You want to buy a home. You know you need a deposit, but how much do you actually need? You’ve heard of banks lending on 5%. Is that all you need to save?

Well, in some circumstances yes, but in most cases, if you don’t have 20% deposit then you will be liable for expensive mortgage insurance.

If you don’t have a deposit of at least 20%, then it’s time for a swift action plan. But before you write that plan, you also need to consider not only the deposit but money for conveyancing costs. Things like legal fees. Transfer fees. Stamp duty, bank fees, and more.

If you don’t have at least 20% of the deposit, your bank will require you to pay Lenders Mortgage Insurance, or LMI. This can add amounts like $8,000.00 – $10,000 or even more, depending on the amount you borrow.

Instead of throwing your hands up in horror at the thought of saving 20% (plus extra for conveyancing and other costs), we have some stress-reducing tips to help you get into the SV – the Savings Zone – and love it.

1 Make a budget – and stick to it

This is the most important step towards buying your first home. You need a savings goal and you need a plan to get you there. And you need to stick to it like glue. Your budget is your plan of attack! the NSW Government MoneySmart website has budget planning resources we recommend.

2 Check your credit rating

It’s important to check your credit rating. If you have any issues, try to fix them asap. A bad credit rating tells lenders you’re not a good credit risk and they may not want to give you a mortgage, even if you have a hefty 20% deposit under your belt.

So check this site with suggested providers on the MoneySmart website.


3 Open a high interest savings account

Open a high interest savings account for your deposit, and leverage the power of compound interest. As you earn interest, that’s added to your savings, and you keep earning interest. You’ll reach your savings goal much faster.

4 Set up an automatic transfer

Organise an automatic transfer of the amount you want to save every pay day, and you don’t have to give it another thought. Your money goes into your account like clockwork every pay day. And you’ll become a whiz at managing with the money left in your normal transaction account.

Pre-Approval Phase

Once you’ve either saved your 20% or are getting really close to that goal, this is  where things start hotting up. You enter the hallowed ground of the Pre-Approval Phase. This is the time before you apply for the loan with the lending organisation.

We recommend that you start this phase 6 months before you apply, so you can give your savings as much of a boost as you possibly can. This will show the lender that your mortgage payments and your general life expenses will be a cinch.

So listen up. Here are some ways to get your mortgage over the line with your lender:

  • Put aside the difference between your rent and the anticipated mortgage repayment into your savings account each fortnight.
  • Say NO to Uber Eats! Reduce your discretionary spending (that’s spending on your wants, not your needs).
  • Work out your entertainment budget, and take that out in cash each fortnight. Spend only that amount – no more.
  • How many streaming services do you use? Pick your favourite, and close the rest for the 6 months leading up to your application.
  • We’ve kept the best til last. Reduce the limit on your credit account. Work on paying any amounts owing. In the 3-6 months before your application, stop using it – unless you can pay it off completely each month.

Before you know it, you’ll have that 20% deposit. You’ll have stashed away money for your conveyancing costs – and more. And your first home will be eagerly waiting for you.