How to save for a house deposit

Buying a home is a significant milestone, but before you get your foot in the door you’ll have to save up for a house deposit.

This guide covers everything you need to know, from determining how much you need to save, to strategies for saving while renting, and why the size of your deposit matters for your home loan.

One of the first questions you might ask is, ‘How much deposit do I need for a home loan?’ The answer largely depends on the price of the property and the home loan options available to you.

In Australia, the typical house deposit is 20% of the property's value. This means if you're looking to buy a home valued at $500,000, you should aim to save $100,000. 

However, it's possible to get a home loan with a smaller deposit—sometimes as low as 5%. But keep in mind, if your deposit is less than 20%, you might be required to pay Lenders Mortgage Insurance (LMI), which protects the lender if you default on your loan.

The time it takes to save for a house deposit varies depending on your income, expenses, savings ability, and if you are required to save up a 20% deposit. On the average home loan deposit, it can take two to ten years for singles, or one to five years for couples.

To get a clearer picture of how long it will take you, start by calculating your savings goal. Let’s say you want to buy a house in five years. If you need a $100,000 deposit, you’ll need to save $20,000 per year, or about $1,666 per month. You can use a savings goal calculator to adjust these figures according to your own goals and financial situation.

Saving for a house deposit while renting can be tough, but it’s definitely achievable when you make plans and budget carefully. Here are some savings strategies you can use: 

1. Create a budget: Start by tracking your income and expenses, then identify where you can cut back. Look at expenses like dining out and subscription services, and decide whether you can live without them for a while. With any expenses you cut back on, redirect those savings straight to your deposit. A budget calculator can help.
2. Set up a dedicated savings account: Open a high-interest savings account specifically for your house deposit. The aim here is to keep your regular savings separate from your deposit and reduce the temptation to spend it. 
3. Put your savings on auto-pilot: Set up automatic transfers from your bank account to your savings account each payday, to help you consistently save without having to think about it. 
4. Reduce your rent costs: Consider moving to a cheaper property, getting a housemate, or negotiating a lower rent with your landlord. Any savings you make can be put towards your house deposit.
5. Boost your income: Looking for ways to make extra money, such as taking on a side hustle, freelancing, or asking for a raise can accelerate your savings. 
6. Reduce your debt: Credit card and personal loan debt can linger and become a drag on your savings, especially when interest accrues. Focus on reducing your existing debts so you can save more of your income. Check whether a debt consolidation loan is right for you.

Property in Australia is expensive. So much so that the national average mortgage size is over $630,000. This means finding ways to cut down the size of your deposit or taking advantage of homebuying schemes is crucial if you want to get your deposit, and the keys to your new home, faster.

1. Take advantage of government schemes: The Australian government offers various schemes to help first-home buyers, such as the First Home Owners Grant (FHOG) and Help to Buy scheme. These initiatives can reduce the amount you need to save by providing lump sums of money or allowing you to buy with a lower deposit. 
2. Leverage your superannuation: The First Home Super Saver Scheme (FHSS) allows you to save for your deposit by making voluntary super contributions, which can provide tax advantages and help your savings grow faster. 
3. Consider moving regionally: If you live in a city and can’t afford to buy there, consider moving to a regional area where property prices are generally cheaper. Lower house prices can mean a smaller deposit amount. 

Saving for a house deposit can seem like a long and challenging journey, but staying motivated is key to success. 

Set yourself some savings milestones to break your goal into smaller, more manageable chunks and keep yourself accountable by sharing your savings goal with a friend or family member. 

It’s also important to regularly review your budget and the progress you’ve made. Consider whether you need to make adjustments to your budget to stay on track. Or, if you’re hitting those milestones, treat yourself to a fancy dinner and celebrate getting one step closer to owning your own home.