Melbourne is one of Australia's most expensive property markets — which leads many buyers to assume they need years of saving before they can get in. The reality in 2026 is more nuanced: depending on your situation, you may be able to buy with as little as 2% or 5% of the purchase price, with no Lenders Mortgage Insurance (LMI) to pay. This guide breaks down every deposit option available in Melbourne right now, the real numbers involved, and the suburb-specific context most generic articles miss.
Quick answer: In Melbourne in 2026, the minimum deposit is 2% via Help to Buy (income caps apply) or 5% via the First Home Guarantee (no income cap, no LMI, $950,000 property cap). Without a government scheme, most lenders require at least 5% plus LMI, or 20% to avoid LMI altogether. Stamp duty is a separate upfront cost and must be budgeted on top of your deposit.
How Much Deposit Do Melbourne Lenders Actually Require?
Most Australian lenders set 20% as the standard deposit threshold to avoid Lenders Mortgage Insurance — but this is not the minimum required to obtain a loan. Lenders accept deposits as low as 5% (and 2% with certain schemes), provided you meet serviceability requirements and other credit criteria.
On Melbourne's current median dwelling price of approximately $940,000 (Domain, H1 2026), the deposit maths looks like this:
| Deposit Level | Cash Required on $940,000 | LMI Payable? | Scheme Needed? |
|---|---|---|---|
| 2% | ~$18,800 | No (Help to Buy) | Yes — Help to Buy |
| 5% | ~$47,000 | No (First Home Guarantee) / Yes (no scheme) | Yes for no-LMI — First Home Guarantee |
| 10% | ~$94,000 | Yes (unless guarantor) | No |
| 20% | ~$188,000 | No | No |
The most common structure for Melbourne first home buyer loans in 2026 is the 5% deposit pathway using the First Home Guarantee — expanded significantly from October 2025 to remove income caps entirely and allow unlimited scheme places. This is the most impactful change to Melbourne's first home buyer landscape in years, and it changes the deposit equation for a much wider group of buyers than before.
Can I Buy a Melbourne Home with Just a 5% Deposit?
Yes — and in 2026, the access conditions have been loosened considerably. The First Home Guarantee (FHG) allows eligible first home buyers to purchase with a 5% deposit, with the federal government guaranteeing the remaining 15% of the purchase price. This eliminates LMI, which on a Melbourne home can otherwise add $15,000 to $35,000 or more to your upfront costs.
Key terms of the First Home Guarantee in 2026:
- No income caps — removed from 1 October 2025. Any income level is eligible
- Unlimited places — previously capped at 35,000 per year nationally; now unrestricted
- Melbourne and Geelong property price cap: $950,000 (up from $800,000)
- Must be a genuine first home buyer — never previously owned property in Australia
- Must be an Australian citizen or permanent resident
- Must intend to live in the property as owner-occupier (not investment)
- Must apply through a participating lender — not directly to the government
Melbourne suburb context: At the $950,000 cap, the First Home Guarantee covers a large share of Melbourne's northern and western suburbs — including Coburg, Brunswick, Fawkner, Pascoe Vale, Sunshine, Taylors Lakes and most of Geelong. Most inner-city properties and houses in the inner east fall above this threshold and would not qualify. Units and apartments in these areas often do.
Since the FHG is accessed through participating lenders rather than a direct government portal, the lender you choose — and how your application is structured — matters. An experienced Melbourne mortgage broker can identify which FHG-participating lenders will assess your application most favourably and confirm your eligibility before you begin property searching.
What Is Help to Buy — Can You Really Get in with a 2% Deposit?
The Help to Buy scheme launched on 5 December 2025 and represents the lowest entry point into Melbourne property currently available. It's a federal shared equity program — the government becomes a co-owner of your home, contributing up to 30% of the purchase price for an existing property or up to 40% for a new build. Your required deposit is just 2% of your portion of the purchase price.
Unlike the First Home Guarantee, Help to Buy comes with income caps:
- Singles: $90,000 or less in gross annual income
- Couples: $120,000 combined gross annual income or less
- Melbourne property price cap: $950,000 (same as FHG)
The key trade-off: the government holds a proportional equity stake in your property and receives a share of any capital gain when you sell or when you buy out the government's interest. For buyers who prioritise getting into the market now over maximising long-term equity, Help to Buy can be a powerful tool. For those without income constraints, the First Home Guarantee — where you own 100% of the property from day one — is typically the cleaner structure. Book a call with IFG to compare which scheme fits your specific situation.
