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How to save for a house deposit

The good news? You may not need as big of a deposit as you think. Learn how much you can afford to borrow and follow these 3 steps to get into your own home sooner.

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.

Find out more about LMI (and how to avoid it!)

How much deposit do you need?

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 2.5%, the mortgage repayments are around $1,900 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.

Even better – if you're a first home buyer, you may be able to avoid these LMI premiums with the First Home Loan Deposit Scheme (FHLDS).

Check if you're eligible to save thousands with the FHLDS

Finder survey: As a percentage of property price, what is the average deposit amount on a low-deposit loan?

Source: Finder survey by Pure Profile of 1112 Australians, December 2023

2. Get serious about saving

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.

You can read more about the potential savings in our state-by-state stamp duty guide, or enter your details into this stamp duty calculator.

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.
  • Maximise your savings. Put your money to work while building your deposit with a high interest savings account or consider putting some of your savings in a term deposit.

Read our complete money-saving guide here

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.

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, either. Some states and territories offer stamp duty discounts to owner occupiers, meaning you'll pay less than an investor or a buyer from overseas. And you don't have to be a first home buyer to access the FHG mentioned above – although, you do have to be single.

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.
  • 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.
  • 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.
  • 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 Loan Deposit Scheme 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?

More helpful guides for hopeful first home buyers

John is the co-host of the this is money and this is property podcasts (formerly my millennial money and my millennial property). He is Director at SOLVERE Wealth, Director/Buyers Agent at Envisage Property, and is property coach of over 25 years.
John is the co-host of the this is money and this is property podcasts (formerly my millennial money and my millennial property). He is Director at SOLVERE Wealth, Director/Buyers Agent at Envisage Property, and is property coach of over 25 years.

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