Understanding the Basics of Deposit Required for Home Loans

Most lenders will ask for at least a 5% deposit to approve a home loan, but that figure only tells part of the story.

Your deposit affects more than just whether you can buy. It determines the interest rate you pay, whether you need to cover lenders mortgage insurance, and how much you can borrow. If you work in medicine or nursing, there are specific deposit options that can bring ownership forward by years. This article walks through the actual deposit requirements for buyers in Kogarah, how genuine savings rules work, and what happens when you have less than 20%.

How Much Deposit Do You Actually Need

You can apply for a home loan with as little as 5% of the purchase price saved, but most lenders prefer to see 10% or more. Under the Australian Government 5% Deposit Scheme, first home buyers can purchase with a 5% deposit without paying LMI, provided the property is under the price cap and the lender is part of the panel. In NSW, that cap is $1,500,000 in Sydney and the Central Coast, and $800,000 in other areas. Kogarah sits within the Sydney metro cap.

Banks classify your deposit based on whether it comes from genuine savings, a gift, or other sources. Genuine savings means funds that have been held in your account for at least three months. A regular pattern of deposits from salary counts. A lump sum transferred from a family member three weeks before application does not. Most lenders require at least 5% of the purchase price to come from genuine savings even if you have a 10% deposit overall.

Consider a nurse purchasing a unit near St George Hospital. If the property is valued at $750,000 and she has saved 7% through salary over 18 months, that full amount qualifies as genuine savings. If her parents then contribute another 3% as a gift, she reaches a 10% deposit, but only the 7% she saved herself counts toward the genuine savings requirement. That structure meets most lender policies and keeps her application moving.

What Happens When Your Deposit Is Below 20%

When your deposit is less than 20% of the property value, lenders will require you to pay for lenders mortgage insurance. LMI protects the lender if you default on the loan. It does not protect you. The premium is calculated on a sliding scale based on your loan amount and loan-to-value ratio. At a 10% deposit, you are borrowing 90% of the property value, and the LMI premium will be higher than it would be at 15%.

LMI is a one-off cost that can be paid upfront at settlement or added to your loan amount. Adding it to the loan increases your monthly repayment slightly but avoids needing to find extra cash at settlement. At a 10% deposit on a $750,000 property, the LMI premium could range from $15,000 to $25,000 depending on the lender and your borrowing profile. Some lenders offer lower LMI rates than others, and a broker can show you the comparison before you commit.

Medical professionals including doctors, dentists, pharmacists, and registered nurses often qualify for an LMI waiver at up to 90% LVR with certain lenders. That means you can borrow up to 90% of the property value without paying LMI at all. The waiver is based on your profession and employment status, not your income level. If you are a medical professional working at St George Hospital or one of the practices around Railway Parade, and you have a 10% deposit saved, you may not need to pay LMI. That change alone can save you over $20,000 and let you buy sooner or borrow more within your borrowing capacity.

Genuine Savings Rules and How They Affect Approval

Genuine savings requirements vary between lenders, but the principle is the same. Lenders want to see that you can manage money over time and build a deposit through regular saving. If your deposit appears overnight or comes entirely from gifts, some lenders will decline the application or charge a higher interest rate.

Acceptable sources of genuine savings include funds held in a savings account for at least three months, shares or managed funds held for at least three months, and the sale proceeds from another asset you owned. Rental bond refunds, tax refunds, and employment bonuses can also count if they have been held for the required period. The First Home Super Saver Scheme allows you to make voluntary contributions into your super fund and release up to $50,000 toward your deposit. Funds released through that scheme are treated as genuine savings by most lenders even if they were only contributed recently, because the structure itself demonstrates planning.

Gifts from parents or other family members are accepted by most lenders, but they do not count toward the genuine savings requirement. A signed gift letter confirming the funds are not a loan is required. If your entire deposit is a gift and you have no genuine savings at all, some lenders will still approve the loan but may apply a higher interest rate or require a larger deposit overall.

