Buying a home
How to save for your first home in Australia
12 October 2020
Owning your first home is a big part of achieving the ‘Australian Dream’, but it’s not without its challenges. According to Moneysmart, ‘it takes 4.6 years for the average first home buyer couple to save for a 20% house deposit.’1
However, by developing healthy savings habits and understanding what government support is available to you, you may be buying your first home before you know it.
Understand how much you need for your deposit
As a rule of thumb, your first home deposit needs to be 20% of the property’s purchase price, plus enough to cover other purchase costs such as stamp duty. Try our Home Loan Government Fees Calculator to understand more about the upfront costs of buying a house in your state.
That said, some lenders only require a deposit of as little as a 5% plus costs. Remember though, the smaller your deposit, the bigger your loan. And you’ll have to pay for lenders mortgage insurance.
Lenders mortgage insurance (LMI)
LMI is a cost you’ll incur whenever you contribute less than a 20% deposit towards the purchase price of your home. It protects your lender if you’re unable to meet your loan repayments and have to sell your home for less than the value of your loan. You’ll be charged a one-off fee which can be paid at settlement or added to your home loan. If you opt for the latter, you’ll incur interest on your repayments.
Loan to value ratio (LVR)
LVR is calculated by dividing the loan with the purchase price of the property. For example, if you’re buying a $600,000 house and you have a $480,000 loan, the LVR is 80%.
Have a question? Fill out our Home Loan Enquiry Form and a home loan specialist will get back to you within 48 hours.
Check your eligibility for government assistance schemes
First Home Owners Grant
The First Home Owners Grant offsets the effect of GST on home ownership. It’s a national scheme that’s funded and administered by each state or territory. If you’re eligible, you could receive a one-off grant to assist you with the costs of buying or building your first home.
First Home Super Saver Scheme
The First Home Super Saver Scheme was introduced by the Coalition government in 2017-182. It allows you to save for your first home via your superannuation fund. Because super is taxed at a concessional rate, you’ll be able to save a contribution to your deposit faster.
5 tips for saving for a house deposit
1. Create a budget
When you’re saving for your first home deposit, budgeting is a useful tool. By understanding where your money goes each month, you’ll know what your expenses are and you may even find ways to reduce your spending. Try our guide to creating a budget and Budget Planner tool to get you on the right track.
When you’re just starting out, don’t be too hard on yourself if you accidentally overspend on something. You might find it useful to start small. That way, you’ll be building healthy money habits as you go.
2. Find ways to cut your expenses
As you develop your budget, you’ll identify expenses that can be cut or reduced. You might be able to:
- reduce your living expenses by finding a cheaper place to rent (if you’re renting) or moving back in with your parents for a period
- reduce your impulse spending and avoid schemes such as ‘buy now, pay later’, which can affect your chances of getting a home loan, or
- find ways to save money on your grocery bill.
Even small changes can add up to big savings!
3. Prioritise reducing your debt
If you have debts, you’ll be paying additional interest. Reducing your debt will help you to save a little extra cash, and could help you borrow more when it comes time to purchase your first home.
If you’re meeting your repayments on any existing loans, you may not be adversely impacted when it’s time to apply for a home loan. Comprehensive Credit Reporting takes into account good financial behaviour in your credit report, where previously only negative consumer credit information was included. Lenders, including Suncorp Bank, review this information when assessing loan applications.
4. Get a high-interest savings account
5. Seek out additional sources of income
Whether you’ve got a side hustle you can capitalise on, or some valuable unused items lying around, cashing in on these could be a useful way of saving extra money towards your home deposit.
Information is intended to be of a general nature only and any advice has been prepared without taking into account any person's particular objectives, financial situation or needs. You should make your own enquiries, consider whether advice is appropriate for you and read the relevant Product Information Document before making any decisions about whether to acquire a product.