Context & Problem

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Property prices in Australia remain high, even as growth slows in some areas. In 2024, the median house price in Sydney was around $1.16 million, while in Brisbane it was closer to $800,000 (CoreLogic dwelling values(houses + units), March 2024). That makes saving a deposit a big hurdle — especially for first home buyers without help from family.

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1. Understand how much you need

Most lenders want at least a 20% deposit to avoid paying Lenders Mortgage Insurance (LMI).But some loans allow you to borrow with as little as 5% deposit, especially if you’re eligible for a government scheme.

Example:

Buying a $600,000 home

• 20% deposit = $120,000
• 5% deposit = $30,000 (but likely to pay LMI unless you qualify for a Federal Govt exemption)

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Don’t forget upfront costs:

Stamp duty exemption (State Govts): Subject to value limits and eligibility conditions.

• Conveyancing/legal fees: $1,000–$2,000
• Inspections: $400–$800
• Loan setup or broker fees: Often waived, but not always

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2. Explore first home buyer support

There are several programs that may reduce how much you need to save:

First Home Guarantee (Federal Govt): Allows eligible buyers to purchase with just 5% deposit and no LMI.

• First Home Super Saver Scheme (FHSSS-Superannuation): Lets you withdraw up to $50,000 of voluntary super contributions to use as a deposit.
• Stamp duty exemption (State Govts): Subject to value limits and eligibility conditions.
• First Home-Owners Grant (State Govts): NSW, Vic, WA, Tas $10,000;  Qld,  SA $15,000; up to limited values and conditions apply. Grants typically apply only to new homes, including newly built properties, off-the-plan purchases, or substantially renovated homes.
  
  • Note: Qld & Tas may grant $30,000 for eligible transactions up 30 Jun 2026.
• Check eligibility carefully on official sites like moneysmart.gov.au or your state revenue office. Most grants require applicants to be Australian citizens or permanent residents, aged 18 or over, and to occupy the home as their principal place of residence for a minimum period, typically within 6 to 12 months. Owner-occupancy requirements vary by state and scheme, so check your state revenue office and the scheme rules.”

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3. Build a strong savings track record

Most lenders look for genuine savings—money you’ve saved consistently over 3–6 months. Even if your parents gift you money or act as guarantors, the bank still wants to see that you can manage your own finances.

Tips to strengthen your application:

• Avoid late bill payments or buy-now-pay-later debt
• Reduce credit card limits (even unused ones count against you)
• Keep your job stable during the pre-approval process

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4. Plan for affordability, not just approval

Banks assess your borrowing power based on income, expenses and existing debts, but just because you’re approved for $650,000 doesn’t mean you should borrow it. Use the 3% buffer rule—could you still afford repayments if interest rates rose by 3 percentage points? This is roughly the test lenders apply (APRA guideline, updated 2021).

Example :

• Loan of $500,000

Using standard principal-and-interest repayments over 30years, the approximate repayments are:

• 6% interest = ≈ $2,998/month
• 9% interest = ≈ $4,023/month

Make sure your budget can handle the higher number.

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5. Understand equity and how it builds

Equity is the difference between what your home is worth and what you owe on it. It grows overtime through:

• Loan repayments(reducing the loan)
• Market growth(if your property increases in value)
• Improvements(like renovations or upgrades)

Equity can later be used to

• Fund renovations
• Buy an investment property
• Refinance to a better loan

But early on, your equity will be low. Don’t rely on fast gains—plan for steady progress.

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Ben and Alisha, 28 & 29 – Saving Smarter with Super

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Situation :

Saving on two moderate incomes ($60k and $75k), aiming for a $650,000 townhouse in Melbourne’s west.

Strategy :

• Used First Home Super Saver Scheme (FHSSS) to withdraw $30,000 (refer to the article in our library on this)
• Saved an additional $20,000 in a high-interest savings account
• Applied through the First Home Guarantee to avoid Loan Mortgage Insurance (LMI)

Outcome:

• Bought with a 7.7% deposit: $50,050
• Approximate loan (before any capitalised costs): $599,950
• Total up front cost: ≈ $55,000 including stamp duty and fees
• Paying $3,670/month in loan repayments at 6.2% interest
• Still have emergency savings and a plan to make extra repayments

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