What If My Parents Can Help? How Does a Family Guarantee Work in Melbourne?
A family guarantee (also called a guarantor home loan) allows a parent or close family member to use equity in their existing property as additional security for your loan. In practice, this can eliminate the need for a cash deposit entirely — and allow you to avoid LMI — without needing a government scheme.
Here's how guarantor loans work in practice:
- Your parent (or eligible family member) offers a portion of their home equity as a limited guarantee — typically covering the difference between your deposit and 20% of the purchase price
- You borrow up to 100% of the property price, secured against both your new home and the guarantor's property
- Once your loan balance falls below 80% of the property value — through repayments and/or property value growth — the guarantee is released and the family member's property is no longer at risk
- Your guarantor is liable for the guaranteed portion if you default, so this requires careful family discussion and independent legal advice for the guarantor
Guarantor loans are particularly effective when parents have substantial equity but limited capacity to gift cash, and when the buyer has stable income but hasn't had the time to accumulate a deposit. IFG helps Melbourne first home buyers navigate guarantor structures across 30+ lenders to find lenders with the most guarantor-friendly policies.
How Much Does LMI Actually Cost on a Melbourne Home Loan?
Lenders Mortgage Insurance protects the lender — not the borrower — in the event of default where the loan-to-value ratio (LVR) exceeds 80%. Despite this, it is a cost you pay and can be a significant one.
LMI is calculated as a percentage of the loan amount and varies by lender, LVR and loan size. Approximate LMI costs on Melbourne home loans:
| Deposit | Approx. LVR | Approx. LMI on a $750,000 loan |
|---|---|---|
| 5% (no scheme) | 95% | $20,000–$30,000+ |
| 5% (First Home Guarantee) | 95% | $0 — government guarantees 15% |
| 10% | 90% | $10,000–$16,000 |
| 15% | 85% | $4,000–$8,000 |
| 20%+ | 80% or below | $0 |
LMI can be added to your loan (capitalised) or paid upfront. Capitalising LMI means you pay interest on it over the life of the loan, which increases its true cost further. Given this, the First Home Guarantee's no-LMI structure at 5% deposit represents a genuine saving of $20,000 or more on a typical Melbourne purchase. For those who have already purchased with a smaller deposit and LMI, reaching 20% equity through refinancing to a new lender removes the LMI obligation from that point forward.
What Counts as Genuine Savings for a Melbourne Home Loan?
Genuine savings is a lender requirement that catches many buyers off guard. Most lenders require you to demonstrate that at least 5% of the purchase price has been held in an account in your name for a minimum of three consecutive months. The intent is to show borrowing discipline — that you have the capacity to accumulate and hold funds, not merely receive a lump-sum gift.
What typically counts as genuine savings:
- Bank account savings held for 3+ months
- Term deposits held for 3+ months
- Shares or managed funds held for 3+ months
- First Home Super Saver Scheme (FHSS) withdrawals
- Rental payment history — some lenders accept a 12-month rental record as evidence of savings discipline
What typically does not count as genuine savings on its own:
- A parental cash gift received within the past 3 months
- A recent tax refund
- An inheritance received within 90 days
- The First Home Owner Grant (FHOG) — the Victorian FHOG of up to $10,000 for new homes can't be used as the genuine savings component
Lender policies on genuine savings vary considerably — some are more flexible than others, particularly around gifted funds that have been held for 90+ days. IFG brokers know which lenders are most accommodating for different deposit compositions, and can structure your application accordingly.
What Is Your Real Total Upfront Cost in Melbourne? Deposit Plus Stamp Duty
One of the biggest gaps in most deposit guides is the failure to account for stamp duty (land transfer duty) as a separate upfront cost. In Victoria, stamp duty on a $950,000 purchase is approximately $50,070 — and unlike your deposit, it cannot be borrowed and must be paid in full at or before settlement.
Victorian stamp duty concessions for first home buyers:
- $0 stamp duty on properties valued at $600,000 or less
- Partial concession on properties between $600,001 and $750,000 — the concession tapers to zero at $750,000
- Full duty rates apply on all properties above $750,000
With Melbourne's median dwelling price sitting above $900,000, many first home buyer purchases in the city fall above the concession threshold entirely — meaning stamp duty is a very real and significant cost. Our complete 2026 guide to Victorian stamp duty includes a full rate table and examples by purchase price.
