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.
How Lenders Assess Your Deposit
Lenders look at two things when you apply: the deposit you have saved and your ability to service the loan. The deposit determines your loan-to-value ratio (LVR) — borrow 95% of the price and you have a 95% LVR — and above 80% LVR you normally pay Lenders Mortgage Insurance, which protects the lender, not you, and can cost $10,000–$30,000 on a typical loan. That is why the First Home Guarantee (5% deposit, no LMI) and Help to Buy (2% deposit) are so valuable: they remove or shrink the LMI cost entirely.
Lenders also apply a serviceability buffer — they assess your repayments at a rate above the advertised rate (typically 3 percentage points higher) to make sure you can cope with rate rises — and they scrutinise where your deposit came from. "Genuine savings" — money saved over time, not a sudden gift — is the safest evidence, though gifted deposits from parents are accepted by most lenders if documented properly.
Action Plan: Deposit Milestones for 2026
- Work out your target: 5% via the First Home Guarantee, 2% via Help to Buy, or 20% to avoid LMI entirely.
- Use the FHSS scheme for a tax-advantaged portion of your deposit.
- Park savings in a high-interest savings account and automate a transfer on payday.
- Document any gifted deposit with a signed letter from the giver — lenders require it.
- Keep three months of statements showing your savings pattern before you apply.