Home Deposit Saving Tips Every First-Time Buyer Needs to Know

For many Australians, especially first-time buyers, saving for a home deposit is a major financial goal. While the process may seem overwhelming, strategic planning, discipline, and taking advantage of government incentives can make it achievable. Here, we outline effective steps and practical tips for saving for a house deposit to guide you on your journey toward homeownership.

At Unconditional Finance, we know that saving for a home deposit is a big step for first-time buyers. Our team is here to help you explore your options and provide solutions to make buying your first home easier. We’ll guide you through each step to help you achieve your homeownership goals confidently.

Ready to learn how to save for a home deposit? Let’s get started!

Understanding Home Deposits and Why They Matter

What is a home deposit?

A home deposit is the upfront payment made when purchasing a property, usually ranging from 5% to 20% of the property’s value for those purchasing their first home. The amount of your deposit plays a critical role in mortgage approval, influencing interest rates, loan terms, and whether you need to pay for Lender’s Mortgage Insurance (LMI), which is often required for smaller deposits.

Typical deposit requirements:

• 5% to 10% deposits: Common among first-time buyers and often made possible through low-deposit home loan options, though they may require LMI to protect the lender.
• Larger deposits (e.g., 20%): These can reduce or eliminate LMI costs, offer better mortgage terms, and often result in lower interest rates, providing more financial flexibility.

Tips for First Home Buyers

Buying your first home is an exciting journey but can feel challenging at times. Here are some practical tips for first-home buyers to help you through the process and make your dream of homeownership a reality.

1. Explore Low Deposit Home Loan Options

With low-deposit home loans, buyers can step into the property market by saving as little as 5% of the purchase price. These loans can be especially appealing for first-time buyers, as they often come with additional incentives and government support designed to make homeownership more accessible and affordable. This option allows buyers to start building equity sooner while minimising the initial savings hurdle.

PROS	CONS
Quicker access to the property market By reducing the amount of savings needed upfront, buyers can enter the market sooner, potentially taking advantage of property value increases over time.	Higher repayments Since the initial loan amount is larger due to the smaller deposit, monthly repayments may be higher compared to loans with larger deposits.
Government support Programs and grants specifically designed for first-time buyers may reduce overall costs and make purchases more manageable.	Lender’s Mortgage Insurance (LMI) Borrowers with low deposits may need to pay for LMI, which protects the lender if you default on the loan but increases your overall costs.
Lower initial savings requirement With a smaller deposit needed, buyers can shift their focus to building equity and repaying their mortgage.	Interest rates Low-deposit loans can sometimes come with higher interest rates, impacting the total cost of your mortgage over time.

2. Set Realistic Saving Goals

Creating achievable saving goals is essential for turning your dream of homeownership into a reality. It involves careful planning, tracking, and adjustments to stay on course.

• Assess how much you need to save

Take a comprehensive look at the total cost of buying a house, which goes beyond just the deposit. This includes costs such as stamp duty, legal fees, inspections, and any potential renovations or moving costs. Understanding these additional expenses upfront will give you a clear target for how much you need to save, ensuring you’re financially prepared for all aspects of the purchase.

• Create a savings plan.

Set a realistic plan by deciding how much you can save each month comfortably. Break down your total savings goal into smaller, manageable monthly or weekly targets. This approach will keep you on track and motivated as you build up your deposit. Adjust your plan as needed to fit any changes in your financial situation.

• Do the Calculations and Use Tools to Track Progress

Determine how much you need to save for your deposit, factoring in upfront costs like stamp duty, legal fees, and a buffer for unexpected expenses. Utilise online saving calculators, high-interest savings accounts, and financial apps to accurately track your progress, maximise interest, and accelerate your savings journey.

3. Create and Stick to a Budget

Creating and following a budget is essential for managing personal finances, especially for first-time home buyers working toward a deposit. A well-structured budget helps you prioritise savings and cut unnecessary spending.

• Identify and Cut Unnecessary Expenses

Review your spending and organise your expenses into categories. Identify areas where you can cut back, such as dining out, entertainment subscriptions or impulse buys. Redirecting this saved money toward your home deposit can make a significant impact over time.

• Set a Monthly Target

Establish a monthly savings target that aligns with your deposit goal and overall budget. Breaking your savings into smaller, manageable amounts makes the goal feel more achievable and helps you stay consistent.

