Almost every Sydney buyer starts with the same number in their head: twenty per cent. It's the figure that gets quoted at barbecues and repeated by well-meaning relatives, and for a lot of people it's the reason they think home ownership is still years away. The truth is messier and more useful. There isn't one deposit figure in Sydney - there are several, they do different jobs, and the gap between the deposit that lets you borrow and the deposit you physically hand over on the day is where a surprising number of buyers come unstuck.
Where the 20% figure comes from
Twenty per cent isn't a legal requirement - it's the threshold above which most lenders will lend without charging you lenders mortgage insurance. Put down 20% of the purchase price and the bank considers the loan low enough risk that it doesn't need to insure itself against you defaulting. On a $1.2 million Sydney home that's a $240,000 deposit, which is why the number feels so out of reach in this city. But 20% is the point at which borrowing gets cheapest, not the point at which it becomes possible. Plenty of Sydney buyers get in with far less.
The real minimum: buying with 5% to 10%
Most lenders will approve a loan with a deposit as small as 5% of the purchase price, and some products go lower for buyers who qualify. The catch is that anything under 20% almost always triggers lenders mortgage insurance, which we'll come to. A 10% deposit is a common middle ground: it keeps the insurance premium more manageable than a 5% deposit does, and it gives you a buffer if the lender's valuation comes in lower than the price you agreed. So the honest answer to 'how much do I need?' is usually somewhere between 5% and 20% - the question is what each extra percentage point costs or saves you.
A crucial distinction: the deposit that qualifies you for a loan is not the same as the deposit you pay the seller. When you exchange contracts on a Sydney home you typically hand over 10% of the price then and there - even if your loan is a 90% or 95% loan. The bank's share only turns up at settlement weeks later. You need access to that 10% at exchange.
Lenders mortgage insurance: the cost of a smaller deposit
Lenders mortgage insurance, or LMI, protects the lender - not you - if your loan is more than 80% of the property's value. It's a one-off premium that rises steeply as your deposit shrinks and as the loan gets larger, and on a Sydney-sized mortgage it can run into the tens of thousands. Most buyers capitalise it, meaning it's added to the loan and paid off over time with interest rather than upfront. LMI is often framed as money down the drain, but that's not always the right way to see it: paying it can let you buy years earlier, before prices move further away from you. The real decision is whether the cost of LMI is smaller than the cost of waiting - and in a rising market it frequently is.
What actually shapes the deposit you'll need
- The purchase price - a percentage of a Sydney price is a large absolute number, so the suburb you target matters as much as the percentage
- Whether you're willing to pay LMI to get in sooner, or want to reach 20% and avoid it
- Whether you qualify for a government scheme that reduces or removes the deposit hurdle
- The lender's valuation, which can come in below your agreed price and quietly increase the deposit you need to cover the gap
- Your genuine savings - many lenders want to see that a chunk of the deposit was saved over time, not just gifted or borrowed
Working out your budget and want a buyers agent lined up for when your deposit's ready?
Talk to a Sydney buyers agentIt's not just the deposit: the costs sitting alongside it
Buyers often save hard for the deposit and forget the costs that land at the same time. In New South Wales, transfer duty - what most people still call stamp duty - is the big one, and on a mid-market Sydney home it can be a five-figure sum unless you qualify for a first-home concession. On top of that sit conveyancing or legal fees, building and pest inspections, a strata report if you're buying an apartment, loan application or valuation fees, and moving costs. These aren't part of your deposit, but they come out of the same savings, so the cash you genuinely need on hand is meaningfully more than the deposit figure alone.
First-home buyers: schemes that move the goalposts
If you're buying your first home, the deposit maths can change substantially. New South Wales offers first-home buyers duty exemptions and concessions below certain price thresholds, which can wipe out one of the largest upfront costs. Federal government schemes can also let eligible first-home buyers purchase with a low deposit while avoiding LMI, effectively letting a smaller deposit do the work of a larger one. Eligibility, price caps and places are limited and change over time, so treat this as a reason to get specific advice rather than a fixed rule - but for many first-home buyers, these schemes are the difference between buying now and buying in three years.
The auction catch every deposit plan should account for
Most Sydney homes in the sought-after pockets sell under the hammer, and auctions rewrite the deposit timeline. If you win, contracts exchange on the spot with no cooling-off period, and you pay the deposit - typically 10% - immediately, usually that day. There's no 'subject to finance' safety net. That means the 10% has to be genuinely available and liquid before you raise your hand, not sitting in an asset you'd need weeks to release. Buyers who plan only for the loan deposit and forget the exchange-day deposit are the ones scrambling at the auction table. If you can't comfortably cover the 10% on the day, you're not ready to bid.
Getting your deposit genuinely ready
- Separate the two numbers in your plan: the loan deposit that gets you approved, and the 10% you pay at exchange
- Budget for stamp duty and the buying costs alongside the deposit, not after it
- Keep the exchange deposit liquid and accessible, especially if you'll be bidding at auction
- Ask a broker whether paying LMI to buy sooner beats waiting to reach 20% in your situation
- Check your first-home scheme eligibility early, since it can change how much deposit you actually need
Where a buyers agent fits in
A buyers agent doesn't arrange your deposit or your finance - that's the work of a licensed mortgage broker or your lender - but they shape the property side so your deposit stretches sensibly. They help you target suburbs and property types where your budget is genuinely competitive rather than aspirational, so you're not saving for a deposit on a price you'll never win. They coordinate the timing between finance, inspections and offers, which matters most at auction where the deposit has to be ready the moment the hammer falls. For anything financial, always speak to a licensed broker or lender; the agent's job is to make sure the home you chase lines up with the deposit and finance you've actually got.