02/07/2025 by Nicholas Parpis

Forget the old “20% deposit” rule

In today’s Sydney market, interest rates and stricter lending rules, it’s not just about how much deposit you have.

Here’s the reality:

20%+ Deposit

Still the gold standard — it means you avoid Lenders Mortgage Insurance (LMI) and your loan repayments are more manageable. But given higher interest rates and stress testing at around 7%, you’ll need a strong income to service the loan comfortably.

For example,

A $700,000 property with a 20% deposit means a $560,000 loan.

Monthly repayments tested at 7% are roughly $3,750 — which usually requires a combined household income of $130,000+, depending on your expenses and debts.

10% Deposit

Possible, but banks will expect you to have strong evidence of stable income and good savings habits. You’ll pay LMI, and your repayments will be higher.

For a $700,000 property with a 10% deposit, your loan would be about $630,000. Monthly repayments tested at 7% are around $4,150 — meaning lenders typically want to see a combined household income of at least $140,000+ for approval at this loan-to-value ratio.

If your income is lower, it may be challenging to get approved at this LVR.

Less Than 10% Deposit

Usually only available for first home buyers through government schemes — but even then, lending criteria are strict.

If your loan is $650,000 or more with less than 10% deposit, lenders will want to see a household income closer to $150,000+, or evidence of strong rental income or other offsets.

This is the toughest bracket to qualify for because banks are cautious with higher risk lending.

Why Your Income Matters More Than Ever

Banks now assess your ability to repay loans with higher interest rate buffers, often testing repayments at 7% or more. This means:

• Even if your current rate is around 6%, they’ll check if you can still afford repayments at 7%+
• Your living expenses and other debts are scrutinised closely
• A strong, stable income is crucial — casual or irregular income can be a red flag

Bottom line:

Your deposit is important, but it’s only one part of the equation. Your income, expenses, and credit will have an even bigger say in what you can borrow today.

If you want a realistic assessment of your borrowing power and how to plan your deposit — let’s chat. I’ll help you cut through the noise and figure out what’s achievable right now.