realise, and it is worth checking eligibility before you assume you need to save the full 20%.
- First Home Owner Grant (WA): a one-off payment of $10,000 for eligible first home buyers building or buying a new home in WA, capped at the purchase price if that figure is lower. Only one grant is payable per eligible transaction. Full eligibility details sit with the WA first home owner grant page.
- Australian Government 5% Deposit Scheme: lets eligible first home buyers get into a home with a minimum 5% deposit (2% for single parents) with no LMI payable. Price caps and place limits vary and are updated regularly, so check current detail on the 5% Deposit Scheme page directly.
- Keystart: the WA State Government’s own shared-equity home loan provider, offering deposits as low as 2% for eligible WA buyers who might not qualify with a mainstream lender.
These schemes are not mutually exclusive for every buyer, and the eligibility rules differ across all three, which is exactly the kind of detail worth checking with a broker before you rule yourself out of one.
Home Loan Deposit Calculators Are a Start, Not the Whole Answer
A house deposit calculator or home loan deposit calculator is a decent first step. Punch in a target purchase price and it will show you what 5%, 10% or 20% looks like in dollar terms. What it will not tell you is that a particular lender wants a higher deposit for a unit under a certain size, that another lender will accept a lower deposit if your income sits in a specific bracket, or that you might qualify for a grant that changes the numbers entirely.
That is the gap between a calculator and an actual approval, and it is where most of our conversations with clients start.
How a Perth Mortgage Broker Gets You There Faster
Every lender on our panel treats deposit size differently. Some are conservative on low-deposit lending for units and off-the-plan purchases, others are genuinely competitive on 5% and 10% deposit deals for the right borrower. Part of our job is matching your situation, income, property type, deposit size, to the lender who will actually approve it, rather than the one whose ad you saw first.
As WA’s Broker of the Year, we have built the kind of working relationships with lender credit teams that let us push for exceptions on deposit and LMI when a client’s file genuinely deserves it. As one of the home loan brokers in Perth who works through this every week, if you already have a low-deposit loan with LMI attached today, it is also worth flagging that once your equity passes that 20% mark, we can look at whether a mortgage broker for refinance strategy can remove that LMI cost for good.
Common Questions
How much deposit do I need to buy a house in Perth?
Most lenders want to see a 20% deposit to avoid Lenders Mortgage Insurance, but that is not a hard rule. Many lenders on our panel will approve a 5% to 10% deposit with LMI included in the loan, and WA-specific support like the First Home Owner Grant and the Australian Government’s 5% Deposit Scheme can lower the amount you need to save even further for eligible buyers.
What is the first home owner grant in Western Australia?
The First Home Owner Grant (FHOG) in WA is a one-off payment of $10,000 for eligible first home buyers building or buying a new home to live in. It is capped at the purchase price if that is less than $10,000, and only one grant is payable per eligible transaction, even if two people buy together. Full eligibility criteria are set out on the WA Department of Finance’s first home owner grant page.
What happens if my deposit is smaller than 20%?
If your deposit is below 20% of the purchase price, most lenders will require you to pay Lenders Mortgage Insurance, which protects the lender if you default, not you. You can still get approved with a 5% or 10% deposit through many lenders on our panel, or explore a guarantor loan or a government scheme that removes the LMI cost altogether.
What is Lenders Mortgage Insurance (LMI) and how do I avoid paying it?
LMI is a one-off insurance premium that lenders charge when your deposit is below 20% of the property value, to protect themselves against the risk of a low-deposit loan. You can avoid it by saving a full 20% deposit, using a guarantor loan, qualifying for a no-LMI government scheme like the 5% Deposit Scheme, or in some cases through a profession-based waiver that a broker can negotiate on your behalf.
Conclusion
So, how much deposit do you need for a home loan? The honest answer is that it depends on your lender, your property, and whether you qualify for the WA and federal support currently on the table, not just the 20% figure most people default to. Some buyers will get there with a full deposit and no LMI, others will get there sooner with 5% or 10% and a smart lender match, and some will get there with no cash deposit at all through a guarantor.
This article is general information only and does not take into account your personal financial situation, needs or objectives. Speak with one of our brokers for advice tailored to your circumstances before making any decisions. If you want to work out exactly where you stand, get in touch with the PPF Mortgage Brokers team and we will run the numbers with you.