The good news? You may not need as big of a deposit as you think. Learn how much you can afford to borrow and whether you're eligible for any grants or schemes.
Saving a house deposit can take years, especially when Australian property prices continue to go up. But if you can be disciplined with your spending, draw up a budget and research your support options, saving a deposit might be easier (and less expensive) than it seems at first.
3 steps to saving a house deposit
1. Work out your deposit size. Get a rough idea of what you need to save.
2. Get serious about saving. Set a budget and find ways to cut back.
3. Get help with your deposit. Government help, family assistance and more.
1. Work out your deposit size
The typical house deposit is 20% of the property price, but many lenders will accept a deposit as low as 10% or even 5%. Some may even accept a deposit of just 2%, under the Family Home Guarantee.
Be aware that a smaller deposit means borrowing more money and therefore paying more interest over time. Getting into the property market sooner rather than later could mean you own your home outright faster, so that could be a price worth paying.
When your deposit is less than 20%, you usually have to pay lenders mortgage insurance (LMI), which can add thousands to your costs.
There are 2 parts to a property purchase: the deposit (the amount you save up) and the loan (the money you borrow). How much deposit you need depends on the loan you qualify for.
A great way to work out how much you might be able to afford is by looking at how much rent you pay now. Then, use a loan repayment calculator and see how mortgage repayments compare to your rent.
For instance, on a $480,000 mortgage at 6%, the mortgage repayments are around $2,900 per month. How does this compare to your rent?
A mortgage of $480,000 could go towards a house worth $600,000, if you're lucky enough to have a 20% deposit worth $120,000. But here are a few different ways your deposit scenario could play out...
With a 5% deposit
Property price: $600,000
Deposit: $30,000 (a 5% deposit)
Loan amount: $570,000
Plus LMI of around $23,000
With a 10% deposit
Property price: $600,000
Deposit: $60,000 (a 10% deposit)
Loan amount: $540,000
Plus LMI of around $13,000
With a 20% deposit
Property price: $600,000
Deposit: $120,000 (a 20% deposit)
Loan amount: $480,000
No LMI payable
That LMI premium of $13,000 is pretty steep on a 10% purchase, right? With a 5% deposit, you pay LMI of over $23,000 – almost as much as you've saved as a deposit!
These are eye-watering sums. On the plus side, you may be able to add these premiums to your mortgage, so you don't have to find the money upfront. The other benefit is you take advantage of any capital growth in your asset, which may outweigh the LMI that you have paid.
"Unlocking the door to your first home starts with a solid plan. Begin by defining what matters most in a home and location. Once your priorities are clear, set your deposit target, streamline your spending, explore creative income opportunities, and leverage available support options. With determination, smart strategies, and a little flexibility, home ownership could be closer than you think."
Beyond your deposit (and possibly LMI), there's one more big upfront cost to watch out for: stamp duty. If you're a first home buyer you might get a discount or exemption on stamp duty, depending on where you live.
Once you have your deposit goal in mind, you need to get serious about saving. Here are some basic, essential tips:
Examine your spending. Track your spending using an app like the Finder app and get a detailed breakdown of what you really spend each month.
Set a budget. Using your spending breakdown, set a realistic budget and work out where you can make cuts to your current spending.
Pay off urgent debts first. Get any debt under control as fast as possible. Prioritise high interest debt first: a HECS debt is much less urgent than credit card debt.
Sell something. If you have an asset you could sell, like a car you're willing to part ways with, or some shares, you might consider selling them and putting the money towards your deposit.
"I have a savings goal of $120,000, which is roughly 20% of a two-bedroom unit in Sydney's west. I'd rather save for longer than pay higher monthly repayments. I started saving two years ago – being a first generation immigrant, I don't have the benefit of the bank of mum and dad, so creativity is a must. I've been salary sacrificing to super using the FHSS, starting with $500 then increasing to $1k. This allows me to reduce my taxable income – voluntary super contributions are taxed at 15%, which is significantly lower than my marginal tax rate. I plan to withdraw my salary sacrificed contributions in about 3 years time, when I expect it to be around $45k. To get to my $120k goal, I'm also putting money in an index-based ETF every month. Hopefully house prices don't get too crazy – or crazier! – in 3 years time."
John R
Sydney renter, on a mission to buy a home
3. Get help with your deposit
When you're scraping together a home loan deposit, literally every dollar counts. It can feel like a massive uphill slog, but if you set out a clear plan and take advantage of all the different schemes and incentives, it can bring the dream of owning your own home that little bit closer.
You don't always have to be a first home buyer to get a financial boost, either. Some states and territories offer stamp duty discounts to owner occupiers, so you'll pay less than an investor or a buyer from overseas.
Here are some other ways you could get help with your deposit:
Parental guarantor. If your parents own their home (or the majority of it) and they're willing to guarantee part of your deposit, you can avoid LMI and save a smaller deposit. Read more about guarantor mortgages.
Live with your parents. This is another tip that involves family help – but if it's possible to live back at home for a short while so you can put your saved rent towards your home loan, that could fast-track your deposit goals.
First home owner grant. In some states there are cash grants for first home buyers. You usually need to buy a newly built home under a certain price in order to qualify. If eligible, you can use the grant to form part of your deposit.
Cash gift. If your parents are able and willing (and we understand this is not often the case!) they could provide a cash gift to boost your deposit. There are just a few rules you need to be aware of.
Other government help. The federal government's First Home Super Saver Scheme lets you make extra contributions to your superannuation, pay less tax and then use the money as part of your deposit. The First Home Guarantee also allows up to 10,000 first home buyers to save 10% deposits and get homes, without needing to pay LMI.
Watch: How much should you save to buy a house?
The fastest way to save is to create a plan that sets out exactly what your goal is, and the steps you need to take to achieve it. If your goal is to save $50,000, work out how much you can set aside from your income; what you can save on household bills; where you can trim your spending; what extra work you can do to earn money; you could even ask friends and family for money instead of birthday presents. Set a goal and stay motivated as you work towards achieving it, and you'll start to build momentum.
It could be, depending on the type of property you're buying, it's location and your income. As well as deposit, banks will take into account your ability to repay loans. If you have a smaller deposit of $20,000 but you earn a high income and can afford higher repayments, you might qualify for a low-deposit loan. Whatever the size of your deposit, it might be worth speaking to a mortgage broker to find out what your options are.
Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full bio
Richard's expertise
Richard has written 556 Finder guides across topics including:
As an authority on all things personal finance, Sarah Megginson is passionate about helping you save money and make money. She is an editor and money expert with 20 years’ experience and an extensive background in property and finance journalism. Sarah holds ASIC RG146-compliant Tier 1 Generic Knowledge certification, and she's a regular media commentator, appearing weekly on TV (Sunrise, Channel 7 news, Nine news), radio (KIIS FM, Triple M, 3AW, 2GB, 6PR) and in digital and print media. See full bio
Sarah's expertise
Sarah has written 191 Finder guides across topics including:
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