Most people have been told they need a 20% deposit to buy a home. In reality, in NSW in 2026, you could buy with as little as 5% — or even less with a guarantor. Here's the full picture.
5%
Minimum deposit (FHBG)
$0
LMI with 5% (if eligible)
$0
Stamp duty under $800K
0%
Guarantor (no deposit)
The 4 Deposit Options in NSW in 2026
There is no single "correct" deposit amount. What you need depends on which path you take. Here are your four realistic options:
Option 1: 5% Deposit with the First Home Guarantee (No LMI)
The First Home Guarantee (FHBG) is the most powerful scheme available to first home buyers in 2026. It allows you to purchase with just 5% deposit — and the Federal Government guarantees the remaining 15%, so no Lenders Mortgage Insurance is charged.
This is a genuine game-changer. On an $800,000 purchase, LMI without the FHBG would typically cost $25,000–$35,000. The FHBG eliminates that entirely.
- Income limit: $125,000 (single) or $200,000 (couple)
- Property price cap: $900,000 in Sydney
- You must be a first home buyer buying to live in
- Must be an Australian citizen or permanent resident
- Minimum 5% in genuine savings
Real Example — 5% Deposit, $780,000 Purchase
Option 2: 10% Deposit (Standard Loan with LMI)
If you don't qualify for the FHBG — or the places are full — a 10% deposit is the next common option. You'll pay LMI (Lenders Mortgage Insurance), but it can be added to your loan so you don't need the cash upfront.
On an $800,000 purchase with 10% deposit ($80,000), LMI is typically $12,000–$18,000 capitalised into the loan. Your loan becomes $738,000–$742,000 rather than $720,000. The trade-off: a slightly higher loan vs saving for longer.
Option 3: 20% Deposit (No LMI, Standard Loan)
The "old rule" — 20% deposit means no LMI, no government scheme needed, and the broadest range of lenders and rates. On an $800,000 property that's $160,000 in deposit, plus costs. This is achievable for many buyers but takes longer to save.
The question is whether waiting to save 20% costs you more in rising property prices than you save in LMI. In most growth markets, it's better to get in earlier with 5–10% than wait 3–5 years saving.
Option 4: Guarantor Loan (Zero Deposit)
A guarantor loan allows a parent or close family member to use equity in their home as security for part of your loan. In some cases this means you need zero cash deposit — you can borrow 100% of the purchase price, with your parents' home acting as the guarantee.
This is an excellent option for buyers with strong income but limited savings. The parents don't hand over any cash — they simply put up their equity as security. Once your loan-to-value ratio drops below 80% (through repayments or property growth), the guarantee is released and the parents are no longer involved.
How Much Do You Actually Need in Cash?
Here's a side-by-side comparison for a $780,000 purchase in NSW as a first home buyer:
| Deposit Route | Deposit | LMI | Total Cash |
|---|---|---|---|
| 5% + FHBG (no LMI) | $39,000 | $0 | ~$41,500 |
| 5% + LMI capitalised | $39,000 | +$32K to loan | ~$41,500 |
| 10% + LMI capitalised | $78,000 | +$14K to loan | ~$80,500 |
| 20% — no LMI | $156,000 | $0 | ~$158,500 |
| Guarantor — no cash deposit | $0* | $0 | ~$5,000 costs |
$780K purchase, first home buyer NSW, stamp duty $0 under $800K threshold. *Guarantor: no deposit cash but parents must have equity in their home.
What About the Stamp Duty Saving?
This is where NSW first home buyers have a huge advantage in 2026. The stamp duty exemption means:
- Properties under $800,000: Zero stamp duty — a saving of up to $31,335
- Properties $800,000–$1,000,000: A partial concession (sliding scale, still significant)
- Properties over $1,000,000: Full stamp duty payable
Staying under the $800,000 threshold where possible isn't just about the purchase price — it's about keeping your total upfront costs dramatically lower.
