How Much Deposit Do You Need to Buy Your First Home in Brisbane?
If you’re a first home buyer in Brisbane, you may have heard that you need a 20% deposit to buy a home.
The good news is, that’s not necessarily true.
Depending on your circumstances, you may be able to buy your first home with a 5% deposit, use a family guarantor, pay Lenders Mortgage Insurance, or potentially purchase with as little as a 2% deposit through the Australian Government’s Help to Buy scheme, if you’re eligible.
I’m Maryanne Elliott, a mortgage broker at 360 Mortgage Solutions in Brisbane, Queensland, and I specialise in helping first home buyers understand their borrowing options and navigate the process of purchasing their first home.
One of the biggest misconceptions I hear from Brisbane first home buyers is:
“I can’t buy yet because I don’t have a 20% deposit.”
Before you spend another few years trying to save 20%, it’s worth finding out what options are actually available to you.
Do First Home Buyers Need a 20% Deposit in Australia?
No. You don’t necessarily need a 20% deposit to buy your first home.
A 20% deposit can certainly have advantages. In an ideal situation, having a 20% deposit plus your purchasing costs may allow you to avoid Lenders Mortgage Insurance, commonly known as LMI.
But saving 20% has become increasingly difficult for many first home buyers.
For example, if you’re looking at buying a property for $1 million, a 20% deposit would be:
$200,000
And that’s before considering other purchasing costs.
For many first home buyers in Brisbane, waiting until they’ve saved a full 20% deposit could mean delaying their purchase significantly.
Fortunately, there are other ways to get into the property market.
Can I Buy a House in Brisbane With a 5% Deposit?
Potentially, yes.
There are several ways a first home buyer may be able to purchase a property with less than a 20% deposit.
Your options will depend on factors including your income, existing debts, borrowing capacity, property price, eligibility for government schemes and the lender you use.
Here are some of the options we regularly discuss with first home buyers.
Option 1: Buying With Less Than 20% and Paying Lenders Mortgage Insurance
You don’t necessarily have to wait until you’ve saved a 20% deposit.
Some lenders will allow eligible borrowers to purchase a property with a smaller deposit.
When your loan represents a higher percentage of the property’s value, however, you may be required to pay Lenders Mortgage Insurance, or LMI.
One important thing for first home buyers to understand is that LMI generally protects the lender, not you as the borrower.
The cost may be added to your home loan in some circumstances, rather than needing to be paid entirely upfront.
Whether paying LMI to purchase sooner makes sense will depend on your circumstances.
For some buyers, waiting and saving a larger deposit could be the better option. For others, getting into the Brisbane property market sooner may be worth considering.
This is something we can calculate and compare before you make a decision.
Option 2: Using a Family Guarantor to Buy Your First Home
Another option is a family guarantee home loan.
We regularly see parents who want to help their children buy their first home but don’t necessarily have a large amount of cash available to give them.
They may, however, own a property with significant equity.
Depending on the lender and circumstances, a parent may be able to use some of the equity in their property as additional security for their child’s home loan.
This can potentially help a first home buyer purchase sooner and, in some circumstances, avoid Lenders Mortgage Insurance.
There are risks involved for guarantors, so this isn’t something that should be entered into lightly.
We spend time explaining the structure and potential risks, and guarantors may also need to obtain independent legal advice before proceeding.
Option 3: Government Support for First Home Buyers With a 5% Deposit
Eligible first home buyers may also have access to Australian Government home buyer support that can allow them to purchase with a smaller deposit without paying Lenders Mortgage Insurance.
Depending on the scheme and your eligibility, you may be able to purchase with around a 5% deposit plus applicable purchasing costs.
Instead of requiring you to pay LMI, the government provides a guarantee over an eligible portion of the home loan.
This can make a significant difference for someone who has the income to afford a mortgage but is struggling to save a 20% deposit while also paying rent and everyday living expenses.
Government scheme rules and eligibility requirements can change, so it’s important to check the current requirements rather than assuming you’re eligible.
Option 4: Buying a Home With a 2% Deposit Through Help to Buy
Another option available to eligible Australians is the Help to Buy scheme.
Help to Buy is different from a traditional first home buyer guarantee because it is a shared equity arrangement.
Under the scheme, eligible buyers may be able to purchase with a deposit starting from 2%, with the Australian Government contributing towards the purchase of the property.
In return, the government holds an equity share in the property.
This can be particularly useful where someone has enough income to service a home loan but their borrowing capacity isn’t quite high enough to purchase a suitable property.
Does the Government Own Part of My House Under Help to Buy?
Yes.
With a shared equity arrangement such as Help to Buy, the government has an equity interest in your property.
This is one of the concerns I hear from buyers:
“I don’t want to buy a house with the government.”
I understand that hesitation.
It’s also why I think it’s important to look at the numbers and understand how the scheme works before automatically ruling it out.
Depending on the scheme rules that apply to you, there may be opportunities to progressively buy back the government’s equity share over time.
For the right buyer, that can create a pathway from shared ownership towards owning the property without the government’s equity contribution.
What Happens if My Property Increases in Value?
This is an important consideration with shared equity.
If the government continues to own a percentage of your property and the property increases in value, the value of the government’s share can also increase.
