How to Save for a House Deposit
Practical strategies to build your deposit faster and reach your home ownership goals.
Saving for a house deposit is often the biggest hurdle for prospective home buyers. While the traditional 20% deposit remains the gold standard, there are multiple pathways to home ownership with smaller deposits. This guide explores practical strategies to accelerate your savings journey.
Understanding Deposit Requirements
Most lenders require a minimum 5% deposit, though a 20% deposit helps you avoid Lenders Mortgage Insurance (LMI) and access better interest rates. For a $600,000 property, that's $30,000 minimum or $120,000 ideal. First home buyers may qualify for government schemes allowing deposits as low as 5% without LMI.
Create a Dedicated Savings Plan
Open a high-interest savings account separate from your everyday banking. Set up automatic transfers on payday—even $500 per fortnight becomes $13,000 annually. Use budgeting apps to track spending and identify areas to cut back. The 50/30/20 rule (50% needs, 30% wants, 20% savings) provides a solid framework.
First Home Super Saver Scheme (FHSS)
The FHSS allows you to save up to $50,000 ($15,000 per year) inside your super fund for a first home deposit. Voluntary super contributions receive concessional tax treatment (15% vs your marginal rate), accelerating your savings. You can withdraw these contributions plus earnings when ready to buy.
Reduce High-Interest Debt
Credit cards and personal loans directly impact borrowing capacity. Paying off a $5,000 credit card could increase your borrowing power by $30,000-$40,000. Focus on high-interest debts first while maintaining minimum payments on others.
Boost Your Income
Consider side hustles, freelancing, or asking for a raise. Even an extra $200 per week ($10,400 annually) significantly accelerates your timeline. Some buyers work overtime or take on temporary second jobs specifically during their savings phase.
Government Grants and Schemes
First Home Owner Grants vary by state but typically offer $10,000-$20,000 for new builds. The First Home Guarantee allows eligible buyers to purchase with just 5% deposit without LMI. Research your state's specific programs—they can reduce your required savings by thousands.
Key Takeaways
Saving for a deposit requires discipline and strategy, but it's achievable with the right plan. Combine multiple approaches—dedicated savings, super contributions, debt reduction, and government schemes—to reach your goal faster. A mortgage broker can help you understand exactly how much you need and structure a savings plan accordingly.
Need personalized advice?
Every situation is different. Speak with one of our mortgage brokers to discuss how these principles apply to your circumstances.
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