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Genuine Savings: What Lenders Actually Need
Most lenders require that at least some of your deposit comes from genuine savings — money you've accumulated yourself rather than receiving as a gift or windfall. The standard requirement is:
- At least 5% of the purchase price held in your account for a minimum of 3 months
- Evidence of regular saving behaviour (lenders review 3–6 months of bank statements)
- Rental payment history can sometimes substitute for savings history in some lenders
Some lenders are more flexible than others. If your deposit is partially gifted by parents, there are lenders who will accept this — especially combined with strong income and low debts. A broker knows which lenders apply which rules.
Parental Gift + Genuine Savings
If your parents are gifting you part of the deposit, you don't need to decline it — but you do need to document it correctly. Lenders require a "gift letter" confirming the funds don't need to be repaid. The remaining portion should still show 3 months of genuine savings in your name. We structure this correctly for many clients.
How the First Home Owner Grant (FHOG) Fits In
The First Home Owner Grant is a separate $10,000 cash payment available specifically for new builds under $600,000. It doesn't reduce your deposit requirement, but it does help with your total cash position:
- Only applies to brand new properties (first occupant) or homes substantially renovated
- Property value must be under $600,000 (contract price of the home, not the land for H&L packages)
- Applied at settlement — it goes toward the purchase, not given to you in cash beforehand
- Can sometimes be used toward the 10% exchange deposit if structured correctly — ask your broker
This means in growth corridor suburbs like Leppington or Marsden Park where new house-and-land packages are available, you could stack FHBG + FHOG + stamp duty exemption simultaneously — potentially $50,000+ in government assistance for one purchase.
Can You Use Your Super for a Deposit?
Yes — through the First Home Super Saver (FHSS) Scheme. This allows you to voluntarily contribute to your superannuation and later withdraw those contributions (plus earnings) to use as a home deposit.
- Maximum withdrawal: $50,000 per person ($100,000 for a couple) in total voluntary contributions
- You save on tax while accumulating — contributions go in at the concessional tax rate (15%) not your marginal rate
- You must apply to the ATO to release the funds before signing a contract
- The FHSS can be used alongside the FHBG
The FHSS works best for buyers who have been making voluntary contributions for at least 1–2 years. If you haven't started yet, speak with a financial adviser about beginning voluntary super contributions as part of your deposit strategy.
How to Increase How Much You Can Borrow (Without a Bigger Deposit)
Your deposit affects your loan-to-value ratio (LVR) — but your borrowing power is determined by your income and expenses. Here are practical strategies to increase what you can borrow before applying:
- Cancel unused credit cards or reduce limits — each $10,000 in credit card limits reduces borrowing power by ~$30,000–$40,000
- Pay off personal loans and buy-now-pay-later — these count as ongoing commitments in lenders' assessments
- Add a co-borrower — a second income on the application can dramatically increase borrowing power
- Apply before year-end if your income has increased — lenders use your most recent tax return for self-employed buyers
- Choose the right lender — borrowing power varies by $80,000–$130,000 between lenders for the same application profile
Which Deposit Strategy Is Right for You?
The right approach depends entirely on your circumstances:
- Have $40,000–$50,000 saved + eligible income? → FHBG with 5% deposit is almost certainly your best path — get in sooner with zero LMI
- Have parents with equity? → Guarantor loan could let you buy with minimal or zero deposit right now
- Over the FHBG income threshold? → 10–15% deposit with LMI capitalised may still get you in the market faster than waiting to reach 20%
- Buying new in a growth estate? → Stack FHBG + FHOG + stamp duty exemption — the total savings are substantial
The single most valuable thing you can do is talk to a broker before you assume what you can or can't afford. Most buyers underestimate what's possible — and what government support they qualify for. At Mortgagefy, the consultation is free, and we've helped hundreds of buyers across Western and Southwest Sydney access schemes they didn't know they were eligible for.
Browse our suburb-specific guides to understand what your deposit buys: Campbelltown, Oran Park, Leppington, or see our full affordability guide.
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