Start Building Your First Home Deposit Today

Sahil Talwar
Nov 16, 2024
2 min read

Getting together a deposit is the initial crucial stage in the process of purchasing a house in Australia. However, for numerous aspiring homeowners, this step can pose a significant challenge. Even though it might seem daunting, accumulating a deposit is feasible by following a well-thought-out strategy and seeking advice from professionals. Discover the required savings target, explore additional financial assistance options, and learn strategies to accelerate your savings progress.

How much deposit do you need?

Prior to commencing your savings plan, it is crucial to determine the amount you need to save. Typically, a recommended savings goal is 20% of the property's purchase price, in addition to funds for miscellaneous expenses such as stamp duty and legal fees.

While certain lenders may offer loans to individuals with a down payment as low as 5%, a smaller deposit often results in a larger loan and a higher loan-to-value ratio (LVR). (LVR represents the loan amount in relation to the property's value.) This scenario could lead to stricter borrowing requirements or increased interest rates.

Furthermore, a reduced deposit might necessitate the payment of Lender’s Mortgage Insurance (LMI), which safeguards the lender in case of loan default, potentially costing several thousand dollars extra. Accumulating a larger deposit not only helps in avoiding LMI charges but also enhances the likelihood of loan approval.

Where to get more financial assistance?

There are several government programs available that can assist you in purchasing your first home, in addition to saving for your own deposit. These programs include the First Home Owner Grant (FHOG), which is designed to help cover part of the expenses associated with buying or constructing your first home.

The grant, funded by state governments, varies in amount by state or territory, does not require repayment, and is not subject to taxation. Another program, the First Home Super Saver Scheme (FHSSS), enables you to contribute voluntary funds to your superannuation account to save for your first home.

You can then withdraw up to $15,000 of your contributions annually, up to a total of $50,000 across multiple years, along with any associated earnings. Lastly, the First Home Guarantee Scheme allows first home buyers in Australia to purchase a property with a deposit as low as 5% without having to pay Lenders Mortgage Insurance.

This initiative, supported by the Australian Government, involves guaranteeing a portion of the home buyer's loan from a participating lender through Housing Australia.

Get expert help and guidance

Work with a Next Step Financing Consultant and get personalised advice to help you on the path to home ownership. Contact Next Step Financing Consultant today to connect with a finance consultant near you.