Tips to Save Your First Deposit


Introduction

The Australian dream of home ownership might seem increasingly out of reach for many first-time buyers. With the median home price in Australia now at $820,000, saving for a 20% deposit (around $164,000) can feel like an insurmountable challenge. But don't be discouraged – there are strategic approaches and government support programs that can help you go from zero savings to homeowner more quickly than you might think.

This guide will walk you through practical strategies to build your deposit, leverage available government assistance, and ultimately achieve your goal of owning your first home in 2025 and beyond.


Understanding the Current Market

The property landscape continues to evolve in Australia. After a period of high interest rates, the Reserve Bank of Australia (RBA) implemented its first rate cut in February 2025, dropping the cash rate from 4.35% to 4.10%. While housing affordability remains challenging, this shift and anticipated further cuts in 2025 create a potential window of opportunity for first home buyers.

According to property experts, early 2025 could be a good time for first-home buyers to enter the market, as many investors have withdrawn due to low capital gains and additional taxes on investment properties in some states. This reduced competition may give first-time buyers an advantage in certain market segments.


Setting Your Deposit Goal

How Much Deposit Do You Really Need?

While a 20% deposit is traditionally recommended, it's not the only path to homeownership:

  • Standard deposit (20%): This is the ideal amount as it helps you avoid Lenders Mortgage Insurance (LMI) and typically secures better interest rates.
  • Minimum deposit (5-10%): Many lenders will accept a smaller deposit, though you'll incur Lenders Mortgage Insurance (LMI) if your deposit is less than 20% of the purchase price.
  • Government scheme deposit (5% or less): Through programs like the First Home Guarantee, you might only need a 5% deposit without paying LMI.


Calculate Your Target Amount

Before you begin saving, determine your price range based on:

  1. Your income and expenses
  2. Your borrowing capacity (use online calculators provided by banks)
  3. Property prices in your target areas
  4. Additional costs (stamp duty, legal fees, inspections)

Remember to factor in that in states like NSW, those earning an average income will need to save for about 6.9 years to accumulate a 20% deposit on a median-priced home, while in Queensland it might take around 5.4 years. Setting realistic timeframes is important for your mental well-being during this journey.


Strategic Saving Techniques


1. Create a Dedicated Savings Plan

The foundation of your deposit-building strategy should be a solid savings plan:

  • Set up a high-interest savings account: Look for accounts specifically designed for home deposits with minimal fees and competitive interest rates.
  • Automate your savings: Boost your savings by transferring money to your savings account as soon as your salary arrives through automatic transfers or direct debits.
  • Budget meticulously: Track every dollar using budgeting apps or spreadsheets. Categorize expenses as "essential" and "non-essential" to identify potential savings.
  • Implement the 50/30/20 rule: Allocate 50% of income to needs, 30% to wants, and 20% to savings and debt repayment.


2. Accelerate Your Savings

  • Reduce high-interest debt first: Pay down credit cards and personal loans to free up more money for saving.
  • Consider a side hustle: A second source of income outside your regular working hours, such as driving for a ride-share company or turning a hobby into something that generates cash, can help you reach your deposit goal faster.
  • Minimize lifestyle expenses: Review subscriptions, dining out, entertainment costs, and other discretionary spending.
  • Temporarily downsize your living situation: Consider moving to a more affordable rental, sharing accommodation, or even moving back with family if possible.


3. Leverage Term Deposits and Fixed Interest

  • Ladder your savings: Split your savings between different term deposits with varying maturity dates for better interest rates while maintaining some liquidity.
  • Look for first home saver incentives: Some financial institutions offer special rates for first home buyer accounts.


Government Programs and Incentives


First Home Guarantee (FHBG)

The First Home Guarantee is an Australian Government initiative that enables eligible home buyers to purchase a home with a deposit as little as 5% without paying Lenders Mortgage Insurance (LMI). Here's what you need to know:

  • Guarantee amount: Up to 15% of the property value
  • Places available: 35,000 places from July 2024 to June 2025
  • Income limits: $125,000 for individuals or $200,000 for joint applicants
  • Requirements: Must be first home buyers intending to be owner-occupiers


First Home Super Saver Scheme (FHSSS)

The FHSSS allows you to make voluntary contributions to your super fund to help save for your first home. You can contribute up to $15,000 in any one financial year, up to a total of $50,000 across all years.

