Nov 14, 2024 11:28:47 AM

Start Building Your First Home Deposit Today

Topics: First Home Buyer 0

Saving for a deposit is the first major step towards buying a home in Australia, but for many potential home buyers, it can be the hardest part. While it may feel like an impossible task, saving for a deposit is achievable with the right plan and expert guidance. Find out how much you'll need to save, where to go for more financial help, and get tips to help you save faster.

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How much deposit do you need?

Before you start saving, it's important to understand how much you'll need to save. Generally, a good savings target is 20% of the home’s purchase price, plus enough to cover extra costs like stamp duty and legal fees.

While some lenders will lend to borrowers with a deposit as low as 5%, a smaller deposit usually means a bigger loan and a higher loan-to-value ratio (LVR). (LVR is the size of your loan compared to the value of the property.) And that could mean stricter lending criteria or higher interest rates.

What’s more, a smaller deposit could also mean you have to pay Lender’s Mortgage Insurance (LMI), which protects the lender if you're unable to repay the loan, easily amounting to several thousand dollars extra. Saving a bigger deposit not only helps you avoid paying LMI, but it could also improve your chances of getting your loan approved.

Where to get more financial assistance?

In addition to saving your own deposit, there are a few government programs that you may be able to access that can help you get into your first home faster:

  • First Home Owner Grant (FHOG) is available to eligible home buyers in Australia to help cover part of the cost of buying or building a first home. It’s funded by state governments with varying amounts available in each state or territory, it doesn’t have to be repaid and is not taxable. Find out more here.
  • First Home Super Saver Scheme (FHSSS) allows you to make personal voluntary contributions into your super fund to help you save for your first home, then withdraw up to $15,000 of your voluntary contributions from any one financial year, up to a total of $50,000 across multiple years, plus associated earnings. Find out more here.
  • First Home Guarantee Scheme is an Australian Government initiative that helps first home buyers buy a property with a deposit as small as 5% without paying Lenders Mortgage Insurance. Under the FHBG, part of the home buyer’s home loan from a participating lender is guaranteed by Housing Australia. Find out more here.

How to start saving a deposit

Once you know how much you'll need for your deposit and whether you’re eligible for any government assistance, it's time to start saving. Here are some tips to help you grow your savings faster: 

Set a savings goal and budget

  • Use online calculators to work out how much you can afford to borrow.
  • Research house prices in your preferred area to get a clear idea of how much deposit you'll need.

Track your spending

  • List all your monthly expenses in a budget planner or spreadsheet.
  • Set a budget for each month and keep track of where you’re going over or under in your spending.

Save on everyday expenses

  • Plan your meals ahead for the week and shop according to your meal plan.
  • Buy in bulk for items you use often.
  • Limit eating out or set aside a budget for takeaways.
  • Review your utilities and compare prices to see if you qualify for cheaper deals.

Automate your savings

  • Set up an automatic transfer from your main account to a savings account every time you're paid. 

Get expert help and guidance

Work with a Mortgage Express Finance Consultant and get personalised advice to help you on the path to home ownership. Contact Mortgage Express today to connect with a finance consultant near you.

 


While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.

Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFCA) | Member of Choice Aggregation Services.