First Home Buyers · May 2026
How Much Deposit Do You Actually Need to Buy a House in Sydney?
"Save 20%" is the advice most people have heard — and for many Sydney buyers, it's the wrong target. With a median house price well above $1 million and strong government schemes now available for 5% and 2% deposits, the deposit question is far more nuanced than it used to be. Here's a complete picture of how much you actually need, across different purchase prices and scenarios.
The 20% Rule: Where It Comes From and When It Applies
The "save 20%" guidance exists for one reason: at 80% LVR (loan-to-value ratio) or below, lenders don't require Lenders Mortgage Insurance. LMI is the insurance premium you pay to protect the lender — not yourself — when you borrow more than 80% of the property's value. It can cost $10,000–$35,000 depending on loan size and LVR.
But 20% is not a legal requirement. It's a threshold for avoiding one specific cost. Given Sydney's property prices, insisting on 20% means many buyers spend 5–7 additional years saving — during which prices may rise faster than they can accumulate the deposit. The right answer depends entirely on your situation.
What Does "Deposit" Actually Include?
Your purchase costs include more than just the deposit. Before you set a savings target, understand the full picture:
Deposit (equity contribution): The portion of the purchase price not covered by the loan. Minimum 5% for most lenders; 2% under Help to Buy.
Stamp duty: For first home buyers under $800,000 — zero. For $800k–$1M — concessional. Above $1M or for non-first-home buyers — full stamp duty (can be $40,000–$50,000 on a $1.2M purchase).
LMI (if applicable): Paid by the lender's insurer but charged to you; typically capitalised onto the loan.
Conveyancing (solicitor): Approximately $1,500–$2,500 for a standard purchase in NSW.
Building/pest inspection: $400–$800 before making an offer on an established property.
Loan application/settlement costs: Most lenders charge minimal fees; government registration fees approximately $250–$500.
Real Deposit Targets: Sydney Scenarios
$750,000 purchase — First home buyer (established property)
Stamp duty: $0 (full first home buyer exemption)
5% deposit (FHGS — no LMI): $37,500 + ~$2,500 costs = ~$40,000 total
10% deposit (no scheme): $75,000 + LMI ~$10,500 + costs = ~$88,000 total
$950,000 purchase — First home buyer (new apartment)
Stamp duty: ~$14,000 (concessional rate $800k–$950k band)
5% deposit (FHGS): $47,500 + stamp duty + costs = ~$65,000 total
20% deposit (no LMI): $190,000 + stamp duty + costs = ~$208,000 total
$1,200,000 purchase — Non-first-home buyer
Stamp duty: ~$50,000 (full rate; no first home buyer relief)
10% deposit (with LMI ~$19,000): $120,000 + stamp duty + costs = ~$175,000 total
20% deposit (no LMI): $240,000 + stamp duty + costs = ~$295,000 total
What Counts as "Genuine Savings"?
Most lenders require your deposit to be "genuine savings" — funds that have been in your account for at least 3 months. They want to see a pattern of regular saving rather than a lump sum that appeared suddenly (which might be borrowed). Acceptable genuine savings include:
• Regular deposits from salary savings over 3+ months
• Term deposits held for 3+ months
• Equity in an existing property
• FHSS withdrawals (super savings)
Gifted funds from family typically do not meet the genuine savings requirement on their own — but when combined with 3+ months of genuine savings, they can supplement the deposit. The proportion required varies by lender. A broker will match you to the lender whose genuine savings policy best fits your situation.
The Right Target for You
The deposit you should aim for isn't a fixed percentage — it's the minimum that qualifies you for the purchase you want, with the lowest total cost (deposit + LMI + stamp duty) for your specific situation. For a first home buyer in Sydney under $800k, the FHGS with 5% deposit and zero stamp duty is often the most efficient path. For a second property purchase above $1.2M, 20% avoids LMI on a large loan where LMI costs become significant.
Bridge Finance runs this analysis as a standard part of every initial consultation — calculating the optimal deposit target for your specific purchase price, income, and timeline.
About the Author
William Zhu
Director, Bridge Finance. 8 years of mortgage broking + 5 years in construction. $600M+ settled. Access to 70+ lenders. MFAA member.
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© 2026 Bridge.Finance Pty Ltd ATF Zhu Family Trust. Credit Representative 567817 of Australian Credit Licence 384704. MFAA Member. AFCA Member.
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