• Create a Dedicated Savings Account

Open a specific account, such as a first home buyer savings account, to keep your deposit funds separate from everyday expenses. This helps you stay accountable, avoid unnecessary withdrawals, and easily track your progress.

4. Boost Your Income

Increasing your income can speed up your savings and help you reach your home deposit goal faster. By exploring different strategies for saving for a home deposit, you can boost your financial capacity and speed up the journey to homeownership. Strategies include:

• Freelance Work or Side Hustles

Take on part-time work, freelance gigs, or gig economy jobs to earn extra income. This can be especially helpful if you’re self-employed and looking to maximise savings for a home deposit. Even a few extra hours a week can make a meaningful impact on your savings.

• Short-Term Rentals

If you have a spare room in your rental property with permission from your landlord, you could consider short-term rentals on platforms like Airbnb. This can generate some additional income, especially if you live in a sought-after area, but it’s essential to check tenancy rules and agreements.

• Invest in Real Estate Funds

While saving for your first home, consider diversifying your income through real estate investment funds. These funds help you to invest in property markets without needing a large deposit or direct ownership. The returns earned can supplement your deposit savings and provide exposure to real estate growth, helping you get one step closer to homeownership.

• Increase Your Income Through Selling and Career Growth

Begin by going through your home and selling items you no longer use through online marketplaces. This can quickly turn unused belongings into extra cash that goes directly into your deposit savings. Additionally, look for ways to increase your income at work, such as asking for a raise, seeking a promotion, or earning bonuses. Any extra earnings can greatly boost your savings potential.

• Consider Rentvesting

Although you may not own property yet, rentvesting involves purchasing an investment property in a more affordable location while continuing to rent in your preferred area. This strategy can help you build equity and grow your wealth over time while still allowing you to enjoy the lifestyle you want.

By focusing on these income-boosting strategies, first-home buyers can effectively grow their savings, making their dream of homeownership a closer reality.

5. Take Advantage of Tax Incentives and Government Schemes

Boosting your savings for a home deposit can be more effective with the right strategies and incentives. Consider placing your money in high-interest savings accounts to earn better returns and explore employer savings programs that may offer matching contributions.

Additionally, you can benefit from tax incentives and specific government schemes designed to support first-time buyers, making homeownership more achievable:

• First Home Guarantee: This program allows eligible buyers to purchase a home with as little as a 5% deposit without the need to pay Lender’s Mortgage Insurance (LMI), reducing upfront costs significantly.
• Regional First Home Buyer Guarantee: Designed for those buying in regional areas, this scheme allows eligible buyers to purchase with a 5% deposit, encouraging property ownership outside major cities.
• Family Home Guarantee: Specifically for single parents, this program offers the opportunity to buy a home with a deposit as low as 2%, providing crucial support to help families enter the property market.

By combining these government programs with smart savings strategies, like using high-interest accounts and employer support, you can reach your homeownership goals faster and with greater confidence.

6. Reduce Debt to Strengthen Your Mortgage Application

Paying down your debt is important to boost your borrowing potential before applying for a mortgage. Lenders closely examine your financial obligations when deciding on your loan eligibility and terms, so taking proactive measures to lower your debt can make you a more appealing borrower.

Strategies for Reducing Debt Before Buying a Home

• Pay Off High-Interest Debt

Prioritise reducing high-interest debts, such as credit cards or payday loans. This will free up more money for savings and lower your overall interest costs.

• Consolidate Debts

Think about consolidating your debts into a single loan with a reduced interest rate. This approach can simplify repayments, lower monthly costs, and help you pay down your debt more quickly.

Focus on Improving Your Credit Score

A high credit score is important for mortgage approval, as lenders use it to assess your financial reliability. To boost your score, make payments on time, lower existing balances, and avoid new debt. By demonstrating responsible financial behaviour, you can increase your chances of securing a better home loan offer with more favourable rates and terms.

7. Use Family Support 

Receiving support from family or pooling resources with others can make entering the property market easier and faster for first-time buyers. These options help you boost your deposit, improve your borrowing potential, and make homeownership more accessible.

