First homebuyers grant

Save for a House Deposit

Ross Laycock

Start building your home deposit today.

Buying a house is exciting and life changing. It all starts with saving for the deposit.

Find out how much you’ll need to save and get tips to help you save faster.

How much you need for a house deposit

A great savings goal for a house deposit is:

  • 20% of the purchase price of the house
  • plus enough to cover the costs of buying a house

Some lenders only require a 5% deposit. But a smaller deposit means a bigger loan and you’ll have to pay for lenders mortgage insurance (LMI).

A bigger deposit also shows lenders you’re a good saver and able to manage your finances. This can increase your chances of getting approved for a home loan.

Loan to value ratio

The bigger your deposit, the lower your loan to value ratio (LVR). Your LVR is the amount of the loan divided by the purchase price (or appraised value) of the property. For example, if you’re buying a $600,000 house and you have a $450,000 loan, your LVR would be 75%.

The lower your LVR, the less likely you’ll have to pay for LMI. You’re also more likely to get approval for a loan.

Lenders mortgage insurance

If your LVR is above 80%, you usually have to pay for LMI. This insurance protects the lender if you can’t make the loan repayments and the lender can’t recover the loan balance. LMI protects the lender, not you or a guarantor.

You’re charged a one-off fee to cover the cost of LMI. You can pay this fee on settlement or add it to the loan. If you add the LMI fee to your loan, interest will be charged when you repay it.

The average LMI fee is $6,200. But it can be a lot more if you have a low LVR. For more on LMI, see the Understand Insurance websites frequently asked questions on LMI.

How long it takes to save for a house deposit

Saving for a house deposit does take time and it’s important to be realistic about how long. Nationally, it takes 4.6 years for the average first home buyer couple to save for a 20% house deposit.

But by having a savings plan and sticking to it you can reach your savings goal sooner.

The Money Smart website has many helpful calculators such as how much deposit you might need, how long it may take to save that deposit in your area and many others.