Deposit size, LMI and your borrowing power
Last updated September 2026 · Back to the calculator · All guides
Your deposit does not change how much a lender thinks you can service, but it does change how much you need to borrow, whether you pay Lenders Mortgage Insurance (LMI), and therefore the price you can realistically afford.
Deposit and the price you can afford
The most you can spend is roughly the loan you are approved for plus your deposit, less the costs of buying. A larger deposit lets you reach a higher price on the same loan, and a smaller deposit means you need a larger loan to buy the same property, which the lender tests against your income.
What LMI is
LMI is a one-off insurance premium you usually pay when your deposit is under 20% of the property value. It protects the lender, not you. The premium rises as your deposit shrinks, and many people add it to the loan, which increases the amount they borrow and repay.
Ways around it
- Save a 20% deposit. No LMI, and a smaller loan.
- Use a government scheme. The 5% Deposit Scheme lets eligible first home buyers avoid LMI with a small deposit, but the lender still tests the larger loan against your income. Help to Buy needs only 2% and makes the loan smaller, in exchange for a government share of the home.
- Buy a cheaper property. A lower price can lift the deposit you have to a better percentage.
Costs on top of the deposit
Stamp duty, legal fees and other purchase costs come on top of the deposit, so check what you will need in total. State first home buyer grants and duty concessions may reduce the bill, and they vary by state.
Before you decide
- Work out the total you have available, after costs.
- Run the calculator with different deposit sizes to see how the loan and price change.
- Compare buying sooner with a small deposit against waiting until you have more.
- Ask a broker to compare the real cost of LMI across lenders.
See also how much a first home buyer can borrow.
How a broker helps, at no cost to you
- Finds the right lender. Compares lenders across their panel to find which will lend you the most, including those taking part in the 5% Deposit Scheme and Help to Buy.
- Handles the scheme. Checks your eligibility and the price cap, and applies for your scheme place through the lender.
- Gets you ready to bid. Sorts the paperwork and a pre-approval before you make an offer.
Who pays? Most mortgage brokers charge you nothing. The lender you choose pays the broker a commission when your loan settles. By law a broker must act in your best interests, not the lender's. We may receive a referral fee from the broker; it does not change what you pay.
This page is general information only, not credit advice or a recommendation. Lender policies change; a licensed broker or lender can confirm what applies to you.