The deposit you need to get into your first home has dramatically dropped

Saving up for your first home can take years. Depending on your other financial obligations, it could even take a decade or more.

Buyers generally need at least a 20 per cent deposit of the property's value to avoid having to pay lenders mortgage insurance (LMI), which means a maximum loan-to-value ratio of 80 per cent.

Lenders tend to avoid LVR loans over 80 per cent of the property as they are deemed to be higher risk.

That means the average new first home buyer would have to save up about $100,000 to even access a home loan given that the median house price hit $880,000 across the nation.

Given that the average annual wage in Australia hovers around $90,000 to $100,000, which can be less in regional areas, that's a huge financial commitment just to get onto the property ladder.

Once you're in your first property, you've then got to be able to service the mortgage.

A helping hand

However, the First Home Buyer Guarantee allows you to buy a home with a five per cent deposit and be able to avoid LMI.

The scheme, which came into place from 1 October, 2025, enables eligible buyers to purchase with a five per cent deposit, with no income restrictions or limits on the number of places available in the scheme.

The deposit amount required drops to two per cent for single parents.

Property price caps for capital and regional centres:

NSW - $1.5 million

Victoria - $950,000

Queensland - $1 million

Western Australia - $850,000

South Australia - $900,000

Tasmania - $700,000

Cotality economist Kaytlin Ezzy says the scheme empowers first home buyers with greater choice, while levelling the playing field for those without access to the bank of mum and dad.

"Previously, to qualify for the scheme, first home buyers were largely restricted to more affordable housing options, including units and housing in outer mortgage belts and regional markets."

How much do I need?

Major banks and a number of smaller lenders offer loans under the Scheme, allowing 5 per cent deposits with government guarantees, so seek out a mortgage broker and start crunching the numbers to see how much you need to save to get your foot in the door in your local area.

To calculate how much you need to save, start by working out the median house price in your local area.

For example, the median house price in Ballarat is $637,500, which means first home buyers should be aiming to save $31,875 for the 5 per cent deposit.

The more affordable suburbs of Canberra, like Charnwood and Banks, offer homes for around $700,00 to $750,000, so you should be aiming to save $37,500.

In Launceston, the median house price hovers around the low to mid $600,000, depending on the suburb, which means first home buyers will need to save $30,000.

Illawarra homes tend to sit well over $1 million, which calls for a deposit of $50,000.

A five per cent deposit is a far more affordable amount to save, so start the new year by sticking to a budget and you'll be closer to your goal of home ownership in no time.