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 start by addressing the elephant in the room: you’re about to save a whole lot of dosh. More than you've probably ever seen in your life. Enough money to buy literally thousands of plates of smashed avo - a tedious comparison made by mainstream media to undermine your hard work.
What we’re saying is, it’s OK to feel a little intimidated right now. And excited! All the feelings! But this is a seriously big chunk of saving and it’s going to take some doing.
Still here? Perfect. Let's talk about how to make this happen.
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 the 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 cost $450,000, at 10% you’ll need to save $450,000 x 5% = $22,500 plus extras like stamp duty. At 20%, that figure becomes $90,000. We know. Ouch.
A smaller deposit can be a great way to get on The Property Ladder (a beautiful place where no one can tell you not to put a galaxy of glow-in-the-dark stars on every ceiling) but it does come with greater risk. Interest rates can change, for example, 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. Ouch.
Hang on, what's 'loan to value ratio' mean?
Big name, simple idea. The loan to value ratio is an expression of how much 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 ration (the closer to 1:1), the greater the risk is 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, like tiny dog couches and a leopard print ottoman.
On the other hand, some people decide that rising costs of buying in their area make LMI 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 way to start is the First Home Owner Grant website, which can direct you. If you’re buying for the first time - and anyone you’re buying with has also never owned or part-owned a property in Australia - there’s a chance you’re eligible for some sweet government funds.
Where do I start?
You’re in the right place! Kick off an Up Home Deposit Saver to receive love in the form of automated payments, Round Ups, Boosted Round Ups and the odd extra savings amount whenever you can make it happen.
And don't forget to reach out any time you need a little motivation or discussion on the best place to hit up for a sneaky avo toast: we won’t judge you if you don't judge us.
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