How much deposit do you need for a house?

Saving the deposit required for a home loan is complicated, right? All those zeroes and decimal places. You save and save but sometimes the goalposts move, or you get hit with unanticipated expenses, or you just really needed that jacket on sale.

The good news is, we understand it’s tough to save the minimum deposit for a home loan, especially when you really love all three of your streaming services. We want you to walk up your street and be filled with happiness at the sight of your own place. We want to see you in your comfy new living room. We want you to feel settled while you binge Netflix.

And we’re good at maths, so we know it’s way easier to save for a 5% deposit home loan. That’s why we let you borrow up to 95% of the value of your chosen property.

But here’s the best part. Your deposit doesn’t have to all come from personal savings. There are plenty of grants and first home loan deposit schemes that first home buyers can put towards their deposit.

Let’s break down how much deposit for a house you really need.

How much deposit do you need for a house?

Bigger (deposits) is (are) better

Lenders look at something called ‘loan-to-valuation ratio’, or LVR – that’s the ratio of your loan versus the value of the property you want to buy. So if you have a deposit of, say, 20%, you have an LVR of 80%. Or, if your deposit is worth 5%, your LVR is 95%.

The bigger your deposit, the better. It lowers your LVR, and that means lower repayments. And the lump sum you contribute as a deposit at the start, is money you’re not paying interest on later.

Smaller deposits mean lenders mortgage insurance.

There’s another good reason to aim for a bigger deposit. If your LVR is above 80%, it’s likely you’ll need to pay lenders mortgage insurance (LMI). It’s a one-off sum that protects the lender if you default on your loan.

Usually it’s bundled into the amount you borrow so it’s not an upfront payment, but it does mean you’ll pay a bit of a low deposit premium.

There are other upfront costs after you've established your sweet 5% deposit home loan.

Buying a house is an expensive exercise. Besides the deposit for your lender, you’re also going to be forking out for legal fees, insurances, moving trucks, connection and disconnection fees and a fancy new welcome mat.

Stamp duty is the big drainer. It’s calculated on the contract price for your property and it just goes straight to the government, not towards paying off your place. The amount you’ll pay varies between states and territories – and as a first home buyer, you could be eligible for a discount. Use our stamp duty calculator to plan ahead.

You’ll need to have all of these costs covered in addition to the minimum deposit for a home loan.

Need a helping hand to save the deposit required for a home loan?

Your deposit could be helped along by a whole range of grants and support from the Australian government. Here’s what’s currently up for grabs.

• $20,000 WA Building Bonus – available when you build a new place in WA. Better still, no income or property value limits apply. Applications close on 30 April 2023.
• First Home Super Saver Scheme - The FHSS scheme allows you to save money for your first property inside your super fund.
• First Home Loan Deposit Scheme - under this scheme, part of your home loan will be guaranteed by the National Housing Finance and Investment Corporation (NHFIC). Any guarantee of your home loan is for up to a maximum amount of 15% of the purchase price. Each financial year, 10,000 First Home Loan Deposit Scheme places will be available to eligible first home buyers.
• First Home Owner Grant – in Australia, if you’re a first-time buyer, you may be eligible for the first home owner grant (FHOG) . That’s a one-off payment to help get you into your home. There are various conditions and criteria, but it can contribute thousands of dollars to your loan – well
  worth checking out.

More ideas to get you closer to a 5% deposit home loan.

You could explore buying a property with someone else. Maybe you and a friend can go halves, or the bank of mum and dad is happy to top up your deposit? Remember if you’re buying with a friend, they will also need to demonstrate a strong savings history and ability to make repayments in their loan application.

A cash gift can also be an incredibly generous boost to your deposit. Keep in mind that we’re keen to see your healthy relationship with savings, so getting a lump sum to cover the whole lot is actually not as impressive as consistently putting aside what you can afford.

Saving for a house deposit can be pretty daunting, but a small deposit doesn’t have to lock you out. Have a play with the slider on our borrowing power calculator to see how a bigger deposit can affect your repayments.

And when you’re ready, a ME Mobile Banker can answer all your questions about getting into your own place sooner.