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How to Save for a House Deposit

Find out how much to save for your home loan deposit and tips for doing so, as well as comparing your options, with Savvy.

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, updated on August 7th, 2023       

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It’s rarely easy to save up a deposit for your home purchase, as there’s plenty of discipline and self-control that’s required for you to achieve your goals. Fortunately, there are a range of key tips and tricks which you can employ to not only save up more effectively, but faster too. Compare a range of home loan options with Savvy today and find out how to save for a house deposit.

How much do I have to save for a house deposit?

In most cases, lenders will require you to save a deposit worth at least 20% of the value of your home. This is the industry standard across all lenders, with 80% of the purchase price sometimes the maximum lenders will be willing approve you for. However, it’s still possible to get approved for a deposit of as little as 5% by paying Lenders Mortgage Insurance (LMI). This is a policy implemented to protect lenders in the event the borrower fails to repay their debt, which can cost tens of thousands of dollars.

Ultimately, though, how much you have to save for your house deposit will depend on different factors unique to your situation. For instance, a 20% deposit on one house is likely to be substantially different to that of another due to the difference in value. Additionally, you may be required to save more to cover the cost of your home’s stamp duty or the cost of LMI, so you should be aware of what each of them cost, as they can eat into money which may be set aside for a deposit.

How can I save for a house deposit fast?

There are many steps which you can take to help realise your goal of saving for your house deposit sooner, so it’s important to familiarise yourself with them and look to employ as many as you can wherever possible. Some of the key steps include:

Create a detailed budget

The most important thing is to set a household budget to follow in the leadup to submitting your deposit. This will help you determine where your money is going, where its usage can be improved and what amount is comfortable and reasonable for you to put aside each week, fortnight or month. Using this budget, you can narrow down what expenses are essential for you (such as food and rent) and which aren’t (such as costly gym and entertainment subscriptions you may not be using) to help you maximise the funds being dedicated to your deposit saving.

Set yourself savings goals

Using your household budget, you can determine what your ideal savings goals are. While you may have a specific amount in mind to pay for your dream home (which you can work out by multiplying the indicative cost of a home by the percentage of deposit you want, such as $500,000 x 20% = $100,000), the time taken may be more difficult to work out.

By determining what you can afford to save each week or month, you can calculate the time it’ll take you to save for it. For example, if you were able to put aside $300 each week and were aiming to save an extra $30,000, you’d be able to work out that it’d take you less than two years to reach it. Having clear timeframes in mind can provide greater incentive and motivation to reach your goals. You can use Savvy’s savings calculator to help work out how long it’ll take for you to reach your goal.

Maximise your personal savings

Of course, there’s more you can do with your savings to help bring your deposit goal closer within reach. You should always look to secure a high interest savings account in which to house your savings, as the interest generated each month can make a big difference. Using the previous example based on an existing savings balance of $70,000 and a goal of $100,000, you could reach it in three years by contributing just over $175 each week and would generate more than $2,500 in additional savings with a 1% p.a. interest rate.

Get on top of your outstanding debts

Debts such as credit cards and personal loans come with interest which can mount over time, potentially costing you thousands of dollars more than if you’d paid them off at a faster rate. That’s why it’s important to pay off as many debts as you can as soon as possible when saving up for a home purchase deposit. This is especially the case for credit card debts, as these are often high interest but, when paid promptly, the interest debt is reduced significantly compared to a minimum monthly payment, which could end up taking decades.

What assistance is available when saving up for a house deposit?

When first home buyers ask how to save for a home deposit, there are several different types of government assistance available. These include:

First Home Loan Deposit Scheme (FHLDS)

This scheme enables eligible recipients to receive a government guarantee for up to 15% of their mortgage deposit, meaning they won’t be required to pay LMI with a deposit as small as 5% of the property price. Some of the main eligibility criteria include:

  • Annual income of up to $125,000 (or $200,000 for couples)
  • Never have owned a home previously
  • Purchasing as an owner-occupier

New Home Guarantee

The New Home Guarantee is similar to the FHLDS, but applies specifically to the purchase of new homes, whether recently built or bought and constructed by the borrower as part of a house and land package. It also guarantees up to 15% of the value of a home deposit, although the following property price caps apply:

  • $600,000 – NSW and ACT
  • $550,000 – Victoria
  • $500,000 – Queensland
  • $400,000 – WA, SA and NT

First Home Owner Grant (FHOG)

This scheme provides eligible recipients with a lump sum of up to $10,000 to $15,000 towards the purchase of their home, which may be used as part of their deposit. You mustn’t have owned any property in the past, nor can your partner have done if you’re purchasing property together. A lump sum like this can be a great help to young buyers struggling to save for their deposit.

First Home Super Saver Scheme (FHSSS)

The FHSSS is a scheme which enables Australians to make both voluntary pre- and post-tax contributions into their super fund to help save for their home. This can be obtained up to a maximum of $15,000 in one year or $30,000 overall. However, contributions made by your employer or spouse cannot be included in this scheme.

More questions about house deposits and how to save for them

Can I avoid making a deposit on my home loan?

Yes – it’s possible to make a deposit of less than 20% (or none at all) without paying LMI by applying for your home loan with a guarantor. This is an individual who agrees to shoulder the responsibility of repaying your loan in the unlikely event you’re unable to do so yourself. This is usually a parent or grandparent who’s in a strong financial position and holds equity in a property, which is often part of the qualification criteria. The added safety measure of a guarantor allows borrowers to access mortgages with a loan-to-value ratio (LVR) of up to 100% or sometimes more.

How do I save for a house deposit in a year?

How to save for a house deposit in a year (and whether you’re able to do so) wholly depends on your individual financial circumstances and the type of property you’re looking to purchase. If you were earning a comfortable, high income and had relatively low expenses, you might be able to reach your goal with 12 months of aggressive savings to supplement your existing funds. You shouldn’t put yourself at risk of financial hardship in order to pay for your deposit; it’s worth taking the extra time to save if it’s the difference between comfort and discomfort in your day-to-day life.

Can I automate my contributions into a savings account?

Yes – you can set up automatic transfers into a specific savings account to help ensure you don’t forget to contribute towards your savings goal in a given month. This can be done by having your wage deposited directly into your deposit savings account and taking out the funds you need or simply contact your financial institution to arrange direct transfers into your account every week or month as you’re paid.

What is an offset account and can I use it to save up for a deposit?

An offset account is a highly useful home loan feature which enables you to deposit funds into an account attached to your mortgage which subtracts from your total, reducing the interest you’re required to pay. For instance, if you had a $500,000 home loan and $50,000 in a mortgage offset account, you’d only be required to pay interest on $450,000 of your loan. Because of this, they can’t be used to help you save for a deposit.

Should I put my savings in a term deposit?

A term deposit can be a great idea if you’re saving up for a house deposit, as this involves locking away your savings for a pre-determined period, over which they can often accrue a higher-than-usual level of interest. You’re unable to access these funds without giving sufficient prior warning and/or paying a fee for doing so, so it’s important to carefully consider whether you’ll ultimately need the funds.

Will I need to save up a larger deposit if I’m buying an apartment or townhouse?

You may be required to submit a larger proportion of the cost of your property if you’re looking to buy another type of property, such as an apartment, townhouse or unit. This is because these come with strata title, meaning the purchase of the land becomes more complicated given that you own your individual property and a share of the rest of the communal space on the lot. This makes them slightly more complicated to sell, so your lender may ask for a more substantial deposit of up to 30% (although this isn’t always the case).

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