How much deposit do I need to buy a house in NSW?
Most NSW lenders require a minimum 5% deposit, but you will need 20% to avoid Lenders Mortgage Insurance (LMI). In practice, many Illawarra buyers enter the market with between 10% and 20% saved — sometimes supplemented by first home buyer schemes that allow 5% deposits with a government guarantee.
The Fuller Picture
The minimum deposit required to secure a home loan in NSW is typically 5% of the purchase price. However, lenders treat a 5% deposit very differently from a 20% deposit. With less than 20% down, most lenders will require you to pay Lenders Mortgage Insurance (LMI), which protects the lender — not you — in the event you can't repay the loan. LMI can add tens of thousands of dollars to the cost of your purchase, depending on your loan size and LVR (Loan to Value Ratio).
Some buyers are eligible for government-backed schemes that allow 5% deposits without LMI. The First Home Guarantee (formerly the FHLDS) and the Regional First Home Buyer Guarantee both work this way — the government guarantees the gap between your deposit and 20%, removing the lender's LMI requirement. These schemes have income caps, property price caps, and limited places available each financial year, so eligibility is not guaranteed.
Beyond the deposit itself, you also need to budget for upfront costs: stamp duty (which may be reduced or waived for first home buyers under certain thresholds), conveyancing and legal fees, building and pest inspection costs, and loan establishment fees. A practical rule of thumb is to hold an additional 3–5% of the purchase price in savings on top of your deposit to cover these costs.
What This Means for Your Purchase
The deposit size directly affects how much you will pay overall. Entering with a 10% deposit versus a 20% deposit on a $700,000 Wollongong property could mean paying $15,000–$25,000 in LMI premiums, often capitalised into your loan. That means you are paying interest on the LMI cost for the life of the loan, not just as a one-off fee. It is worth running the numbers rather than assuming LMI is always the wrong choice — sometimes buying earlier with a smaller deposit and accepting LMI makes financial sense if prices are rising.
A smaller deposit also means a higher LVR, which can attract a higher interest rate or stricter lending conditions. Some lenders require genuine savings evidence — usually at least three to five months of regular contributions — rather than gifted funds or short-term windfalls for high-LVR applications. If your deposit includes a cash gift from family, discuss this with your broker before counting on it.
If you are purchasing with a partner and pooling funds, lenders will treat the combined deposit as a single figure. The key calculation is straightforward: deposit divided by purchase price, multiplied by 100, gives you your LVR percentage. LMI applies at both 90% and 95% LVR, and costs increase at each tier — so even moving from 95% to 90% makes a meaningful difference to what you pay.
How This Shows Up in the Illawarra
In the Illawarra, entry-level houses in suburbs like Warrawong, Dapto, and Unanderra have been transacting in the $550,000–$750,000 range, while coastal suburbs like Thirroul and Austinmer push well beyond $1 million. A 20% deposit on a $650,000 purchase is $130,000 — a significant savings target for most buyers, particularly those coming from rental markets. Many buyers in this region enter at 10–15% and pay LMI, accepting it as the cost of getting into the market rather than continuing to rent while saving.
First home buyers in the Illawarra should check scheme thresholds carefully. NSW property price caps for first home buyer assistance schemes apply per region, and Wollongong and the broader Illawarra have historically been classified differently depending on the scheme — sometimes metropolitan, sometimes regional. It is worth confirming current caps and your eligibility with a broker or the NSW Revenue Office before assuming a scheme will apply to your purchase.
Frequently Asked Questions
Does the 20% deposit rule apply to all lenders?
Not all lenders treat the 20% threshold identically, but it is the standard point at which most major lenders waive the LMI requirement. Some specialist lenders and professional packages have different thresholds, but 20% is the widely accepted benchmark.
Can I use my super as a deposit?
Under the First Home Super Saver Scheme (FHSSS), eligible buyers can access voluntary concessional and non-concessional contributions made from 1 July 2017, up to $50,000 in total. It does not allow access to compulsory employer contributions and has specific eligibility requirements. Speak to your accountant before building your deposit strategy around this.
I'm a first home buyer — can I really buy with just 5%?
Yes, if you are eligible for the First Home Guarantee, subject to income and property price caps. You will still need 5% in genuine savings, and you are competing for one of the limited scheme spots available each financial year. A broker can help you apply through a participating lender.
How long does it take to save a deposit in Wollongong?
It depends on income, expenses, and your target price range. For entry-level properties in the $600,000–$700,000 range, a 10% deposit ($60,000–$70,000) is achievable for a dual-income household saving consistently over two to three years. A 20% deposit on the same property takes considerably longer unless income is high or other equity is available.
If I have a 10% deposit, is LMI always required?
Generally yes with standard lenders, but there are exceptions. Some lenders waive LMI for certain professionals at high LVRs, and guarantor loans can allow sub-20% deposits without LMI if a family member provides additional security. Both options have their own conditions and risks worth understanding before proceeding.
Can a buyers agent help with deposit strategy?
A buyers agent focuses on property selection and purchase strategy, not lending. However, a good buyers agent will connect you with a trusted broker early and can help you calibrate your budget realistically given current Illawarra prices — which directly affects the deposit size you actually need.
If you're working out your deposit position before buying in the Illawarra, we're happy to have a straightforward conversation about what's realistic for your situation. Get in touch and we can help you understand the market before you start inspecting.
