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Saving A Deposit

The truth about the Australian Dream

The unfortunate truth is that many Australians will never buy their own home. We may have the income required to pay a mortgage, but we simply don’t have the ability to save a deposit!

Rather than developing a no deposit home loan to help these customers that cannot save, the banks choose to decline their home loan applications.

The reason for this is simple. The banks know that people who can’t save a deposit are likely to default on their home loan repayments.

So how can you save a deposit and break out of the rental trap? Read on to find out.

What size deposit will you need?

You should aim to save 5% of the purchase price as a deposit for your home. Depending on the state you are buying in, you may need to save a little more to cover expenses such as stamp duty and conveyancing costs.

A 5% deposit is a great target as it meets most lender’s requirements for genuine savings and it is the minimum deposit required to apply for a 95% home loan.

Try to save this money in a separate savings account that you won’t be accessing on a day to day basis. Studies have shown that if you see a high balance in your account when you withdraw money from an ATM, you feel wealthier and end up increasing your spending!

Do your parents own a property? If they guarantee your loan then you may be able to buy a home without saving a deposit at all!

Get help from the government

Did you know that the government can help you to save a deposit if you are a first home buyer? If you open a first home saver account, the government will contribute additional money on top of the money you save.

In addition to this, the interest on savings will attract a lower tax rate. However, you can only withdraw the funds to purchase a home. If you open a first home saver account then you are committed to buying a home!

You may also be eligible for the First Home Owners Grant, A Builders Grant (if applicable in your state) or a stamp duty exemption (if available in your state). These benefits are made available when you buy a home, however, if you are aware of them now, you can work out the deposit you will need to save. To find out if you are eligible for any of these benefits simply call your state’s first home buyer hotline.

Cap your standard of living

Setting a budget and cutting down on unnecessary expenses is the best way to maximise your savings. For those of you who may find it hard to set a budget, it may be easier for you to maintain the same standard of living, but avoid taking lavish holidays or buying a new car. Keep living as you are now, but when your income increases you should then try and increase the amount you are saving each month. This will help you work towards saving that deposit.

Set a realistic goal

Write down your savings target (5% of the purchase price) and put it on the wall where you will see it everyday. Your savings target is not your focus, the amount you put aside each month is the goal you want to be achieving. By putting money aside every month, you will be well on your way to saving that deposit.

For example, if you want to buy a property for $500,000, you will need to save a $25,000 deposit. To do this over four years you would need to save roughly $500 a month. Saving $500 a month, every month, for the next four years is your goal. Write this regular savings goal next to your savings target.

Why most people can't save

Most people don’t save because they spend every dollar they earn! Sometimes more! If you have this problem and you don’t want to budget then how can you save a deposit?

The answer is surprisingly simple! Open a separate savings account and then setup a direct debit payment or regular transfer from your cheque account so your savings are made automatically. Some savings accounts have a feature allowing you to do this or, alternatively, you can setup a recurring transfer through internet banking.

A variation on this method is to ask your employer to send some of your pay directly to your savings account. You never see the money in your day to day spending account and therefore you won’t miss it.

Why is this method so effective? This forces you to save and your living expenses will adjust over time to take this new “expense” into account.

Take action!

We don’t mean to scare you, however if you don’t start saving then chances are you never will. The longer you wait to buy a home, the more house prices will rise and the larger a deposit you will need.

Go online to your bank’s website and open a savings account right now!

Prepare to apply for your mortgage

Did you know that if you don’t meet standard lending criteria, you may need to save more than a 5% deposit! To avoid this problem you should read our article on preparing to apply for a home loan. If you follow this advice then you will be well on your way to home ownership!


This information is general advice only. Should you require specific financial advice, please speak to a qualified financial planner who can assess your situation.

Whilst we have made every effort to ensure that the information on this page is accurate, you should not rely on this information, as it may be out of date or contain errors.