3 Ways to Help You Save Your First Home Deposit

Owning a home is the quintessential Australian dream. Perhaps you are ready to move out of your parent’s house, or part ways with the rental lifestyle for good. Or perhaps you are a young family looking for a place to settle down and raise your children in.

For many, the first and biggest hurdle of towards home ownership is saving for a deposit. If that’s you, rest assured that this is an achievable goal but one that will take time and commitment.

This article will provide you three ways to save up your deposit quickly and (relatively) effortlessly.

Set a budget that works for you

Did you know that in Australia, it takes the average first home buyer couple 4.6 years to save for a 20% deposit?

A sure-fire way to stay on course on your journey to save is to set a budget that works for you. First you need to work out how much you’re spending, what you’re spending on, and how much you have left each month. You can start by checking your bank statement and categorising your expenses with the help of an online budget planner, like this one here.

Next you will need to work out how much you can sustainably save every fortnight or month. The 50/30/20 rule is a great starting point – this means 50% of your budget is essentials like food and rent, 30% on discretionary spending and 20% on savings.

The flipside to saving furiously is to have a realistic expectation about what you can afford. It may be a good idea to speak with a mortgage broker, who will be able to give you a full picture of your financial situation and inform you just how much you can borrow versus needing to save. 

Take advantage of first home buyer schemes

The great news is that there are a number of schemes available to help you put down your deposit faster.

The First Home Owners Grant is available across all States and Territories (except ACT) to eligible buyers as a one-off, lump-sum payment. Depending on where you live, the grant may only apply to new properties or properties under a certain value.

The other is a new government initiative called the First Home Loan Deposit Scheme (FHLDS), which gives eligible first home buyers the ability to put down a deposit as little as 5% of the purchase price. Traditionally, deposits less than 20% of the house price are charged with a Lender’s Mortgage Insurance, which can potentially set you back tens of thousands of dollars. Accessing this scheme comes down to meeting the requirements and timing, as there are only 10,000 FHLDS spots each financial year.

Fast-track your savings with super

Did you know you can use your superannuation towards your first home deposit? The First Home Super Save Scheme (FHSSS) is a smart way to save by speeding up your savings while simultaneously reducing your tax payments. As it is most complex of the schemes available, this section only covers the basics of how it works.

In a nutshell, you can contribute $15,000 into your super account each financial year, with a total limit of up to $30,000. You can then withdraw the amount you have contributed when you are ready to put down a deposit.

The beauty of the scheme is that because you’re using your super to save, you pay less tax than if you had saved outside of your super. Therefore, you get to hold onto more of your money, which helps you save up your deposit faster.

How you access this scheme works depends on your employment. If you are an employee with a PAYG arrangement, the main way you can take advantage of the tax savings is through salary sacrificing. If you are self-employed, you will most likely need to make your own super contributions. If you contribute with your before-tax income, you can claim a tax deduction on the contribution.

Where to go from here

You don’t have to act alone in your journey to buying your first home. Help is available in the form of mortgage brokers, who are the experts in this area.

A mortgage broker will be able to sit down with you to work out how much you can borrow, and explain how the first home buyer schemes work and if they are right for you. They will then be able to recommend you the best home loans based your goals and circumstance.

You can approach a mortgage broker before you start looking for a home, even if you know you’re not ready to buy straightaway.

Remember, there’s no better time to save then now. Understanding how first home buyer schemes work, and applying some of these saving strategies, you are already one step closer to securing your first home.