Benefits include:

  • Concessional tax treatment (contributions taxed at 15%)
  • 30% tax offset on assessable amounts
  • Potential for higher returns compared to standard savings accounts


State and Territory Grants

Most states and territories offer additional support:

  • First Home Owner Grants (FHOG): Queensland offers up to $30,000 (until June 2025) for first-home buyers purchasing or building a new home valued under $750,000.
  • Stamp duty concessions: Many states offer reduced or waived stamp duty for first home purchases under certain thresholds.
  • Regional incentives: The Regional First Home Buyer Guarantee supports eligible regional home buyers with as little as a 5% deposit without paying Lenders Mortgage Insurance.


Help to Buy Scheme

A new national shared equity scheme supporting eligible home buyers to purchase with just a 2% deposit. The government provides an equity contribution of up to 40% for new homes or 30% for existing ones. This program is designed for singles earning less than $90,000 annually and couples earning less than $120,000 annually.


Alternative Pathways to Homeownership


Rentvesting

Rentvesting involves living in a rental property while also renting out your own investment property. Usually, rentvesters buy a property in a more affordable area they don't necessarily want to live in, while renting in a location where they can't afford to buy.

Benefits include:

  • Entering the property market sooner
  • Living where you prefer while building equity elsewhere
  • Potential tax benefits from investment property


Shared Ownership or Co-Buying

  • Family assistance: Parents may be able to use their equity or savings to help with your deposit.
  • Friends or siblings: Pooling resources with others can make property ownership more attainable.
  • Fractional ownership: Some platforms now allow you to purchase a portion of a property and gradually increase your share.


Building Better Financial Habits

Track Your Progress

  • Set milestones and celebrate achievements along the way
  • Use visualization techniques to stay motivated
  • Join online communities of other first home buyers for support


Improve Your Credit Score

  • Pay bills on time
  • Reduce credit card limits
  • Maintain stable employment
  • Minimize new credit applications


Educate Yourself

  • Attend first home buyer seminars
  • Research property trends in your target areas
  • Build relationships with mortgage brokers and real estate agents


Preparing for Purchase

As your deposit grows, prepare yourself for the purchase process:


Get Pre-Approval

Getting pre-approved for a home loan helps you understand how much you can borrow and makes you a more attractive buyer. This process can take time and require different documentation, so it's good to start a few months before you plan to buy.


Research Areas Thoroughly

Investigate locations that align with your budget and lifestyle, considering factors like proximity to work, schools, amenities, and potential growth. If you can't afford to buy where you want to live, consider alternative strategies like rentvesting.


Understand the Full Costs

Beyond the deposit, be prepared for:

  • Stamp duty (if applicable)
  • Legal and conveyancing fees
  • Building and pest inspections
  • Moving costs
  • Initial repairs or renovations


Success Stories: From Zero to Homeowner


Sarah and Michael, Brisbane

Starting with just $5,000 in savings, this couple implemented aggressive saving strategies, cutting expenses by 40% and taking on weekend work. They utilized the First Home Guarantee and Queensland's First Home Owner Grant to purchase a $500,000 townhouse with a 5% deposit after 18 months of dedicated saving.


Jamie, Melbourne

As a single buyer, Jamie leveraged the First Home Super Saver Scheme to build his deposit tax-effectively. By making salary sacrifice contributions over three years, he accumulated enough for a 10% deposit on a one-bedroom apartment while still maintaining his city lifestyle.


Conclusion

The path from zero savings to homeownership is challenging but absolutely achievable with strategic planning, disciplined saving, and smart use of available government programs. The Australian property market in 2025 presents a potentially favorable window for first home buyers with interest rates beginning to fall and less competition from investors in some market segments.

Remember that your first home doesn't need to be your forever home – getting a foothold in the property market is the first step toward building long-term wealth and stability. Start where you can, stay consistent with your savings plan, and leverage every available support program to make your dream of homeownership a reality.

By combining determination with the strategies outlined in this guide, you can join the thousands of Australians who successfully make the transition from renters to proud homeowners each year.


Useful Resources

Housing Australia - Information on federal government housing programs

Australian Taxation Office - Details on the First Home Super Saver Scheme

Moneysmart - Government financial guidance including budgeting tools

First Home Owner Grant - State and territory grant information