Here's what your total upfront cash requirement looks like on a $750,000 Melbourne purchase (a realistic first home buyer target in the northern and western suburbs):
| Cost Item | Estimated Amount |
|---|---|
| 5% deposit (First Home Guarantee) | $37,500 |
| Stamp duty (partial concession at $750,000) | ~$0–$13,000 (tapering) |
| Conveyancing / legal fees | $1,500–$2,500 |
| Building & pest inspection | $500–$800 |
| Loan establishment / application fees | $0–$600 (varies by lender) |
| Estimated total cash required | ~$40,000–$55,000 |
The First Home Super Saver Scheme (FHSS) can also boost your deposit by allowing you to withdraw voluntary superannuation contributions of up to $50,000 for a first home purchase. These withdrawals are taxed at a concessional rate, making the FHSS one of the most tax-effective ways to save for a Melbourne deposit. Speak with an IFG broker about combining the FHSS with the First Home Guarantee or Help to Buy.
What to Do Next — A Practical Checklist Before You Start House-Hunting
Before committing to open homes, IFG recommends working through these steps:
- Assess your genuine savings position — confirm you have 3+ months of savings history, or that any gifted funds have been in your account long enough to qualify
- Check scheme eligibility — have you ever owned property in Australia? If not, the First Home Guarantee is very likely available to you right now
- Understand your borrowing capacity — your deposit amount alone doesn't determine how much you can buy. Read our guide to how much you can borrow in 2026 to understand how lenders assess your income and expenses
- Budget for all upfront costs — factor in stamp duty, legal fees, inspection costs and loan fees. A $37,500 deposit on a $750,000 property may require $50,000+ in total cash
- Get pre-approval before you bid — Melbourne's competitive auction market means sellers favour pre-approved buyers. Learn more about the pre-approval process with IFG's first home buyer loan service
Frequently Asked Questions
How much deposit do I need to buy a house in Melbourne in 2026?
The minimum is 5% with the First Home Guarantee (no LMI, no income cap, $950,000 property cap) or 2% with Help to Buy (income caps: $90,000 singles / $120,000 couples). Without a government scheme, most lenders require 5–10% plus LMI, or 20% to avoid LMI. On Melbourne's median ~$940,000 dwelling price, a standard 20% deposit is approximately $188,000.
Can I use the First Home Guarantee on a property up to $950,000 in Melbourne?
Yes. As of 1 October 2025, the Melbourne and Geelong property price cap under the First Home Guarantee is $950,000. There are no income caps and no limits on available places. You must be a genuine first home buyer, an Australian citizen or permanent resident, and apply through a participating lender.
What is genuine savings for a Melbourne home loan?
Genuine savings is money held in your name for at least three consecutive months. Gifts from family members may or may not qualify depending on the lender and how long the funds have been in your account. An IFG broker can identify which lenders have the most flexible genuine savings policies for your deposit structure.
How does a family guarantee (guarantor loan) work in Melbourne?
A parent or close family member uses equity in their own home as additional security for your loan, enabling you to borrow up to 100% of the purchase price without LMI. Once your loan-to-value ratio falls below 80% through repayments or property growth, the guarantee is released and the guarantor's property is no longer encumbered.
Is the Help to Buy scheme available in Melbourne and how much deposit do I need?
Yes. Help to Buy requires a minimum 2% deposit. The government co-purchases up to 30% of an existing property or 40% of a new build. Income caps apply: $90,000 for singles and $120,000 for couples. The Melbourne property price cap is $950,000. The scheme launched 5 December 2025 and is available through participating lenders.
Ready to Work Out Your Real Deposit Number?
IFG's Melbourne mortgage brokers will assess your eligibility for the First Home Guarantee, Help to Buy, and guarantor options — then find the right lender from 30+ options. No cost to you, no obligation.
Book a free consultation or call 0401 333 636
This article provides general information only and does not constitute financial, legal or tax advice. Scheme eligibility criteria, deposit thresholds, LMI costs, stamp duty figures and all other amounts stated are indicative only and subject to change. Your individual financial circumstances, credit history and lender policies will determine what options are available to you. Always speak with a qualified mortgage broker and, where appropriate, a financial adviser or solicitor before making borrowing decisions.