How First Home Buyer Grants Affect Your Deposit

The NSW First Home Owner Grant is $10,000 for new homes or substantially renovated properties valued up to $600,000, or a combined land and build value up to $750,000. The grant does not apply to established homes. In Kogarah, where most available housing is established units and townhouses, the grant will not be available unless you are building or buying a newly completed property.

Stamp duty relief in NSW provides a full exemption on homes valued up to $800,000 and a sliding concession on homes between $800,001 and $1,000,000. That relief applies to both new and established properties and can save a first home buyer over $30,000 on a property valued at $800,000. Those savings do not add to your deposit, but they reduce the upfront cash you need at settlement, which can make the difference between proceeding with a purchase or waiting another year.

If you qualify for the Australian Government 5% Deposit Scheme, you can combine that with the NSW stamp duty relief. You cannot combine the government guarantee scheme with Help to Buy, which is a separate program that provides an equity contribution of up to 30% for an existing home in exchange for a government share in the property. Both schemes are available through participating lenders, and applications cannot be made directly to Housing Australia. If you are working with a broker, they will check which lenders on their panel participate in the schemes and whether your circumstances fit the eligibility criteria. For more detail on the options available to people purchasing for the first time, refer to our guide for first home buyers.

Using Equity From Another Property as a Deposit

If you already own a property with available equity, you can use that equity as part or all of the deposit for a new purchase. Equity is the difference between what your property is worth and what you owe on it. If your home is valued at $900,000 and your loan balance is $500,000, you have $400,000 in equity. Lenders will allow you to borrow against up to 80% of that property value without needing to pay LMI, which in this case means a maximum loan of $720,000. That leaves you with $180,000 in usable equity after accounting for your existing loan.

That equity can be used as a deposit on an investment property, an upgrade to a larger home, or to help a family member purchase. The property you already own is used as security, and in most cases a second mortgage is registered over it. If you are buying an investment property in Kogarah while continuing to live in your current home elsewhere, the equity structure can let you proceed without selling or needing to save a new cash deposit. You will need to demonstrate that you can service both loans, and lenders will assess your total debt and income position accordingly. For more information on loans for investment purposes, refer to our page on investment loans.

What Settlement Costs Should You Budget Beyond the Deposit

Your deposit is only part of the upfront cost. You also need to budget for stamp duty, legal fees, building and pest inspections, loan establishment fees, and any LMI premium. On a $750,000 property in NSW, stamp duty alone is around $28,000 unless you qualify for a concession or exemption. Legal fees typically range from $1,500 to $3,000 depending on the complexity of the purchase. Building and pest inspections cost around $600 to $1,000 combined. If you are taking out a loan with a 10% deposit, your LMI premium could be another $20,000 unless you qualify for a waiver.

Lenders will require evidence that you can cover these costs in addition to your deposit. If your deposit is exactly 10% and you have no additional savings, the application may be declined or delayed while you build a buffer. A good rule is to have your deposit plus at least $15,000 to $25,000 in accessible savings before you start making offers. That buffer covers settlement and gives you a safety margin if unexpected costs appear during the purchase process.

If you are buying in Kogarah and planning to use public transport to commute into the city or to one of the hospitals in the area, proximity to Kogarah station and the retail precinct around Railway Parade and Belgrave Street tends to add value to properties in the suburb. That location premium can affect your borrowing amount and the deposit percentage required, so it is worth factoring in when you run the numbers on what you can afford. A broker can help model different deposit scenarios and show you how small changes in your savings position affect your borrowing limit and monthly repayment. You can also request a loan health check if you already have a mortgage and want to understand whether you are in a position to use equity for your next purchase.

Call one of our team or book an appointment at a time that works for you. We work with medical professionals and other buyers across Kogarah and can show you exactly what deposit options apply to your situation.

Frequently Asked Questions