• Family Support

Family members may offer financial help for your home deposit, either through gifts or by acting as guarantors. Guarantor loans involve a family member (usually a parent) using the equity in their own home as security for your loan, helping you secure a larger mortgage or avoid paying Lenders Mortgage Insurance (LMI). This support can improve your chances of buying a home, but it’s important to consider the financial implications and responsibilities for both parties.

• Co-Buying a Property

Co-buying with a friend or family member is another way to combine resources and meet deposit requirements more quickly. By sharing the purchase cost and ongoing expenses, you can make property ownership more affordable. However, it’s essential to clearly outline all legal and financial responsibilities in a co-ownership agreement to avoid potential disputes in the future.

• Joint Investment Opportunities

Consider entering a joint investment with others to purchase a property. This approach not only allows you to pool funds but also offers a way to share property ownership costs. Joint investments can help build equity and get your foot in the market, though it’s crucial to establish terms, expectations, and legal agreements to ensure a smooth partnership.

Exploring these family-supported and co-buying options can help you overcome deposit hurdles and move closer to achieving your dream of homeownership.

8. Building a Strong Financial Profile

To improve your chances of mortgage approval, it’s essential to demonstrate financial stability. Lenders evaluate your financial history and habits to see if you can consistently make loan payments. Building a solid financial profile involves several key steps:

• Maintain Steady Employment

Having a stable job history reassures lenders of your income reliability. Consistent employment shows you’re capable of meeting ongoing financial commitments.

• Save Regularly

Regular savings show financial discipline, which lenders value when assessing mortgage applications. Regularly contributing to a savings account not only builds your deposit but also showcases your ability to manage money effectively.

• Reduce Unnecessary Spending

Limiting unnecessary expenses helps boost your savings rate and demonstrates financial responsibility. This can increase your borrowing potential and show lenders that you prioritise important financial goals.

Prepare Your Documentation

Ensure you have all necessary documents ready when applying for a mortgage. This typically includes income statements, recent tax returns, bank statements, and proof of savings. Being organised and well-prepared makes the application process smoother and strengthens your profile in the eyes of lenders.

9. Staying Motivated on Your Journey to Home Ownership

Keeping yourself motivated during the journey to save for a home deposit is crucial to staying on track and reaching your goals. Here are some practical ways to keep your focus strong:

• Visualise Your Future Home

Picture yourself living in your dream home. Creating a vision board or simply reflecting on what homeownership will mean for you can inspire you to keep pushing toward your goal.

• Connect with Others

Engage with other first-time buyers to share tips, experiences, and encouragement. Learning from others and building a support network can make the process less isolating and more inspiring.

• Revisit and Adjust Your Goals

Regularly reviewing your progress and goals can help you stay focused and motivated. If circumstances change, adjust your plan accordingly to keep yourself on track.

Celebrate Your Wins

Celebrate and reward yourself when you achieve significant savings milestones. Celebrating these small wins keeps you motivated, makes the journey more enjoyable, and helps maintain your momentum. Each step you take moves you closer to owning your home. By sticking to a strong savings plan, using available incentives, and staying positive, you can make your dream of owning a home a reality sooner than you think. Keep celebrating progress and keep moving forward!

10. Consult with a Professional for Expert Guidance

Buying a home can be challenging, but you don’t have to do it alone. Consulting with a professional like a mortgage broker can give you advice and strategies that work for your situation. Professionals can help you understand your borrowing capacity, identify suitable loan options, and ensure you’re maximising available incentives and programs.

For those in specialised fields, there are also Home Loans for Professionals that offer unique benefits, such as flexible terms and higher borrowing capacities. With expert support, you can move forward confidently, knowing you’re making the best choices for your financial future.

Start Saving for Your Deposit and Make Your Dream Home a Reality!

Reaching your goal of saving for a home deposit and achieving homeownership requires focus, discipline, and smart choices. By setting realistic goals, creating a budget, boosting your income, and using available incentives, you’re well on your way to making your dream a reality. Reducing debt and building a strong financial profile further strengthens your chances of securing a great home loan and puts you in the best position for success.

Saving for a home deposit doesn’t have to be complicated. At Unconditional Finance, we’re here to help you make this journey smoother and more achievable. With flexible solutions and expert support, we’ll guide you through every step so you can make confident, informed decisions along the way.

Get in touch with us today, and let’s turn your savings into the key to your new home!