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.
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!)
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
With a 10% deposit
With a 20% deposit
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.
Even better – if you're a first home buyer, you may be able to avoid these LMI premiums with the First Home Guarantee (formerly the First Home Loan Deposit Scheme).
Check if you're eligible to save thousands with the FHG
"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.
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:
Read our complete money-saving guide here
"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."
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:
How a self managed super fund can help, plus options for first-time buyers explained.
Find out how much deposit you need to qualify for a home loan in Australia.
The larger your deposit, the better your chances of getting your home loan approved.
Deposit bonds benefit purchasers who do not have readily available access to a cash deposit or would prefer not to use their own cash.
If you're a single parent buying a home, you may be able to use Centrelink payments to supplement your income.
Getting a home loan deposit from family as a gift? Cash gifts can help you get on the property ladder, but you need some genuine savings, too.