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Designing a First‑Home Deposit Strategy Your Broker Should Walk Through

A good broker doesn’t just ask how much deposit you have; they help you design the right mix of savings, schemes, LMI and family support so you can buy sooner without putting yourself under dangerous stress.

24 July 2026Updated 27 Aug 2026Reviewed 21 Aug 20268 min read

Key Takeaway

A good broker helps first-home buyers choose a deposit strategy by weighing options like 5–10% deposits with LMI, 20% deposits without LMI, government schemes, and family guarantees against borrowing capacity and risk. With around 28% of mortgage holders already ‘At Risk’ of stress in 2026, the safest path usually includes a 5–10% cash deposit plus a 2–3 month buffer rather than stretching to 20% with no savings left. The key actionable step is to model 2–3 deposit scenarios this week with a broker, including repayments at a 3% higher interest rate.

Designing a First‑Home Deposit Strategy Your Broker Should Walk Through

For a first‑home buyer, a “good” deposit isn’t just a number; it’s a plan that balances how soon you can buy with how safely you can hold the loan if rates rise. A good broker will show you, in numbers, how a 5–10% deposit with LMI or a scheme compares to saving 20%, using realistic repayments and a stress test 3% above today’s rates (in line with APRA guidance).

Here’s how that conversation should run — and how you can get decision‑grade clarity this week.

Diagram comparing 5%, 10% and 20% deposit paths for first-home buyers Your broker should model several deposit paths, not just aim for 20%.

Step 1: Clarify the real deposit target (including costs)

A broker won’t just ask, “How much have you saved?” They’ll map what you actually need:

Minimum lender deposit (often 5–10%).
Stamp duty and legals (unless fully waived under a scheme).
LMI or scheme eligibility.
A post‑settlement buffer.

Typical deposit ranges a broker will test

Assume a $750,000 purchase in NSW.

5% deposit = $37,500
10% deposit = $75,000
20% deposit = $150,000

On top of that, you may need costs of 4–6% of the price (stamp duty, legal, inspections, moving), unless schemes or concessions reduce them.

A good broker will build a side‑by‑side comparison including the impact of LMI.

Scenario	Deposit %	Cash needed (inc. 5% costs)	LMI / Scheme	Indicative loan size	Pros	Cons
A	5%	~$112,500	LMI payable or FHBG	~$712,500	Buy sooner, smaller deposit hurdle	Higher repayments, LMI cost or strict scheme rules
B	10%	~$150,000	LMI (smaller)	~$675,000	More equity, slightly better pricing	Longer to save, still pays LMI if no scheme
C	20%	~$195,000	No LMI	~$600,000	Lower repayments, more choice of lenders	May delay buying years, no cash buffer risk

Figures indicative only and will vary by scheme, lender and state duties.

Step 2: LMI vs saving longer — the real trade‑off

What a broker should explain about LMI

Lenders Mortgage Insurance (LMI) is a once‑off premium when you borrow above 80% LVR. It protects the lender, not you, but it can bring forward your purchase by months or years.

A good broker will:

Price LMI across multiple lenders.
Show you time to target (how long to save an extra 5–10%).
Compare that to estimated price growth and rent in that time.

Worked example: 5% + LMI vs waiting for 20%

Assume:

Target property today: $750,000
You can save $2,500 per month.
Market growth assumption: 3% per year.

Buy now at 5% deposit
- Deposit: $37,500 + ~$37,500 for costs and buffer = ~$75,000
- Loan: ~$712,500 (LVR ~95% with capitalised LMI)
- If interest is 6% p.a. over 30 years, P&I is ~ $4,275/month.
- Broker will also stress test at 9% (APRA +3% buffer) ≈ $5,755/month.
Wait ~3 years for 20% deposit
- Extra savings needed (beyond your current $75k): ~$120k → ~48 months at $2,500/month.
- But if prices grow 3% p.a., the property might cost ~$820k in three years.
- 20% of $820k is $164k, so your target keeps moving.

A good broker doesn’t push you to pay LMI. They show you the compounding maths and check whether paying LMI to get in now is safer than chasing a rising 20% target.

For self‑employed buyers, this decision also has to line up with business cash flow and buffers. That’s covered in more detail in Smart Deposit Strategies For Self‑Employed First‑Home Buyers.

Step 3: Using government schemes properly (not just hopefully)

Schemes can effectively replace some or all of your cash deposit, but they come with strict rules. ### Schemes a broker should check - First Home Guarantee (FHBG) – as little as 5% deposit, no LMI, price caps and owner‑occupier rules. - Regional and state grants / concessions – stamp duty reductions or exemptions, often linked to price caps. - FHSS (First Home Super Saver) – saving part of your deposit via super. A good broker will: 1. Confirm basic eligibility (citizenship, residence, prior property ownership). 2. Check price caps…

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Frequently asked questions

Is a 5 percent deposit enough for a first home in Australia?▾

Yes, many first-home buyers purchase with a 5% deposit using either LMI or a government guarantee scheme, provided they meet scheme and lender criteria. The real test is whether you can also fund costs like stamp duty and keep a basic buffer. A broker will stress-test your repayments at a higher interest rate to check that a 5% path is sustainable.

Should I pay LMI or keep saving for a bigger deposit?▾

The choice depends on how quickly you can save and what the market is doing. Paying LMI to buy sooner can make sense if prices and rents are rising faster than your savings, and you can still keep a safety buffer. A broker should compare scenarios, including total cost over the first few years, not just the one-off LMI premium.

How much deposit do I need to avoid LMI?▾

Generally you need at least a 20% deposit plus costs to avoid LMI, but some lenders have different rules for particular professions or postcodes. In higher-risk or high-density areas, maximum LVRs can effectively force a higher deposit. A broker checks these policy details before you commit to a savings target.

Is a family guarantee better than paying LMI?▾

A family guarantee can reduce or remove LMI but puts your parents’ property on the line if you default and the sale doesn’t clear the debt. For some families that trade-off feels acceptable; for others, it doesn’t. A good broker will quantify the risk, model an exit plan for the guarantee and help everyone decide calmly.

Can I use my super as part of my first-home deposit?▾

You can’t use your standard super balance directly, but you may be able to use the First Home Super Saver scheme to withdraw eligible voluntary contributions and associated earnings. How useful this is depends on your income, time frame and tax position. Coordinating with a broker and tax adviser helps ensure FHSS supports, rather than complicates, your deposit plan.

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