For example, if you retain 70% of the equity interest and the government holds 30%, you need to understand how that arrangement affects you if you later sell or buy back the government’s share.
That’s why Help to Buy shouldn’t simply be viewed as “cheap money” or an easy way to purchase with a 2% deposit.
You need to understand the short term benefit as well as the long term implications.
For some buyers, owning a share of a property and having the opportunity to increase that ownership over time could be preferable to remaining outside the property market.
For others, a different lending strategy may make more sense.
It’s very much a case by case decision.
What Is the Minimum Deposit for a First Home Buyer in Queensland?
There isn’t one deposit amount that applies to every first home buyer in Queensland.
Depending on your circumstances and eligibility, your options could potentially include:
20% deposit plus costs: A traditional option that may allow you to avoid LMI.
Less than 20% deposit plus costs: You may be able to purchase using a standard home loan and pay Lenders Mortgage Insurance.
5% deposit plus costs: Eligible first home buyers may be able to use a government backed guarantee.
2% deposit plus costs: Eligible buyers may be able to use the Help to Buy shared equity scheme.
Family guarantee: Some buyers may be able to use equity from a family member’s property to help secure their home loan.
The deposit is only one part of the equation.
We also need to consider your borrowing capacity, income, existing debts, living expenses, credit history, property price and purchasing costs.
What First Home Buyer Grants Are Available in Queensland?
If you’re buying your first home in Brisbane or elsewhere in Queensland, your deposit isn’t the only thing you should investigate.
Depending on the property you’re purchasing and your circumstances, there may be Queensland first home buyer grants, stamp duty concessions and Australian Government home buyer schemes available to you.
Eligibility criteria, property price caps and scheme rules can change.
Rather than relying on something a friend used when they purchased their home a few years ago, check what you’re eligible for based on the current rules and your proposed purchase.
How Do I Know Which First Home Buyer Option Is Best for Me?
This is where getting advice early can make a big difference.
You don’t need to wait until you’ve found a property before speaking with a mortgage broker.
In fact, I’d much rather talk to a first home buyer before they start seriously looking at properties.
We can look at questions such as:
• How much can you currently borrow?
• How much deposit do you actually need?
• Are you eligible for any first home buyer schemes or grants?
• Could you purchase with a 5% deposit?
• Would Lenders Mortgage Insurance be an option?
• Could a family guarantee work?
• Are you potentially eligible for Help to Buy?
• What purchase price could you realistically afford?
• What additional costs should you budget for?
Once you understand those numbers, you can make decisions based on your actual position rather than assuming you need to keep saving.
First Home Buyer Mortgage Broker in Brisbane
At 360 Mortgage Solutions, we help first home buyers across Brisbane and Queensland understand the home buying and home loan process.
Buying your first property can feel overwhelming because there are lenders, interest rates, government schemes, grants, deposits, contracts and borrowing capacity to think about, often all at the same time.
Our job is to make the finance side easier to understand.
We’ll look at your individual circumstances, explain the options that may be available and help you understand what you need to do next.
And if you’re not ready to buy today, that’s okay too.
Sometimes the most valuable outcome from an initial conversation is simply knowing what you need to work towards.
Frequently Asked Questions About First Home Buyer Deposits
Do I need a 20% deposit to buy a house in Brisbane?
No. Some eligible buyers can purchase with less than a 20% deposit. Depending on your circumstances, options may include Lenders Mortgage Insurance, a family guarantee, government backed guarantees or shared equity schemes.
Can a first home buyer buy with a 5% deposit in Queensland?
Potentially, yes. Eligible first home buyers may be able to purchase with a 5% deposit through government supported options, subject to the current eligibility requirements and lender criteria.
Can I buy my first home with a 2% deposit?
Eligible buyers may be able to purchase through the Australian Government’s Help to Buy shared equity scheme with a deposit starting from 2%. Eligibility criteria and other conditions apply.
What is Lenders Mortgage Insurance?
Lenders Mortgage Insurance, or LMI, is insurance that generally protects the lender if a borrower defaults and the lender suffers a loss. It may allow some borrowers to obtain a home loan without having a full 20% deposit.
Can my parents help me buy a house without giving me cash?
Potentially. A family guarantee may allow an eligible family member to use equity in their property as additional security for your home loan. There are risks for guarantors, so appropriate legal advice and careful consideration are important.
Should I wait until I have a 20% deposit?
Not necessarily. Whether you should continue saving or purchase with a smaller deposit depends on your borrowing capacity, income, budget, the property you’re considering and the options available to you.
Ready to Find Out How Much Deposit You Actually Need?
If you’re planning to buy your first home in Brisbane or Queensland, don’t assume you need to save a 20% deposit before talking to someone.
Finding out where you stand now can give you a clear target and help you understand whether buying your first home could be closer than you think.
I’m Maryanne Elliott from 360 Mortgage Solutions, and I specialise in helping first home buyers understand their options and navigate the home loan process.
The first step is a quick 15 minute phone conversation so we can understand where you’re at, what you’re hoping to buy and whether we may be able to help.
Book a 15 minute first home buyer chat with 360 Mortgage Solutions and let’s work out what your next step could be.