Saving for Your First Home: Planning Your Deposit

How Much Deposit Do You Actually Need?

You can buy your first home with a 5% deposit under the Regional First Home Buyer Guarantee or the First Home Loan Deposit Scheme, provided you meet the eligibility criteria. A 10% deposit gives you access to more lenders and loan products, while 20% lets you avoid Lenders Mortgage Insurance (LMI) entirely.

Consider a buyer who has saved $35,000 and wants to purchase in regional Victoria. At 5%, they could look at properties up to $700,000. At 10%, their range drops to $350,000. At 20%, they're looking at $175,000. The deposit percentage you choose doesn't just affect whether you pay LMI. It determines which markets you can access and how quickly you can move.

In regional areas like Gippsland, where median house prices sit considerably lower than Melbourne, a 5% or 10% deposit often makes sense. In metropolitan Melbourne, particularly inner suburbs, you might wait years to reach 20% while prices continue to rise. Sometimes moving with a smaller deposit and paying LMI gets you into the market sooner, and the equity gain outweighs the insurance cost.

Stamp Duty Concessions Change Your Savings Timeline

First home buyer stamp duty concessions in Victoria eliminate or reduce stamp duty on properties up to certain thresholds, which means you need less cash at settlement. For a $500,000 property, the full stamp duty would be around $21,970. Under the first home buyer concessions, you'd pay nothing on a property valued up to $600,000.

In our experience, buyers often forget to factor in other upfront costs beyond the deposit and stamp duty. Conveyancing, building and pest inspections, loan establishment fees, and moving costs can add another $3,000 to $5,000 to your savings target. When you're calculating your borrowing capacity, include these amounts in your planning so you're not caught short at settlement.

Using the First Home Super Saver Scheme

The First Home Super Saver Scheme lets you save up to $50,000 inside your superannuation fund, then withdraw it for your first home deposit. Because super contributions are taxed at 15% instead of your marginal tax rate, you keep more of what you earn. If you're on a marginal tax rate of 32.5%, that difference adds up quickly.

As an example, someone earning $75,000 a year who salary sacrifices $15,000 annually into super for three years would accumulate around $45,000 (after tax and investment returns). If they'd saved the same amount in a standard savings account after tax, they'd have closer to $30,000. That $15,000 difference could be the margin between a 10% and 15% deposit.

You can only withdraw voluntary contributions made from a certain point onward, and there are limits on how much you can contribute each year. This strategy works when you have a timeline of at least 12 months and stable income that allows regular contributions.

Gift Deposits and Genuine Savings

Most lenders require at least 5% of your deposit to come from genuine savings, meaning money you've accumulated over at least three months. The rest can come from a gift, typically from immediate family. A gift deposit needs a signed declaration stating the money doesn't need to be repaid.

If your parents gift you $20,000 and you've saved $25,000 yourself over the past year, you'd have a $45,000 deposit. On a $450,000 purchase, that's 10%, which opens up more home loan options and keeps LMI relatively low. The genuine savings requirement exists because lenders want to see you can manage money consistently, not just receive a lump sum.

Some lenders are more flexible than others on what counts as genuine savings. Term deposits, shares held for three months, and even some first home owner grants (FHOG) can qualify, depending on the lender's policy. When you're preparing your first home loan application, having clear statements showing regular deposits gives you more options.

When to Apply for Pre-Approval

You should apply for pre-approval once you have at least 80% of your target deposit saved and a clear picture of your borrowing capacity. Pre-approval gives you a conditional commitment from a lender, valid for three to six months, which lets you shop with confidence and move quickly when you find the right property.

Waiting until your deposit is fully saved before applying means you might discover borrowing limitations too late. In regional Victoria, properties can move quickly, particularly in towns like Bairnsdale, Sale, and Warragul where supply is limited and demand from Melbourne buyers has increased. Having pre-approval in place means you're ready to make an offer within days, not weeks.

Pre-approval also clarifies whether a variable interest rate, fixed interest rate, or split loan structure suits your situation. If you're buying in a regional area and planning to stay long-term, locking in part of your loan might provide certainty. If you expect income growth or want an offset account to reduce interest, a variable loan offers more flexibility. These decisions are easier to make before you're under pressure to settle quickly.

Choosing Between Offset Accounts and Redraw Facilities

An offset account is a transaction account linked to your home loan where the balance reduces the interest you pay. If you have a $400,000 loan and $15,000 in your offset, you only pay interest on $385,000. A redraw facility lets you withdraw extra repayments you've made above the minimum.

Offset accounts work well for first home buyers who continue to save after purchasing. You keep access to your cash for emergencies or future expenses while reducing your interest. Redraw can be restricted by some lenders, particularly on fixed interest rate loans, and accessing your money isn't always instant.

If you're disciplined with money and want the option to save separately while paying down your loan, an offset gives you control. If you'd rather put extra money straight onto the loan and rarely need to access it, redraw might be sufficient and sometimes comes with a lower interest rate.

Building a deposit takes time, and knowing exactly how much you need, where it can come from, and when you're ready to move forward makes the process clearer. Call one of our team or book an appointment at a time that works for you to talk through your deposit strategy and what your next steps look like.

Frequently Asked Questions