Many Sydney first home buyers purchase with a 5% deposit, not 20%. Under the 5% Deposit Scheme, eligible buyers put down 5% with no lenders mortgage insurance: $37,500 on a $750,000 home instead of $150,000. The right target depends on your price range, your timeline and which government support you can use.

Ask most Sydneysiders how much deposit a first home needs and they will say 20%. On Sydney prices that number stops people before they start, which is why the rule of thumb is worth testing against your own numbers.

What does each deposit size get you?

Buying with 5%

Under the Australian Government’s 5% deposit scheme, eligible first home buyers can purchase with a 5% deposit and pay no lenders mortgage insurance, because Housing Australia guarantees part of the loan to the lender. Since October 2025 there are no income caps and no annual place limits, and the price cap for Sydney and NSW regional centres sits at $1.5 million. On a $750,000 home, that is a $37,500 deposit instead of $150,000, a difference that can move a purchase from "years away" to "this year".

The trade-off is a larger loan and higher monthly repayments, and the scheme runs through participating lenders only, so the lender panel is narrower than the whole market. Eligibility is assessed by Housing Australia and the lender, not by any website, so treat any online checker as a starting point.

Buying with 10% to 19%

Outside the scheme, a deposit in this range opens more lenders and often sharper pricing than a bare 5%. Lenders mortgage insurance applies below 20%, but it is usually smaller than people expect, it shrinks quickly as your deposit grows, and most lenders will add it to the loan rather than asking for it in cash. For buyers above the scheme price caps, or buyers who want a specific lender that does not participate, this is the practical middle path.

The 20% position

No lenders mortgage insurance with most lenders, generally access to the sharpest pricing, and a genuine equity buffer from day one. If you are close to 20%, it can be worth a short wait. If you are years away from it at your savings rate, the more useful question is what waiting costs you if prices move while you save.

How can you close the deposit gap faster?

If you have little or nothing saved, buying with no deposit covers the family guarantee, gift and 2% routes and the cash each still needs.

  • A family gift. Lenders accept gifted deposits with the right paperwork, usually a signed letter confirming the money is a gift, not a loan.
  • A guarantor. A parent’s property can secure part of the loan so you buy without LMI at a small deposit. It is a serious commitment for the guarantor, which is why we wrote a full guide to guarantor home loans.
  • The First Home Super Saver Scheme. Voluntary super contributions can be released for a first home deposit with a tax advantage over saving in a bank account. The mechanics matter, so read the FHSS guide before contributing.

Is the deposit the only cash you need?

Budget for buying costs on top: conveyancing, building and pest or strata inspections, lender fees and adjustments at settlement. Eligible NSW first home buyers pay no stamp duty up to $800,000 and a concessional rate up to $1 million, which at Sydney prices is often the single biggest saving available. For a full itemised picture, the complete costs guide and the buying costs calculator lay it out line by line.

What mistakes should you avoid?

  • Saving for 20% by default without checking whether the 5% scheme fits your price range. For many Sydney buyers it does.
  • Counting every saved dollar as deposit. Keep a separate buffer for costs and for life after settlement. Lenders also like to see it.
  • Ignoring genuine savings rules. Some lenders want to see a history of regular saving, particularly with small deposits. A gift can cover the deposit while your own savings history covers the rest of the story.
  • Fixing the deposit before the price range. Work out what you can comfortably repay first, using the borrowing power calculator, then set the deposit target that matches.

How much deposit do you need at three Sydney prices?

Percentages hide the real numbers, so here is the arithmetic at three prices that bracket most first purchases in Sydney. None of this is advice about what you should pay; it is simply what each deposit size means in dollars.

  • At $650,000, a common apartment price in the middle and outer rings: 5% is $32,500, 10% is $65,000 and 20% is $130,000. Eligible buyers pay no stamp duty at this price.
  • At $800,000, the last dollar of the NSW duty exemption: 5% is $40,000, 10% is $80,000 and 20% is $160,000. This is the price point we walk through line by line in the $800,000 worked example.
  • At $1,000,000, the end of the duty concession: 5% is $50,000, 10% is $100,000 and 20% is $200,000. The 5% scheme still applies here, because the Sydney cap is $1.5 million, but duty relief has tapered to nothing.

Read across those rows and the pattern is obvious. The gap between a 5% and a 20% deposit at any of these prices is six figures, and six figures at a realistic savings rate is years. That is the whole reason the scheme exists, and the reason a blanket “save 20%” rule can quietly cost a buyer the years of ownership they were trying to be prudent about.

What do lenders mean by genuine savings?

Most lenders want to see that at least part of your deposit was saved by you, over time, rather than arriving in one lump the week before you applied. The usual benchmark is 5% of the purchase price held or accumulated in your own accounts across roughly three months, though the exact policy varies between lenders and matters most when the deposit is small.

Several things commonly satisfy the test: a regular savings pattern on your statements, money held in a term deposit or savings account for the period, shares or managed funds you have held for some time, and with many lenders, a history of paying rent on time, which some policies accept as evidence that you can sustain a housing payment. A gift from family is welcome, but on its own it usually does not replace the savings history, which is why the best-prepared buyers let a gift cover the deposit while their own statements cover the story.

How long does it really take to save a deposit?

The honest planning tool is a division sum: the deposit you are targeting minus what you have, divided by what you can genuinely put aside each month, equals the months until you are ready. Run it for 5% and for 20% separately, because the answers are usually so different that they amount to different decisions, not different dates.

Two things shorten the sum. The First Home Super Saver Scheme lets voluntary super contributions build a deposit with a tax advantage, which for many salaried buyers produces more deposit from the same pay. And setting the price range before the deposit target, rather than after, stops you saving towards a number that was never the right one for your borrowing capacity in the first place.

Questions people ask

Does the deposit have to be cash in the bank?

It has to be available at settlement, which means cash or near-cash. Money in super is only usable through the FHSS release process, shares need to be sold, and equity in a family member’s home is only usable through a guarantor arrangement rather than as a cash deposit.

Can I use the First Home Owner Grant as part of my deposit?

In NSW the $10,000 grant applies to new homes within its price caps and is generally paid at settlement or at a construction milestone, so some lenders will count it towards your funds to complete, but most will not treat it as genuine savings. Ask before you rely on it.

Is a bigger deposit always better?

A bigger deposit means a smaller loan and, usually, more lender choice. It is only “better” if the time spent reaching it does not cost more, in rent and in price movement, than it saves. That trade-off is the subject of our 5% versus 20% comparison.

The right deposit strategy is a sequencing decision as much as a savings goal. A free borrowing assessment works through your numbers, your timeline and every scheme you qualify for, so you know exactly what you are saving towards and why.

Sources: Housing Australia, 5% Deposit Scheme (no income caps or place limits since 1 October 2025); Revenue NSW, First Home Buyers Assistance Scheme thresholds; Revenue NSW, First Home Owner (New Homes) Grant, checked 17 October 2026.

General information only, not credit, legal or tax advice. Your situation is assessed properly before any recommendation. Government scheme details change; figures are current at the time of writing.