Top tips to help you save a larger home deposit

Helpful strategies for saving for a home loan deposit


For anyone who has hopes of becoming a homeowner, saving for a deposit can seem like a really daunting task. The minimum deposit required by Pepper Money on some products is five per cent of the purchase price of the property, but it’s always a good idea to have a deposit of 20 per cent or more, if possible, see below for reasons why.

Before you start looking for a property, find out how much you can actually afford. Pepper Money’s Mortgage Repayment Calculator can give you an estimate of what your repayments could be; based on your home loan amount and interest rate you think you’ll be paying. Once you get an idea of your potential repayment, read on to see the several benefits of having a larger deposit and also some useful strategies to help you save!

Depending on the price of your dream home, the required deposit can be a rather hefty sum. Aiming to save a deposit of 20 per cent or more can have several benefits: 

  • Smaller repayment amount - You’ll save money in the long run as you won’t need to borrow as much, which means you’ll pay less interest over the term of your loan. 
  • No Lender’s Mortgage Insurance (LMI) costs – This is an extra fee payable by you as a borrower if you have less than a 20% deposit saved. Having a larger deposit means you can avoid paying this additional cost. Note that Pepper uses a Lender Protection Fee (LPF) which gives us the flexibility to assess loan applications without having to seek approval from LMI providers.
  • Bigger savings means access to better rate – In most cases when you have more than 20% deposit saved, you may be eligible to apply for special rates and deals, which will save you even more money.

While it makes sense to save for a larger deposit, it’s not something that can be easily achieved. Here are some top tips to help you save a larger deposit:

Create a budget
One of the best ways to work out where you can save a few extra dollars is by creating a budget. By tracking your daily, monthly and annual expenses, you can see where your money goes and identify where you can perhaps keep some funds each month to put into savings. The Australian Securities & Investments Commission’s (ASIC) MoneySmart TrackMySPEND app is a helpful tool to work out where you’re spending your money.

Set aside part of your monthly salary
Out of sight, out of mind is a savings strategy that works for many people. You can do this by putting your salary straight into a savings account and then transferring a set amount that you have budgeted to your everyday account to cover daily expenses and bills. That way you help yourself stick to your budget and your savings are safely out of temptation’s reach, and they may even earn you a higher rate of interest depending on the type of savings account you choose.

According to the 50-20-30 Rule, it is recommended that at least 20% of your income should go towards savings. While every person's situation is different, a consistent amount of savings whether its big or small, will eventually add up and help you achieve your financial goals faster. 

The importance of showing your savings
An important thing to consider when you're saving for your deposit is whether your lender requires you to have what is known as genuine savings. Every lender has their own rules, at Pepper Money we consider genuine savings to be money that has been held in your account for at least six months and shows you can save regularly. If your savings are considered to be non-genuine, you may be able to use those funds if you put them into a savings account where they are left untouched for generally a three month minimum.

The ASIC MoneySmart website also offers some great strategies to help you save for that all important deposit, including moving back into your family home to save on rent, as well as getting a high interest savings account.

If you'd like to know more about the deposit amount or type of savings you need to purchase your dream home, have a chat to one of our Lending Specialist to see how we may be able to help. Talk to us today on 13 73 77 or contact your Pepper Money broker.

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