House Deposit Guide for First Home Buyers in Australia
Saving a house deposit is one of the biggest steps toward buying your first home. This guide explains common deposit targets, lenders mortgage insurance, purchase costs, government assistance and how to build a practical savings plan.
How Much Deposit Do First Home Buyers Need?
There is no single deposit amount that applies to every borrower. The amount you may need depends on the lender, the property, your financial circumstances, the loan-to-value ratio and whether you qualify for an eligible first-home-buyer program.
A 20% deposit is often treated as a strong target because borrowing 80% or less of the property's value may help a borrower avoid lenders mortgage insurance. However, some lenders may accept a smaller deposit, and eligible first home buyers may be able to purchase with a deposit as low as 5% through applicable government-supported options.
Example Deposit Amounts on a $700,000 Property
What Happens When Your Deposit Is Below 20%?
When the amount borrowed is more than 80% of the property's value, lenders mortgage insurance may apply. LMI generally protects the lender if the borrower cannot repay the loan; it does not protect the borrower.
LMI is commonly charged as a one-off cost. Depending on the lender and application, it may be paid upfront or added to the loan. Adding it to the loan increases the amount borrowed and may increase the interest paid.
Costs to Save for Beyond the House Deposit
A practical savings target should include more than the deposit. Depending on the state, property and loan, first home buyers may need to budget for several additional costs.
Transfer Duty
Stamp duty or transfer duty varies by state, property value and buyer eligibility.
Legal and Conveyancing Costs
A solicitor or conveyancer can review the contract and manage settlement.
Inspections and Reports
Building, pest, strata and other reports may help you investigate the property.
Lender and Valuation Fees
Application, valuation, settlement or package fees may apply depending on the product.
Insurance
Building insurance may be required before settlement, depending on the transaction.
Moving and Setup Costs
Include removalists, utilities, minor repairs, furniture and initial maintenance.
First Home Buyer Schemes That May Reduce the Upfront Burden
Government support may help eligible first home buyers purchase with a smaller deposit or reduce selected purchase costs. Scheme availability, eligibility requirements, property price caps and participating lenders can change, so current rules should always be checked before relying on them.
| Potential Support | What It May Do | Important Consideration |
|---|---|---|
| Australian Government 5% Deposit Scheme | May allow eligible buyers to purchase with a deposit from 5% without paying LMI. | Lender criteria, eligibility and property price conditions apply. |
| State or Territory First Home Owner Grant | May provide a grant for eligible new-home purchases or construction. | Rules and property requirements differ between jurisdictions. |
| Transfer Duty Assistance | May provide a full or partial exemption from stamp duty. | Thresholds depend on the state, property value and buyer eligibility. |
| First Home Super Saver Scheme | May allow eligible voluntary super contributions to be released for a first-home deposit. | ATO eligibility, contribution and release rules apply. |
What Are Genuine Savings?
Some lenders may want evidence that part of your deposit has been saved or held over a period of time. This is often referred to as genuine savings. The definition and required period vary by lender.
Depending on lender policy, genuine savings may include money regularly saved in a bank account, term deposits, shares held for an acceptable period or other approved sources. Gifts, borrowed money and recently received funds may be treated differently and may require additional evidence.
- Keep deposit savings in clearly identifiable accounts.
- Avoid unexplained large transfers where possible.
- Retain evidence of gifts, asset sales and other deposit sources.
- Keep bank statements showing the savings history.
- Discuss the source of funds before making a formal application.
How to Save a House Deposit More Effectively
A realistic plan starts with a target property range rather than an undefined savings goal. Once you know the likely price range, you can estimate the deposit, purchase costs and emergency buffer.
- Choose a realistic property price range. Base it on income, expenses and likely borrowing capacity.
- Select a deposit target. Compare the consequences of 5%, 10% and 20% deposit options.
- Add purchase costs. Include duty, conveyancing, inspections and lender fees.
- Maintain an emergency buffer. Avoid using every dollar at settlement.
- Automate savings. Transfer a fixed amount into a separate deposit account each payday.
- Reduce expensive liabilities. Credit cards and personal debts may affect borrowing capacity.
- Review progress regularly. Update the target if property prices, income or costs change.
Deposit Mistakes First Home Buyers Should Avoid
- Saving only the minimum deposit and forgetting purchase costs.
- Using all available savings and keeping no emergency buffer.
- Assuming pre-approval guarantees final loan approval.
- Taking new credit or increasing card limits before settlement.
- Relying on an online estimate without checking lender requirements.
- Ignoring the effect of a lender valuation below the purchase price.
- Signing a contract without appropriate legal and finance advice.
How Danphe Finance Can Help First Home Buyers
A mortgage broker can help you understand the general factors that influence borrowing capacity and deposit requirements, compare relevant lending options and prepare the information required for an application.
Danphe Finance can assist eligible first home buyers with:
- Reviewing a proposed property budget and deposit position
- Explaining loan-to-value ratio and possible LMI
- Discussing government-supported deposit options
- Estimating repayments and purchase costs
- Preparing income, expense and deposit documents
- Explaining pre-approval, conditional approval and settlement steps
House Deposit FAQs for First Home Buyers
Can I buy a house in Australia with a 5% deposit?
Some lenders may accept a 5% deposit. Eligible buyers may also qualify for the Australian Government 5% Deposit Scheme. Lender criteria, property price caps and scheme eligibility apply.
Do I always need a 20% deposit?
No. A 20% deposit is a common target because it may help avoid LMI, but lower-deposit loans may be available. A smaller deposit usually means a larger loan and may involve additional costs.
Does the deposit include stamp duty?
No. The deposit is generally separate from transfer duty and other transaction costs. Eligible first home buyers may qualify for an exemption or concession depending on their state and property value.
Can my parents gift me part of the deposit?
A gifted deposit may be acceptable to some lenders, but evidence may be required. The lender may ask for a gift letter, bank statements and confirmation that the funds are not repayable.
Should I use all my savings as the deposit?
Keeping an emergency and settlement-cost buffer is generally prudent. Using every dollar can leave little capacity for repairs, moving costs, rate changes or unexpected expenses.
Ready to Turn Your House Deposit Into a First Home Plan?
Speak with Bikas Kandel at Danphe Finance about your deposit, likely purchase costs, borrowing position and potential home-loan options.
Danfe International NSW Pty Ltd is a Credit Representative, Credit Representative Number 540390, of BLSSA Pty Ltd, ACN 117 651 760, Australian Credit Licence 391237. Bikas Kandel is a Credit Representative, Credit Representative Number 466281, of BLSSA Pty Ltd, ACN 117 651 760, Australian Credit Licence 391237. This guide contains general information only. Deposit requirements, government assistance, lender policies, rates, fees and approval criteria may change and depend on individual circumstances.
