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Deposit Essentials - Smart thinking for first home buyers

Saving for a deposit can be tough especially with the ever increasing cost of living in Australia. But sticking to a strict budget and knowing what’s available out there to help you with the purchase of your first home can get you in the game.


How much deposit do I need?

Working out how much deposit you need to save

  1. First, set your budget. Use online loan calculators to work out what you can comfortably afford to borrow and repay.

  2. Consider neighbouring suburb and narrow your property search to just the homes that you can actually afford.

  3. Most people set a target to save 20% of the property price for a deposit, to avoid paying LMI.*

  4. Remember to include fees & charges in your savings plan such as stamp duty, legal fees, establishment etc.

  5. The minimum deposit required by some non-bank lenders on some products is 5%.

  6. According to ABS, the average loan size for first home buyers is $344,600.1


Different types of savings for a deposit:

  • A genuine savings plan is a key step to building the savings history lenders look for. Get started by putting a little away each month.

  • What’s considered genuine savings? 6 months personal savings, term deposit, share certificate or dividend statement.

  • Generally lenders will check savings accounts for regular deposits and that there aren’t any unusual large deposits.

  • Non-genuine savings may also be considered. Examples include inheritance, gifted deposits, bonuses, sale of shares and tax refunds.

  • As non-genuine savings may include large lump sum deposits, they will usually need to be held in a separate account for up to 6 months, to demonstrate untouched savings.

  • According to MoneySmart, 21% of Aussies put aside their tax refund in their savings account.2

Smart steps towards owning your dream home:

  • Attend auctions to get a good feel for the market.

  • Get some help: family guarantor, or consider co-owning a home with friends or family.

  • Find out if you’re eligible for a First Home Owner Grant (FHOG) through firsthome.gov.au

  • One workaround is to take out Lenders Mortgage Insurance (LMI) which lowers the required deposit.*

  • Get advice from financial advisers about your eligibility for the First Home Super Saver (FHSS) scheme.

  • Start early. Evaluate features, benefits and extras on a range of home loans that best suit your financial position.


Disclaimer: Original content source: Pepper Money. It is designed for publication through Accredited Brokers, to provide you with factual information only, and it is not intended to imply any recommendation about any financial product(s) or to constitute tax advice. If you need financial or tax advice you should consult a licensed financial or tax adviser. The information in the article is believed to be reliable at the time of distribution, but neither Pepper nor its accredited brokers warrant its completeness or accuracy. For information about whether a non-bank loan may be suitable for you, call us on 0412 110 118.

*LMI also known as Lender’s Mortgage Insurance is a third-party insurance premium payable by you as a borrower to protect the lender against the potential loss that may be incurred if you’re unable to repay your home loan.

1.http://www.abs.gov.au/AUSSTATS/abs@.nsf/0e5fa1cc95cd093c4a2568110007852b/d672cf4ebe195f15ca256e910077d9c2!OpenDocument

2.https://www.moneysmart.gov.au/managing-your-money/income-tax/how-australians-spend-their-tax-refunds