What Are the Deposit Requirements for a Home Loan?

How Much Deposit Do You Actually Need?

Most lenders will expect 20% of the property value upfront. Anything below that and you'll trigger Lenders Mortgage Insurance, which adds cost but doesn't stop you from borrowing. The real floor for most applications sits at 5% for first home buyers and in some cases 10% for existing owners, though your deposit size affects more than just whether you get approved.

Teachers on permanent contracts often qualify for LMI waivers for teachers, which means you can borrow with as little as 10% deposit without paying the insurance. Lenders treat teaching roles as stable income, so the calculation shifts. Instead of needing 20% to avoid extra costs, you might only need 10% if your lender offers a waiver and your income supports the loan amount.

Consider a primary school teacher applying for a property valued at the current median in a metropolitan area. With a 10% deposit and an LMI waiver, the upfront requirement drops to around 10% of the property value plus settlement costs like conveyancing, inspections, and transfer fees. Without the waiver, that same 10% deposit would trigger LMI, which could add several thousand dollars to the total cost. The deposit unlocks the loan, but the waiver unlocks affordability.

What Counts as Genuine Savings?

Lenders want to see that your deposit came from income you saved over time, not a windfall that appeared last week. Genuine savings are funds held in your account for at least three months that you accumulated through regular deposits. Your pay slips and bank statements show the pattern.

Bonus payments, tax refunds, and gifts from family don't automatically count as genuine savings, though some lenders accept them as part of your total deposit if you can explain the source. If your deposit includes a family gift, expect to provide a signed letter confirming it's not a loan. Lenders will ask where the money came from and whether it needs to be repaid.

Savings tied to the First Home Super Saver Scheme count as genuine savings once released. The scheme lets you make voluntary super contributions and withdraw up to $15,000 of those contributions plus earnings toward a deposit. The ATO processes the release, and lenders treat the amount as verified savings because it's come from your own contributions over time.

How the 5% Deposit Scheme Changes the Calculation

The Australian Government 5% Deposit Scheme removes the LMI requirement entirely if you meet the eligibility criteria. You put down 5%, Housing Australia guarantees the gap to 20%, and the lender treats the loan as if you had a full 20% deposit. There are no income caps, but property price caps apply depending on location.

First home buyers in New South Wales can use the scheme on properties up to $1,500,000 in capital cities and regional centres or $800,000 in other areas. In Victoria, the cap is $950,000 in capital cities and regional centres and $650,000 elsewhere. The purchase price and the lender's valuation both need to sit at or below the cap.

Applications go through participating lenders, not directly to Housing Australia. You'll need to confirm your lender is on the panel before you start the process. The scheme can't be combined with Help to Buy, but you can still use state-based concessions like stamp duty exemptions or the First Home Owner Grant where available.

Loan to Value Ratio and What It Controls

Loan to value ratio measures how much you're borrowing against the property's value. A 10% deposit gives you a 90% LVR. A 20% deposit gives you an 80% LVR. The lower your LVR, the less risk the lender carries and the more options you'll see when comparing home loans for teachers.

Lenders price loans based on LVR bands. A borrower at 80% LVR will typically get access to lower rates than someone at 90% LVR, even if their income and employment are identical. The difference might only be 10 to 20 basis points, but over the life of a loan that compounds. LVR also determines whether you can access features like offset accounts or split rates on certain products.

An LVR above 80% without an LMI waiver means you'll pay insurance, but it also means the lender applies tighter serviceability checks. They want to see that you can service the loan even if rates rise or your circumstances change. The deposit you bring affects both the cost and the structure of what you're offered.

What Happens If Your Deposit Is Below 10%?

Borrowing with less than 10% deposit is possible, but your options narrow. The 5% Deposit Scheme is the most common route for first home buyers. Outside that scheme, you'll need either a guarantor or access to a lender willing to take on higher LVR applications without government backing.

Guarantor loans let a family member use their property as security to cover the shortfall in your deposit. The guarantor doesn't hand over cash, but they do take on liability if you default. Most guarantors are parents, and most lenders cap the guarantee at 20% of the property value so the guarantor isn't exposed to the full loan. Once you build enough equity through repayments or property value growth, the guarantee can be removed.

Teachers applying for a mortgage for teachers with a guarantor still need to prove they can service the full loan amount on their own income. The guarantee covers the deposit gap, not the repayment capacity. Lenders assess your income, expenses, and existing debts just as they would for any other application.

How Deposit Size Affects Your Interest Rate

Lenders adjust pricing based on risk, and LVR is one of the clearest risk signals they use. A borrower with a 20% deposit will usually be offered a lower variable rate than someone with a 10% deposit, even if both borrowers have identical incomes and credit histories. The gap between rates at different LVR bands can range from 10 to 50 basis points depending on the lender and the product.

Some lenders offer discounts for certain professions, including teachers. These discounts apply on top of the standard rate and can offset the higher LVR pricing to some extent. A teacher borrowing at 90% LVR with a professional discount might end up with a rate close to what a non-teacher would pay at 80% LVR. The discount doesn't eliminate the LVR premium, but it reduces it.

Rate discounts are negotiated at application and usually locked in for the life of the loan, though they're tied to the product you choose. If you refinance or switch products, you'll need to renegotiate. Talking to a mortgage broker for teachers who knows which lenders offer profession-based discounts can make a measurable difference to what you pay each month.

Where Your Deposit Sits Before Settlement

Once you've signed a contract, your deposit moves into a trust account held by the vendor's solicitor or conveyancer. It stays there until settlement, at which point it's released to the seller as part of the purchase price. You don't get it back, and you can't access it once it's been paid.

If the sale falls through because of a failed building inspection or a finance clause, the deposit is usually returned to you. If you walk away without a valid reason covered in the contract, the vendor may be entitled to keep it. The contract sets out the conditions under which the deposit is refundable, so read those clauses before you sign anything.

Your lender will ask for evidence that the deposit has been paid before they release the balance of the loan at settlement. Bank statements, receipts from your solicitor, and the signed contract all form part of that evidence. The deposit proves you have skin in the transaction and that the purchase is proceeding as agreed.

Call one of our team or book an appointment at a time that works for you. We'll walk through your deposit options, check whether you're eligible for an LMI waiver or a government scheme, and show you what your borrowing capacity looks like with the amount you've saved.

Frequently Asked Questions