How to save for a house deposit – tips to get you closer to homeownership

Unless you live in a cave (in which case, you’re probably not bothered about saving for a house deposit), you’ll be aware that we’re currently experiencing a cost-of-living crisis. And it’s affecting people of all backgrounds and incomes.

According to Great Southern Bank’s recently-released No Place Like Home report, 90 per cent of women and 83 per cent of men have changed their spending habits in the last 12 months, with 79 per cent of women and 68 per cent of men ‘concerned’ about the situation.

Clearly saving for a deposit in the current economic climate is challenging. But that’s not to say it’s impossible. In fact, despite the worrying nature of some media articles, our No Place Like Home report shows that many Australians are using clever financial strategies to get ahead.

This is particularly true of millennials, 63 per cent of whom say they prefer to save than spend, with an even more impressive 68 per cent saying they actively monitor savings, investments and superannuation. So, let’s look at our tips to help you save for a house deposit.

How much should I save for a house deposit?

Before you start thinking about how to save, it helps to know how much to save. Generally, 20 per cent of a property’s sale price is recommended. Why? Well, apart from the fact that the larger the deposit, the less you need to borrow, having a deposit of 20 per cent or more means you avoid paying Lenders Mortgage Insurance (LMI).

This can cost thousands over the life of a home loan, so it’s really worth getting to the 20 per cent mark if possible.

However, ‘if possible’ is the operative phrase here. The fact is, the median national dwelling price is currently sitting at $753,654, meaning you would need $150,731 for a 20 per cent deposit on the average Australian property.

And that’s not all, because in most cases there are other upfront costs such as stamp duty, solicitors’ fees, and building and pest inspection costs.

To get an estimate of these additional expenses, check out our upfront costs calculator.

Reasons to be cheerful – part one

Before you get too down about the 20 per cent figure, it’s important to remember that it’s a nice-to-have rather than a must-have. Some lenders, including Great Southern Bank, have home loan options from as little as a five per cent deposit.

Also, you might be able to avoid LMI with less than 20 per cent anyway. With the First Home Guarantee (FHG), the Australian Government guarantees up to 15 per cent of the property’s purchase price to a Home Guarantee Scheme participating lender, meaning deposits as low as five per cent are possible without the need to pay LMI on top.

Even if you’re not eligible for the FHG, a number of other government schemes and grants exist to help first homebuyers get on the property ladder without needing a 20 per cent deposit.

Reasons to be cheerful – part two

Aussies are an optimistic bunch, and that’s reflected in consumer sentiment around the housing market. While things are undoubtedly tighter than they’ve been for some time, almost 50 per cent of people told us they’re planning on buying a home to live in within the next three years.

Tips to save for a house deposit

Set a target amount

It’s easier to remain motivated when you’ve got a dollar figure to work towards. Research your price range, decide what percentage deposit you need to save, and work out your target amount from there.

Create a budget (but be realistic!)

Now that you’ve got a target amount in mind, creating a budget can show you how long it will take to reach it. It’s important to be realistic though. If you don’t factor in the odd treat here and there, chances are you won’t stick to it.

An online budget calculator can help you with this.

Review your non-essential spending

Creating a budget is the perfect opportunity to see where you can make cuts to your non-essential spending. Do you really need all those streaming services? Are you getting good value out of that gym membership? Would losing Friday night takeaways be the end of the world? Throw whatever savings you can make at your house deposit fund instead.

Review your essential spending

While you can’t eliminate essential expenses such as groceries and power bills, you can usually reduce them with a little bit of clever thinking. Shop around for cheaper alternatives to your current gas, electricity and internet providers, take advantage of supermarket and petrol loyalty cards, and don’t be afraid of buying second-hand.

In fact, we have a whole range of thrifty tips to help you save on your essential spending!

Consider ‘bucketing’ your income

Now that opening a new account takes approximately five minutes online, the use of multiple accounts for different purposes, commonly known as ‘bucketing’, has emerged as a favourite savings strategy among millennials.

For an in-depth look at how to optimise this strategy, check out our blog post.

Switch to a savings account with bonus interest

Our research shows that a savings account is the top strategy (58 per cent) Australians are implementing to build a home deposit. While this isn’t exactly surprising, it’s worth bearing in mind that some high-interest savings accounts offer generous bonus rates when certain eligibility criteria are met.

For example, if you deposit at least $2,000 into a Great Southern Bank Everyday Edge Account and make five or more Visa Debit card transactions every month, then you will qualify for a competitive bonus interest rate on a linked Great Southern Bank Home Saver Account.

It pays (literally!) to familiarise yourself with the conditions required to earn bonus interest on your savings account. You might even want to set up scheduled payments to make sure you never miss out.

Take advantage of clever savings tools

You can get some serious savings momentum by combining a high-interest savings account with clever savings tools like The Boost and The Vault.

With The Boost, you simply choose an amount from $0.01 up to $5 to be automatically transferred to your savings account whenever you use your Visa Debit card.

If you’re the type that’s tempted to dip into your savings, we have a solution. When you set up The Vault on your savings account, the balance will be hidden from you. Your regular payments and transfers will work as usual, you just won’t be able to see how much is in there.

You can even give your account a nickname such as ‘House deposit – DO NOT TOUCH!’ to help keep your eyes on the prize. With temptation removed, it should be much easier to keep growing your savings until you’ve reached your goal.

We’re here to help

Great Southern Bank’s mission is ‘to help every Australian own their own home’. If you have any questions about saving for a house deposit, feel free to give us a call on 133 282. Alternatively, you can always pop into your local branch for a chat.