With a 20% deposit you avoid lenders mortgage insurance, which can save you thousands. In this example, a $900,000 four-bedroom home in Clyde North means an 80% loan of $720,000 and a savings contribution of about $238,000 once stamp duty and settlement costs are included.

What does buying with a 20% deposit look like?

Here is a worked example for a four-bedroom home in Clyde North, in Melbourne’s south-east, at about $900,000. The numbers are approximate and for illustration only.

Why does 20% matter?

At 80% loan-to-value or below, most lenders don’t charge lenders mortgage insurance. That alone can save $10,000 to $20,000 or more on a loan this size. You also tend to get access to sharper interest rates and more lender choice.

What costs come on top of the deposit?

The deposit is only part of what you need. You also need:

• Stamp duty, unless you qualify for a first home buyer exemption or concession (in Victoria, full exemption applies up to $600,000 and a concession up to $750,000, so it does not apply at this price)

• Legal or conveyancing fees

• Lender fees such as application or valuation fees

• Adjustment costs for council rates and water paid in advance by the seller

These settlement-day costs often surprise buyers, so we always build in a buffer.

Should I wait for 20% or buy sooner?

It depends. Waiting for 20% saves LMI and can lower your rate, but it takes time, and prices can move while you save. Buying sooner with 5% to 10% means paying LMI (unless a government scheme or waiver applies) but getting into the market earlier. A broker can run both scenarios side by side.

Can I use a gift or family help for the deposit?

Yes, in most cases. Many lenders accept a gift from family as part of your deposit, usually with a signed gift letter confirming it doesn’t need to be repaid. Some lenders also want to see that you have saved part of the deposit yourself over time, often called genuine savings. If family would rather not hand over cash, a family guarantee can let you borrow more than 80% without LMI.

How much income do I need for a $720,000 loan?

It depends on your expenses, debts and the lender, but as a rough guide a couple with no other debts would typically need a combined income somewhere in the mid-$100,000s or more. Credit card limits, car loans and HECS debts all reduce what you can borrow, so clearing or lowering them before you apply can make a real difference.

A typical Melbourne scenario

Mark and Priyanka have $245,000 saved and stable incomes. They find a four-bedroom home in Clyde North for $900,000. Their $180,000 deposit plus about $58,000 in stamp duty and costs leaves a small buffer. They borrow $720,000 at 80%, pay no LMI, and qualify for a lower rate tier than they would at 90%.

Key takeaways

• A 20% deposit usually removes LMI and can unlock better rates.

• Budget for stamp duty, legal fees, lender fees and adjustments on top.

• At $900,000, plan for roughly $238,000 in savings in Victoria.

• Compare waiting for 20% with buying sooner before you decide.

Compare this with buying without a 20% deposit, use the stamp duty calculator and repayment calculator, and talk to our team about first home buyer loans.

General information only. This article does not take into account your objectives, financial situation or needs, so consider whether it is appropriate for you and seek personal advice before acting. Elephant Financial Pty Ltd trading as Elephant Advisory is an authorised credit representative (ACR 487962) of Yellow Brick Road Aggregation Pty Ltd (formerly Vow Financial Pty Ltd) (ABN 66 138 789 161), Australian Credit Licence 390261.