Designing a First‑Home Deposit Strategy Your Broker Should Walk Through

For a first‑home buyer, a “good” deposit isn’t just a number; it’s a plan that balances how soon you can buy with how safely you can hold the loan if rates rise. A good broker will show you, in numbers, how a 5–10% deposit with LMI or a scheme compares to saving 20%, using realistic repayments and a stress test 3% above today’s rates (in line with APRA guidance).

Here’s how that conversation should run — and how you can get decision‑grade clarity this week.

Your broker should model several deposit paths, not just aim for 20%.

Step 1: Clarify the real deposit target (including costs)

A broker won’t just ask, “How much have you saved?” They’ll map what you actually need:

1. Minimum lender deposit (often 5–10%).
2. Stamp duty and legals (unless fully waived under a scheme).
3. LMI or scheme eligibility.
4. A post‑settlement buffer.

Typical deposit ranges a broker will test

Assume a $750,000 purchase in NSW.

• 5% deposit = $37,500
• 10% deposit = $75,000
• 20% deposit = $150,000

On top of that, you may need costs of 4–6% of the price (stamp duty, legal, inspections, moving), unless schemes or concessions reduce them.

A good broker will build a side‑by‑side comparison including the impact of LMI.

Figures indicative only and will vary by scheme, lender and state duties.

Step 2: LMI vs saving longer — the real trade‑off

What a broker should explain about LMI

Lenders Mortgage Insurance (LMI) is a once‑off premium when you borrow above 80% LVR. It protects the lender, not you, but it can bring forward your purchase by months or years.

A good broker will:

• Price LMI across multiple lenders.
• Show you time to target (how long to save an extra 5–10%).
• Compare that to estimated price growth and rent in that time.

Worked example: 5% + LMI vs waiting for 20%

Assume:

• Target property today: $750,000
• You can save $2,500 per month.
• Market growth assumption: 3% per year.

1. Buy now at 5% deposit

   • Deposit: $37,500 + ~$37,500 for costs and buffer = ~$75,000
   • Loan: ~$712,500 (LVR ~95% with capitalised LMI)
   • If interest is 6% p.a. over 30 years, P&I is ~ $4,275/month.
   • Broker will also stress test at 9% (APRA +3% buffer) ≈ $5,755/month.

2. Wait ~3 years for 20% deposit

   • Extra savings needed (beyond your current $75k): ~$120k → ~48 months at $2,500/month.
   • But if prices grow 3% p.a., the property might cost ~$820k in three years.
   • 20% of $820k is $164k, so your target keeps moving.

A good broker doesn’t push you to pay LMI. They show you the compounding maths and check whether paying LMI to get in now is safer than chasing a rising 20% target.

For self‑employed buyers, this decision also has to line up with business cash flow and buffers. That’s covered in more detail in Smart Deposit Strategies For Self‑Employed First‑Home Buyers.