Save for a house deposit

1. Your savings goal

The size of your deposit depends on the price of the home you want. You’ll also need to cover the other costs of buying a house like stamp duty and legal fees.

What you can borrow also plays a part – because the more you can borrow, the less you need to save upfront. 

To work out your deposit: 

• start with the property price 
• add the buying costs  
• subtract what you can borrow 
• the balance is your deposit – that’s your savings goal 

Why a bigger deposit can be better

Saving a bigger deposit has clear benefits:

• You borrow less, so your loan costs less.
• You may avoid extra charges, like lenders mortgage insurance (LMI).
• You show lenders you can save and manage money, which helps when you apply for a loan.

Aim for around 20% of the purchase price, plus enough to cover buying costs. Some lenders may accept as little as 5%. But a smaller deposit may mean higher costs like lenders mortgage insurance (LMI), unless you're eligible for the Australian Government's 5% Deposit Scheme for first homebuyers.

Loan to value ratio

Your deposit also affects the size of your loan compared to the property’s value. Lenders call this the loan-to-value ratio (LVR).

For example, if you borrow $450,000 to buy a $600,000 home, your LVR is 75%. The lower your LVR, the lower your costs and better your chance of loan approval.

Lenders mortgage insurance

If your LVR is above 80%, you may need to pay lenders mortgage insurance. This is a one-off fee that protects the lender if you can’t repay the loan. It doesn’t protect you or your guarantor (if you have one).

You pay the lenders mortgage insurance at settlement, or your lender adds it to your loan. Learn more about lenders mortgage insurance on the Insurance Council of Australia website.

2. What lenders look for when you apply

When you apply for a home loan, lenders look at more than just your deposit. They want to see that you can manage the loan now and in the future. 

Here are the main things they check: 

• Your savings history: Regular saving shows you can budget and commit to repayments. Even small, consistent deposits into a savings account make a difference. 

• Your credit report: Lenders check your credit report to see how you’ve managed debts and bills in the past. A good history makes approval more likely. 

• Your income and expenses: They’ll look at your income, debts, and everyday expenses to work out if you can afford the repayments. 

• Your employment: A steady job or regular income stream helps show you can keep up with repayments. 

• Whether you have a guarantor: Some home buyers have a family member act as a guarantor – someone who uses their own home or savings to help secure the loan. But remember, if you can’t pay, the guarantor has to. 

3. Where to put your deposit savings

Once you’ve set a savings goal, think about where to keep the money while you build your deposit. Choosing the right place can help your savings grow faster and make them easier to manage. Examples of places to save your money for a short time include:

High-interest savings account

These accounts pay you interest while keeping your money safe. Many also offer bonus interest if you deposit regularly and don’t withdraw. It’s a simple way to grow your deposit without taking on risk.

Offset account

If you already have a home loan, an offset account can save you money. The lender counts the money in this account against your loan, so you pay less interest. Unlike a savings account, it won’t earn interest. But it can reduce the cost of your loan over time.

First Home Super Saver Scheme (FHSSS)

This scheme lets you save money for your deposit inside your super account. The government taxes super at a lower rate, so this could help you reach your goal sooner. You can withdraw up to $15,000 of voluntary contributions each year, and up to $50,000 in total. Find out more about the first home super saver scheme on the Australian Tax Office website.

4. Get help to buy a home

When you’re saving for a home, every bit of help counts. If you’re a first-home buyer, government grants and programs can give your deposit a boost or reduce the upfront costs of buying.

First Home Owner Grant

This grant can help out if you're buying or building your first home. Each state and territory sets its own rules and amounts, but the grant can help with your purchase or reduce the stamp duty. For details, check the first home owner grant website.

5% Deposit Scheme

This scheme lets eligible first-home buyers purchase a home with a deposit as small as 5%, without paying lenders mortgage insurance (LMI). The government guarantees part of your loan, which lowers risk for lenders and helps you buy sooner. Find out more about the First Home Guarantee on the Housing Australia website to see if you’re eligible.

5. Start saving your house deposit

Once you know more about housing prices where you want to buy and have set your deposit target, put a savings plan in place to reach it. Saving takes time, but a few simple steps can keep you on track.

• Do a budget: Start by looking at your income and expenses. Work out how much you can save each month, and where you might be able to cut back. If you’re buying with a partner, do a budget together. 

• Automate your savings: Set up an automatic transfer into a separate savings account as soon as you’re paid. This way, you save first and spend what’s left. 

• Find ways to save more: Small changes add up. Cutting back on subscriptions, eating out less often, or shopping around for better deals on bills can all free up money for your deposit. 

• Consider investing (if you have time): If you plan to buy in a few years, you could invest part of your savings. Investing has risk, but it may also grow your money faster. Learn how to choose your investments.