How Much Deposit Do I Need to Build a New Home?

One of the first questions I hear from families thinking about building is this: "How much do I actually need saved before I can start?"

It is a fair question. And the honest answer is — less than most people think.

Most lenders prefer a deposit of between 10% and 20% of the total project cost. This covers both the land purchase and the construction contract.

For a house-and-land package valued at $800,000, that would mean saving between $80,000 and $160,000.

If your deposit is below 20%, lenders will typically require you to pay Lenders Mortgage Insurance (LMI). LMI protects the bank — not you — in the event you cannot meet your repayments. It adds to your upfront costs, but it does not prevent you from building. Many families build with a 10% deposit and factor LMI into their budget from the start.

That said, LMI is not always unavoidable. Certain professions — including medical practitioners, lawyers, accountants, and some other eligible occupations — may qualify for LMI waivers through specific lenders, even with a deposit below 20%. Government-backed schemes such as the First Home Guarantee and Keystart also allow eligible buyers to build with a smaller deposit without paying LMI at all.

There are genuine pathways to build with as little as 5% saved, depending on your circumstances.

Keystart is a Western Australian Government scheme designed specifically for this. It allows eligible buyers to enter the market with a deposit as low as 2% in some cases, without paying LMI. Income and purchase price caps apply, but for many first home buyers in Perth, Keystart is a realistic and well-supported option.

The First Home Guarantee (formerly the First Home Loan Deposit Scheme) is a federal government initiative that allows eligible buyers to purchase or build with a 5% deposit, with the government guaranteeing the remaining 15%. This means no LMI, even with a smaller deposit.

These schemes have limited places each financial year, so timing matters.

When you build a new home, the deposit structure is different from buying an established property.

The deposit required to secure land varies depending on the project and the developer. Some land releases require as little as $5,000 to hold a lot, while others may ask for 10% of the land price. It is worth understanding the specific terms before committing.

The construction loan is then drawn down in stages as the build progresses, meaning you are not paying the full construction amount upfront. This staged drawdown structure is actually one of the advantages of building versus buying established — you are not required to have the full amount sitting in your account on day one.

In Western Australia, eligible first home buyers building a new home may receive the First Home Owner Grant (FHOG) — currently $10,000. To qualify, two criteria must both be met: the total property value (house and land combined) must be $800,000 or less, and the land price alone must be $450,000 or less. Both thresholds need to be satisfied to receive the grant.

While the FHOG cannot be used as your formal deposit with most lenders, it does reduce the amount you need to have saved overall. Some lenders will factor it into your overall financial position when assessing your application.

Every situation is different. The deposit you need depends on:

• Your lender and loan type — different banks have different policies
• Whether you are buying land and building separately, or using a house-and-land package — the structure affects how deposits are staged
• Your income and borrowing capacity — a higher income can sometimes offset a smaller deposit
• Which government schemes you qualify for — these can significantly reduce what you need upfront
• Your occupation — some professions qualify for LMI waivers through certain lenders
• The total project value — land price plus construction cost

The most important thing I can tell you is this: do not wait until you think you have enough saved before having a conversation.

I have worked with families who assumed they were years away from being ready — and after a proper look at their situation, they were building within six months. The numbers are often more achievable than people expect.

There is also a real risk in waiting too long. Perth's property market moves. Land prices rise, and house-and-land packages that are affordable today may not be next year. Families who hold off because they think they are not ready can find themselves priced out of the areas they wanted — not because they were not capable of buying, but because they did not know they already were.

Knowing your actual number — the real deposit required for your specific situation — is far more useful than guessing based on general advice.

If you are wondering whether you are close, or want to understand what you are working toward, get in touch — I am happy to walk through the numbers with you at no cost.