How to save for your home deposit

Owning a home is the great Australian dream, but for many, saving for a deposit is the biggest barrier to getting there.

As record levels of government stimulus, low interest rates and improved confidence in the economic outlook push property prices higher, the time needed to save a deposit has also blown out.

But through serious financial discipline and a lot of hard work, it is possible.

We’ve broken down some ways to help you get there faster.

1. Work out how much you need to save

It sounds simple, but there’s a lot more you need to factor in than just the cost of a deposit.

Other upfront costs

Purchasing a home also comes with a range of upfront expenses, which can quickly run into the thousands of dollars.

Some examples of upfront costs:

• Conveyancing and legal fees
• Building and pest inspections
• Stamp duty

Stamp duty concessions are available for first home buyers in most states and territories.

Our stamp duty calculator can help you get started.

Size of deposit

On top of these costs, you’ll need to work out how much to save for the deposit itself.

An online borrowing calculator can give you an idea of what you may be able to borrow based on your income and expenses. It’s also a good starting point when working out how much you need to save.

Lenders will usually require a deposit of at least 5% plus costs, but some may want to see 20% depending on your personal circumstances and the type of property you wish to purchase.

If you don’t have a 20% deposit, you may have to pay lenders mortgage insurance (LMI), which is a fee that can be added to your home loan and protects the lender if you default on your loan.

Ongoing repayments

If you’ve worked hard to purchase a home, you’ll want to be able to enjoy it, so it’s worth considering any upcoming life events that may impact your income.

For example, are you planning to take time off work to start a family? Do you or your partner want to return to full-time study. Or do you have a new business venture planned? If so, will you still be able to service your home loan?

Our home loan repayment calculator will help you work out your weekly, monthly or annual loan repayments.

2. Factor in government grants

Various grants and incentives are available in all states and territories, especially for first-home buyers so it pays to know what’s available to you.

Probably the most well-known scheme is the First Home Owner Grant, which is a one-off payment for first home buyers.

The federal government also has several schemes available, such as the First Home Loan Deposit Scheme (FHLDS) which allows first-home buyers to get into a home sooner with a smaller deposit.

You may also be able to save money for your first home inside your super fund through the First Home Super Saver Scheme.

Speak to your Mortgage Choice broker about what incentives may be available for you.

3. Turbocharge your savings

Every dollar really does count when you’re saving for a home, here are some tips that can help you get there faster:

Sell what you don’t need

Firstly, sell anything you don’t use or need – you’d be surprised how it all adds up. If you’re working from home more these days, perhaps you could get by catching public transport, allowing you to sell your car.

Round-up transactions

Many banks now allow you to round-up your daily transactions to the nearest dollar, with the difference going straight into your savings account.

For example, your daily coffee could direct hundreds of dollars over the course of the year.

• The coffee costs $4.20.
• Your account is debited $5.
• 80 cents goes straight into your savings account.

After a year, You could save more than $200.

Cut down on your daily costs

There’s no sugar coating it – this part may involve some sacrifices. Look through your recent bank statements and identify anything that isn’t essential.

This could include cutting down on takeaway or cancelling subscriptions that you can go without.

It’s also worth asking your service providers for a better deal – from electricity to insurance. Be prepared to switch to a new provider for a better rate.

Start a savings plan

It helps to know where your money is going, so you can work out how much extra you’re able to put away each week.

Our savings plan calculator will show you how long it will take to reach your goal based on your weekly savings and interest rate.

4. Speak to a mortgage broker

Buying a home is one of the most significant commitments Australians make in their lifetime, so it’s important to get it right.

A mortgage broker can help you determine what grants and incentives are available, and how much you may be able to borrow.