How to save for a down payment on a house? You can refer to this guide from the Australian government

Buying a home is an exciting and life-changing process, and it all starts with saving for a down payment. Here's your complete guide to saving for a deposit and buying a home to help you achieve your homeownership dreams faster.

1. Determine how much down deposit you need

Before you start saving, calculate how much you can afford to borrow. Don't forget to factor in other costs associated with buying a home, such as stamp duty and conveyancing fees.

Calculation formula

Property prices
Plus relevant fees and charges
Subtract the loan amount you can afford
Equal to the down payment required

Why a larger down deposit can save more?

Savings goal suggestions:

Property Value 20% As a down payment
Plus housing purchase related expenses

Some lenders may accept a down deposit of 5%, but the smaller the deposit, the higher the loan amount and you may need to pay lender’s mortgage insurance (LMI).

The larger the down payment, the smaller the loan amount, saving interest expenses
Demonstrate good savings ability to improve your chances of loan approval

Loan-to-Value Ratio (LVR)

The LVR is the loan amount divided by the property value. For example:

If you buy a house worth A$600,000, the loan amount is A$450,000 and the LVR is 75%.

The lower the LVR, the more likely you are to be exempt from LMI and the easier it is to get a loan approved.

Lenders Mortgage Insurance (LMI)

When the LVR exceeds 80%, LMI is usually required to be paid. This is to provide protection for the lender, not the borrower.

The average LMI charge is $6,200, but can increase with high LVRs.
You can choose to pay it as a lump sum or add it to your loan, but adding it to your loan will incur additional interest.

More information: Available Insurance Council of Australia website.

2. Get housing assistance

First Home Owner Grant

First-time homebuyers or those building a new home can apply, with specific rules varying by state or territory:

Help with mortgage payments
Reduction of land transfer tax (stamp duty)

Query details:access First Home Owner Grant official website.

First Home Buyer Super Saver Scheme (FHSSS)

Let first-home buyers save for a deposit through the Super Saver Scheme:

Maximum withdrawal of AUD 15,000 per financial year
All annual withdrawals of up to AUD 50,000 of personal contributions and their earnings

Details: Check Australian Taxation Office website.

Home Guarantee Scheme

The scheme allows eligible first-home buyers to purchase a property with a deposit as low as £5% and without having to pay LMI.

Details:access NHFIC website.

3. Start saving for a down deposit

Create a savings plan

After calculating the price of your home, work with your partner to create a savings plan that includes savings goals and a timeline.

Create a budget

Determine your income and expenses:

Monthly income and expenses
Amount that can be saved regularly
Costs that can be cut

Check Tips for saving money.

Automated savings

Make saving a “no-brainer” by transferring part of your paycheck directly into a savings account, or set up automatic transfers.

Consider investing

If you're planning to buy a home in a few years, consider investing. If you're comfortable with the risk, stocks or managed funds may help you grow your savings.

For more investment options, refer to Choose your investment.