Getting into a home for you and your family is a noble goal. Regardless of the noise and negativity in the media, home ownership IS possible for aspiring Australians today.

The first thing you’ll need to buy a home is an initial deposit of savings. This guide will help you better understand exactly how much savings you’ll need, and what other costs are involved at purchase.

It’s good to remember that things will change along the way, such as interest rates and property prices. Don’t be alarmed by sudden changes. Keep a cool head and keep reassessing your situation and options as you go.

TIP: Partner with a Waymaker Wealth Advocate to stay focused and encouraged on your home-ownership journey.

How much deposit do I need?

Typically, a 20% deposit is required when buying a home, but many first home buyers start with a 10% deposit and pay LMI (Lenders Mortgage Insurance).

It may be possible for some eligible buyers to have as little as a 5% deposit through the Home Guarantee Scheme (HGC), an Australian Government initiative.

Exactly how much savings you’ll need will depend on a few factors, including:

What you can afford to borrow (determined by the bank)
How much your ideal property costs
Your overall financial situation (income, expenses, assets & liabilities)
Your assessed LVR % (potential LMI fee on top of borrowing costs)
Conveyancer fees

The table below gives you an idea of how much money you might need for your deposit based on a range of purchase prices, excluding LMI and purchase costs:

Other things to consider

Your borrowing power

Your borrowing power refers to the amount of money you can afford to borrow from a bank. Each bank will have its own calculators, most of them online, to give you a rough idea of how much you could borrow.

Keep in mind these calculators are not accurate and are partially designed as a selling tool. To properly assess your borrowing power, we recommend you speak to a Mortgage Broker. They can look at your unique financial situation and communicate with the bank directly to get a proper assessment done. No bank is the same when it comes to assessing a loan. Some banks are more flexible in how they determine and calculate your living costs, the type of income you have, or the value of the property.

Example calculator: MyState Bank Borrowing Power Calculator

Government and local incentives

There are plenty of government incentives for first-home buyers at a federal and local level. Some examples of incentives you may be eligible for include:

First home stamp duty concession (QLD Gov link, other states have similar incentives).
First Home Owner Grant (available in all states and territories)
First Home Guarantee (5% deposit) (Australian Government)
Council Rates Rebate for first home buyers (check with your local council)

Rising interest rates

When you apply for a loan, the banks will ‘stress test’ your loan at a higher interest rate (typically +3%) to ensure that you can service the loan long-term. If you fail this test, it’s a sign you’re borrowing too much for your income.

Consider building a buffer into the repayment amount (for your new home loan) to cover any future interest rate rises.

LMI

You may have heard the term Lenders Mortgage Insurance or LMI as it is typically referred to. LMI is an insurance policy that covers your lender (the bank) in the event you default on your home loan. It’s important to understand that LMI is to protect the bank, not you or your guarantor. LMI is usually required when your deposit is smaller than 20% of the property purchase.

LMI isn’t something to shy away from, it can allow you to get into the property market sooner than later. At Waymaker, we’ve seen many cases where people have waited to save a full 20% deposit, only to see property prices rise faster than it would have cost to use LMI and be in their home sooner.

The lending process

Buying your first home is a journey, like all good things it takes time. So it’s important to be patient, flexible and optimistic. The time and complexity of each lending process really depends on each person’s situation, the lender’s ability to process the loan quickly, and the type of property you’re buying (eg. settlement date or legal delays).

In short, there’s no cookie-cutter approach. Each bank, person and property is assessed differently.

When the lending process gets complex or confusing, many people find themselves giving in to the circumstance or giving up altogether.

Get support for the journey

At Waymaker, help make the journey of buying a home and securing finance simpler and easier for Australian families.

There are two ways we can help:

Our 12-month Home Purchase Accelerator program, guided by our Waymaker Wealth Advocates helps you stay focused and encouraged on your first home ownership journey.
Our AFG Accredited Mortgage Brokers are here to help you navigate the lending process and provide support to create better outcomes for you and your family.

Talk to our team and let’s create a plan to save and purchase your first home.

Speak To A Mortgage Broker