Deposit essentials 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.

Working out how much deposit you need to save

an image of budgeting calculatorAn image of magnifying glass represents property searchan image of currency and house represent house deposittwo documents listing fees and chargesfive percent deposit money baghome loan document

Different types of savings for a deposit

a piggy bank representing savingsicons of money to represent genuine savingsan image of bank statement with regular depositsa gift box representing gifted depositsa money bag representing non genuine savingsAustralian map showing aussies saving strategy with tax refund

Smart steps towards owning your dream home

an auction signagean image of parents and kid represents coowningfirst home owner grant paperworklenders mortgage insurance shieldan image of a financial advisorA comparison image representing home loan features


View the accessible text version of the infographic below or download the PDF version.

Working out how much deposit you need to save

  • First, set your budget. Use online loan calculators to work out what you can comfortably afford to borrow and repay. 
  • Consider neighbouring suburb and narrow your property search to just the homes that you can actually afford.
  • Most people set a target to save 20% of the property price for a deposit, to avoid paying a mortgage risk fee*.
  • Remember to include fees & charges in your savings plan such as stamp duty, legal fees, establishment etc.
  • Do you know? The minimum deposit required by Pepper Money on some products is 5%.
  • Fact: According to ABS, the average loan size for first home buyers is $500,000.1

Different type 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.
  • Tip: Generally lenders will check savings accounts to see how savings have been accrued.
  • 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.
  • Fact: According to MoneySmart, 21% of Aussies put aside their tax refund in their savings account.2

Smart step 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 through firsthome.gov.au
  • One workaround is to pay for a mortgage risk fee* which lowers the required deposit.
  • Tip: 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.

* A risk fee is often charged by a lender if you’re looking to borrow more than 80% of the value of the property. This fee is used to either offset the risk associated with the loans, or protect the lender from a possible financial loss if you’re unable to meet your home loan repayments. To learn more about deposits for buying a property, click here.

Remember that different lenders have different deposit requirements and fees, so make sure you set aside some time to do your own research before committing to one home loan provider. MoneySmart outlines what features you need to look out when looking for the right home loan.

To get started you can find out what a Pepper Money home loan might look like for you using our repayment calculator here.

One last thing: you can always give us a call on 13 73 77 or speak to your Pepper Money broker if you have any questions about your eligibility for getting a home loan.

Sources:
1. https://www.echoice.com.au/guides/whats-the-average-australian-home-loan-size/
2. https://www.moneysmart.gov.au/managing-your-money/income-tax/how-australians-spend-their-tax-refunds

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