How Long does it takes to Save for a Home Deposit

How much savings do you need for a home deposit?

First time home buyers should set aside at least 20% of the property value. So if you’re looking to buy a house that’s worth $300,000, you may need to save up $60,000 for the deposit.

Having at least 20% of the purchase price has many advantages. It can increase your chance of getting your home loan approved, you may be offered a lower interest rate, and you will avoid paying Lender’s Mortgage Insurance (LMI). LMI is an insurance policy designed to protect lenders in case the borrower is unable to repay the loan. 

If saving 20% of the house price is out of reach, you can consider putting down a smaller deposit on your home, however this is likely to result in LMI being charged. You can use our LMI calculator to know the cost of your LMI payments. If you don’t have 20% deposit but would still like to purchase a home, you may wish to consider taking out a home loan with a guarantor. A guarantor is a person who agrees to be responsible for your loan in the instance you are unable to meet your ongoing repayments.

How long does it take on average to save for a house deposit? 

The average time in Australia to save for a house deposit will depend on a lot of things. It will depend on where you are buying, the type of property you are buying (house or unit), your income and whether you are saving alone or with someone else. 

According to Corelogic and ABS data, here is the average time it takes to save up for the deposit per capital state:

You can use our calculator to work out how long it will take you to achieve your home deposit goal.

Do deposit requirements vary per state or capital city?

As deposit requirements are determined by the financial institution, they are unlikely to differ per state or capital city, however the housing market and the house prices will vary per state and capital city. So the average time to save for a house deposit will be different and depends on the location, property type, and your own financial circumstances

How does having a larger deposit save you money?

While it may delay buying a house, the biggest advantage of a larger deposit is a smaller loan size. Having a smaller loan size means you will be charged less interest, and your monthly loan repayments will be less. A smaller loan size can make it easier to refinance down the track especially if guarantor is not an option.

Is it better to save more of a deposit first or purchase property now?

Saving for a deposit may take a while, during which the purchase price of the property may increase whi could result in needing to save more for the deposit. You will need to do your own research in terms of assessing the forecasted growth in the state you are buying in, and reviewing if its affordable for you to have a larger loan amount.

What is some key advice to save for a house deposit?

Here are some strategies that could help you save for a house deposit quicker:

Explore savings accounts + savings plans

Take advantage of savings accounts with a high interest rate. It could help you grow your savings as you earn from interest. You can use our savings calculator to see how much you can save with your interest rate and how long you can achieve your saving target.

Explore any government subsidies for first time buyers

There is a national scheme that could help first time home buyers own their first home called First Home Owner Grant or FHOG. The amount of the grant will vary by state and territory. You can check if you are eligible for one by lodging an application through your state or territory. 

Reduce any obvious costs

Get an understanding of your budget and see where you can reduce any of your expenses. You may need to have a lifestyle change like cutting down on everyday spending, such as reducing household expenditures on groceries or utility bills.

Increase your income

One of the best ways to boost your house deposit savings is by earning more. Although this is easier said than done, it may be helpful for you to consider a small side-gig, or even just selling unused things around your home on sites like Gumtree or Ebay.