Before you buy: pre-approval and 2%, 5% or 10% deposits explained
NSW buyer guide. Official sources checked 19 October 2026, Sydney time.
A home search is easier when you know two numbers: what a lender may lend you, and what you can comfortably afford. They are not always the same. Before making an offer, understand your loan conditions, the cash needed to complete the purchase and the costs you will carry after moving in.
Start with pre-approval, then set your own budget
Pre-approval is a lender's conditional assessment of your borrowing position. It can help narrow your search, but it is not a guarantee that finance will be available for a particular property. Final approval still depends on the lender's checks of you and the property. ASIC Moneysmart
Read the conditions and expiry date on your own letter. For example, NAB describes a 90-day conditional approval certificate, while ANZ generally describes around three months, assuming your circumstances do not change. Ask what must be reassessed if your income, debts or plans change. NAB, ANZ
Your search budget should leave room for ordinary life, not just the mortgage. A useful question is: “Could I still manage this home if repayments or household expenses increased?”
When can a 2% deposit apply?
A 2% deposit is available through particular eligible pathways; it is not a general offer to every buyer.
Under the Australian Government 5% Deposit Scheme, eligible single parents or single legal guardians may buy with a minimum 2% deposit without Lenders Mortgage Insurance (LMI). Applicants must be Australian citizens or permanent residents aged 18+, apply alone, meet the scheme's single-parent/dependent-child definitions and satisfy ownership, occupancy and lending rules. Single-parent pathway
A separate program, Help to Buy, also starts at a minimum 2% deposit. It uses shared equity: the government may contribute up to 30% for an existing home or 40% for a new home, and shares in its future value. Applicants must be Australian citizens aged 18+; income, ownership and other limits apply. Government equity must eventually be repaid under the program rules. This differs from a loan guarantee. Help to Buy
Ask your lender which program they mean whenever someone advertises “buy with 2%”.
When can a 5% deposit apply?
The Australian Government 5% Deposit Scheme can help eligible first-home buyers, or buyers who have not owned Australian property or land in the previous ten years, purchase an owner-occupied home without LMI. Applicants must be Australian citizens or permanent residents aged 18+, applying alone or with one other person. Scheme eligibility does not guarantee loan approval. First-home buyer eligibility
The expanded scheme has no income cap, but affordability assessments remain. The government guarantee supports the lender; it does not pay your repayments. Scheme overview
Property caps also matter. The current NSW table lists $1.5 million for the capital city and specified regional centres, and $800,000 for other areas. Both purchase price and lender-assessed value must meet the applicable cap. Check the exact suburb and postcode with your participating lender. Official price-cap checker
Outside a government scheme, some lenders accept 5% deposits, but additional costs and different lending conditions may apply. Moneysmart deposit guide
What about 10% or 20%?
A 10% contribution reduces the amount you need to borrow compared with 5%, but does not automatically remove LMI. Where the loan-to-value ratio exceeds 80%, LMI may apply unless an eligible exemption or arrangement applies. LMI protects the lender, not the buyer. Moneysmart deposit guide
A 20% deposit can help avoid LMI, but buyers still need money for purchase costs. A larger deposit should be weighed against keeping an appropriate cash reserve. Moneysmart buying guide
A simple $800,000 example
These are arithmetic illustrations, not loan offers. They assume the purchase price equals the lender's valuation, exclude all fees and buying costs, and assume no shared-equity contribution:
2% contribution: $16,000; remaining purchase funding $784,000.
5% contribution: $40,000; remaining purchase funding $760,000.
10% contribution: $80,000; remaining purchase funding $720,000.
20% contribution: $160,000; remaining purchase funding $640,000.
The 2% line does not mean every buyer can borrow $784,000. Each pathway has its own eligibility and lending assessment. Help to Buy works differently because a government equity contribution can replace part of the loan.
Your mortgage deposit is not the same as the contract deposit
Your contribution towards the purchase and the amount payable to the seller at exchange are related, but different requirements. NSW contract deposits are commonly 10%, although another amount, such as 5%, may be agreed. A low-deposit loan scheme does not automatically change the seller's contract. Have your conveyancer arrange the deposit amount and payment timing before you commit. The contract deposit is part of the purchase price, not an additional purchase price charge. NSW contract process
For an ordinary NSW residential purchase, cooling off is generally five business days; off-the-plan contracts generally have ten. Exercising cooling-off rights normally costs 0.25% of the price: $2,000 on an $800,000 purchase. This is not a 0.25% home-loan deposit scheme. Auctions, and same-day exchanges after a property passes in, have no cooling-off period. Obtain legal advice before waiving cooling off. NSW contracts and deposits
Allow for costs and a valuation shortfall
Budget separately for transfer duty where payable, legal work, inspections, registration and loan costs, then ongoing rates, insurance, strata levies where relevant and maintenance. NSW buying costs
NSW first-home duty relief has separate rules: eligible homes up to $800,000 may receive an exemption, with concessions above $800,000 and below $1 million. Eligibility for a federal deposit scheme does not automatically mean no stamp duty. Revenue NSW
A bank's valuation may differ from the price you agree to pay. ANZ valuation guide
For example, if a lender permits 90% of a $780,000 valuation on an $800,000 purchase, the loan would be $702,000. You would need $98,000 towards the price, rather than $80,000, plus costs. This is an illustration, not a prediction of a lender's decision.
Before you make an offer: six questions to answer
What monthly repayment fits my household budget, with a buffer?
Which deposit pathway has the lender assessed for me?
What conditions and expiry date apply to my pre-approval?
What cash is needed at exchange, and what additional cash is needed at settlement?
Have my lender and conveyancer checked this property's finance and contract risks, including whether a finance condition is needed?
If buying at auction or signing unconditionally, am I ready for a binding commitment without relying on pre-approval alone?
Bring those answers together before deciding your offer limit. A confident purchase starts with a workable plan, not simply the highest borrowing figure.
For help finding a property around your lender-confirmed budget, contact Thao Pham on 0452 526 888.
Thao Pham | Licensed Real Estate Agent | Licence No. 20375265
General educational information only, not personal credit, financial, tax or legal advice. Eligibility, lending policies and scheme rules can change. Obtain finance advice from a licensed lender or mortgage broker and contract advice from your solicitor or conveyancer before committing.
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