The 20% deposit has long been seen as the golden standard for property purchases in Australia. For Melbourne buyers looking to upgrade or invest, that translates to just less than $200,000 on a median-priced house, according to Cotality’s most recent home value index. That’s a considerable sum that can delay your plans for years.
And, with Melbourne’s market forecast to grow over 2026, the reality is that accumulating a full 20% deposit often means watching property prices rise whilst you save.
How long does it take to save a 20% deposit?
Even for households that could comfortably service mortgage repayments, building the upfront deposit remains a major barrier. According to PropTrack, an average-income household, saving 20% of its income, would need the equivalent of 5.8 years to build a 20% deposit on a median-priced home.
The good news is that buying without a 20% deposit is not only possible, but it's also increasingly common, and several options are available.
Government schemes
Recent changes to government policy have opened new doors for first home buyers with smaller deposits. As of late 2025, the Australian Government removed the income caps for the 5% Deposit Scheme (formerly the Home Guarantee Scheme). This allows individuals and couples to access government-backed loans with as little as a 5% deposit and no LMI.
Additionally, eligible buyers can access the Help to Buy scheme. This is a shared equity program that allows you to purchase with a 2% deposit. The government contributes up to 30% or 40% of the purchase price. The scheme is very limited with just 10,000 places available a year and is restricted to buyers with a taxable income at or below $100,000 for individuals or $160,00 for single parents and couples.
Equity from an existing property
For upgraders and investors, accessing equity in your current property can be an alternative to saving cash. Equity is the difference between your property's current value and your outstanding mortgage balance.
Most lenders allow you to access up to 80% of your property's value minus your existing loan. This is your usable equity.
For example, if your Melbourne home is valued at $1 million and you owe $600,000, you have $400,000 in total equity. Your usable equity would be $200,000 (80% of $1 million is $800,000, minus the $600,000 you owe).
This $200,000 could fund the deposit on an investment property without requiring years of additional savings. You can access this equity through a home equity loan, line of credit or by refinancing your existing loan.
The trade-off is that you are increasing the debt secured against your existing home, which can amplify risk if property values fall. Higher total debt can also place pressure on cash flow, particularly if interest rates rise. Poor structuring may create tax inefficiencies for investors, which is why clear advice is critical.
Lender’s mortgage insurance (LMI)
When you borrow more than 80% of a property's value, lenders view you as a higher risk. To protect themselves, they usually require you to pay for LMI on loans with a loan-to-value ratio (LVR) of more than 80%. LMI is a one-off premium that protects the lender (not you) if you default on your home loan.
This is a common option for buyers who do not have a full 20% deposit saved.
However, LMI can be very expensive. Generally, LMI can range from 1-5% of your loan amount. For a $981,185 house (Melbourne’s median price), this can be up to $49,000 – a considerable amount on top of your other upfront expenses like stamp duty and legal fees.
In some cases, the premium is added to your home loan, which means you pay interest on it over time, increasing your monthly repayments.
LMI waivers
Some lenders offer LMI waivers for certain professions. This is based on the profession’s standard income and status. Some of these include allied health professionals like doctors, nurses, physiotherapists and dentists. Some lenders also offer waivers to essential services like the police, fire department and ambulance workers. Other qualifying careers may include lawyers, accountants, actuaries and other financial professionals.
However, borrowing options can be narrower, as not every lender offers these waivers, and some professional packages come with fewer features or less competitive rates than mainstream loans.
There are also very strict requirements for an LMI waiver, so it is important to speak to a mortgage broker like those at AXTON Finance to find a solution that suits your specific occupation.
Guarantor loans
A guarantor loan allows a family member (usually your parents) to use equity in their property to support your purchase. While guarantor loans are typically associated with first home buyers, they can also be used for upgrading.
This is sometimes called the Bank of Mum & Dad, and it is a significant part of the Australian property market. According to Helia, 35% of buyers in 2025 received financial help from family, and almost half of prospective first home buyers believe they would be unlikely to buy without it.
While not all of this support takes the form of a guarantor arrangement, it highlights how common family involvement has become.
In a guarantor structure, the family member does not provide cash. Instead, they offer their property as additional security for a portion of your loan. Many lenders limit the guarantee to just the amount needed to avoid LMI, which helps cap the guarantor’s exposure.
Once you've built sufficient equity through repayments and capital growth, the guarantor can be released from the arrangement. While this option requires careful consideration of the risks for your guarantor, it can help you enter the market sooner without depleting your cash reserves.
That said, the guarantor’s property is still exposed if you are unable to meet repayments, and releasing the guarantee can take longer than expected if property values don’t grow or even decline. These arrangements can also place strain on family relationships if expectations are not clearly set from the outset, which is why legal advice and careful structuring are essential.
Pooling resources
Some buyers choose to pool resources with a partner, friend or co-investor so that the combined deposit is larger, even if each person contributes less individually. This can reduce or eliminate the need for LMI and, in some cases, improve borrowing capacity by combining incomes. For upgraders and investors, it can also open access to higher-quality properties that may have been out of reach on your own.
However, shared ownership requires careful planning. Lenders typically assess co-borrowers jointly, which means each person is fully responsible for the entire loan, not just their share. Exiting the arrangement can also be difficult if one party wants to sell or refinance before the other. Clear legal agreements are essential to outline ownership percentages, exit strategies and how costs and future gains will be handled.
Make an informed decision with help from a mortgage broker
If you are thinking about a property purchase, whether its your first home, an upgrade or an investment, it is worth checking whether the 20% deposit requirement assumption still holds. Often, it doesn’t.
But, buying without 20% requires careful assessment of your circumstances. Consider your income stability, existing debts, future commitments and your comfort level with the potential additional loan servicing required.
A skilled Melbourne mortgage broker like AXTON Finance can model different scenarios, showing you the true cost of various deposit levels and helping you understand which lenders offer the most suitable terms for your situation. We can also identify whether you qualify for professional LMI waivers or other concessions that could significantly reduce costs.
If you’re considering buying or upgrading and aren’t sure how much deposit you really need, a quick conversation can bring clarity. Contact AXTON Finance to discuss your options and see whether buying with less than a 20% deposit makes sense for you. Call 03 9939 7576, email getabetterrate@axtonfinance.com.au or get in touch today.