Saving a home deposit is the biggest hurdle for most first home buyers. With property prices in major cities averaging $500,000–$1,000,000, a 20% deposit can feel out of reach. But there are strategies, schemes, and tools to help you get there faster.
How Much Deposit Do You Actually Need?
| Deposit Size | What It Means |
|---|---|
| 5% deposit | Possible with the First Home Guarantee — no LMI needed |
| 2% deposit | Possible with Help to Buy shared equity scheme |
| 5–10% deposit | Standard low deposit — LMI may apply (costs $5k–$30k) |
| 20% deposit | Ideal — no LMI, best rates, more lender options |
Lenders Mortgage Insurance (LMI) Explained
LMI is insurance that protects the lender if you default on your loan. When your deposit is under 20%, the lender considers you a higher risk and requires LMI. Key facts:
- Cost: Typically 1–4% of the loan amount — on a $600,000 loan, that's $6,000–$24,000
- Who pays: You do (usually added to the loan balance)
- Who it protects: The lender, not you
- How to avoid it: Use the First Home Guarantee (5% deposit, no LMI), Help to Buy (2% deposit), or save a 20% deposit
- Non-transferable: If you refinance, you may need a new LMI policy
10 Strategies to Save Your Deposit Faster
1. Use the FHSS Scheme
The First Home Super Saver Scheme lets you save through super at a much lower tax rate. You could save $1,500–$3,000 per year in tax compared to a regular savings account.
2. Set Up a High-Interest Savings Account
Use a dedicated savings account with a competitive interest rate (4–5% p.a.). Look for accounts with no fees and bonus interest conditions you can meet.
3. Create a Strict Budget
Track every dollar for 3 months. Use the 50/30/20 rule: 50% needs, 30% wants, 20% savings. Cut subscriptions, eating out, and discretionary spending.
4. Increase Your Income
Side hustles, freelance work, overtime, or a higher-paying job can dramatically accelerate your savings. Even an extra $200/week adds $10,400/year.
5. Move Back Home (if possible)
Living with parents for 12–18 months while working full-time can save you $15,000–$25,000 in rent alone.
6. Get a House Mate or Rent Cheaper
If moving home isn't an option, find a cheaper rental or take on a flatmate to split costs.
7. Consider Regional Buying
Property prices in regional areas can be 30–50% lower than capitals. See our state comparison guide.
8. Use the First Home Guarantee
If you have a 5% deposit, the FHBG saves you from paying LMI — that's money that goes to your deposit instead of insurance.
9. Use Gifted Deposits
Family members can gift you money for a deposit. Lenders typically require a declaration that it's a gift (not a loan).
10. Apply for State Grants
Check if you're eligible for the First Home Owner Grant in your state — $10,000–$15,000 that can go towards your home purchase.
Deposit Savings Calculator
Use this formula to estimate your savings timeline:
Savings per month × 12 = Annual savings + interest + any government contributions
| Monthly Savings | 1 Year | 2 Years | 3 Years | 5 Years |
|---|---|---|---|---|
| $1,000 | $12,000 | $24,000 | $36,000 | $60,000 |
| $1,500 | $18,000 | $36,000 | $54,000 | $90,000 |
| $2,000 | $24,000 | $48,000 | $72,000 | $120,000 |
| $3,000 | $36,000 | $72,000 | $108,000 | $180,000 |
Related Guides
- First Home Super Saver Scheme
- First Home Guarantee — 5% deposit, no LMI
- First Home Owner Grant by state
- Home loan guide
Savings estimates are indicative. Actual results depend on interest rates, inflation, and personal circumstances.