Saving Your Home Deposit

Saving for your very first home? Understanding what size deposit you need can be tricky, so we’ve broken it down into a few simple steps.

Remember, any advice provided on this website is of a general nature only and does not take into account your personal needs, objectives and financial circumstances. You should consider whether it is appropriate for your situation.

Let’s be honest, you're about to save a whole lot of money—it's normal to feel a bit intimidated. So let’s start with the basics to help get you on the right track.

How much deposit do I really need?

Your deposit is proof that you can save money and that you're committed to paying a mortgage off. Many lenders will want 10 or 20% of the price of a home. Others will let you take out a home loan with a 5% deposit.

So, if you reckon the sort of place you'll want will require a loan of $550,000, at 5% you'll need to save $550,000 x 5% = $27,500 plus extras like stamp duty. At 20%, that figure becomes $110,000.

A smaller deposit can be a great way to get started but it does come with greater risk. As an example, interest rates can change and impact how much you'll need to repay. Plus, as property prices fluctuate, your loan to value ratio could change too, and you could even end up owing more than your place is worth.

What's 'loan to value ratio’?

This is an expression of how much of the value of your property is yours, and how much you still owe to your lender. It's the loan amount divided by the value of your home.

The higher the ratio (the closer to 1:1), the greater the risk to the lender. To offset this risk, if you start out owing more than 80% you'll almost certainly have to pay for a thing called 'lender's mortgage insurance' (LMI). It's a once-off premium that gets added to your loan at the beginning.

A larger deposit will help you avoid this extra cost. If you can manage to save a 20% deposit (and only borrow 80% of the purchase price), you won't have to take out LMI and you can instead spend that money on the important things.

On the other hand, some people decide that rising costs of buying in their area make LMI likely cheaper than waiting to save. It's important to know the risks either way, and get financial advice if things don't feel crystal clear.

Can I get a First Home Owner grant?

Australia has a national first home owner grant scheme, which was introduced to offset the GST in 2000. Each state and territory has its own rules, so the best place to start is the First Home Owner Grant website, which can direct you. If you're buying for the first time, there's a chance you're eligible for some help.

For example, in Victoria, if you're buying a brand new property worth up to $750,000, you might be eligible for a $10,000 grant. There are also some concessions based on what you're buying, whether you're receiving a pension, and other factors.

In NSW, the First Home Buyers Assistance Scheme can give you partial or full exemption on paying stamp duty. Queensland offers first-time buyers a grant of $15,000 towards brand new homes.

Where do I start?

Creating a Home Saver in-app is a great first step. Set up Payment Splits to direct money to your Home Saver as soon as you get paid to start saving automatically. And to get your savings really humming along, add Boosted Round Ups to your Home Saver and any odd extra cash whenever you can and you’ll be well on the way to nailing down your deposit.