When you’re watching Downton Abbey with your parents on a Saturday night, saving for a house deposit can feel like a sad and lonely affair. But it doesn’t have to be — and you don’t have to go it alone. In fact, there a tonne of people that have your back.

We spoke to Mortgage Choice broker Tim to find out what tools can get those keys in your hands faster than you can say ‘wingardium leviosa’.

First Home Owner Grant

It feels pretty rare that the government gives you money but when it comes to first home buyers, they’re happy to fork out the cash.

If you intend to live in your home, you may be eligible for the First Home Owner Grant (FHOG). This is a one-off payment provided by the government to first-time buyers. It ranges from $7,000 to $26,000 and in many states is only available for new or off-the-plan properties but the criteria vary from state to state so it’s worth looking into.

Check your state government’s website for first home buyer concessions:

The FHOG and stamp duty waivers are eligible on new and off-the-plan properties in many states. Picture: Getty

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Stamp duty waivers

You know stamp duty, that HUGE tax you have to pay when you purchase a property? Well, the government is willing to waive it (or a portion of it) on some home loans for first-time buyers. In Sydney, for example, they’ll waive stamp duty on new homes under $600,000 and grant concessions on those under $850,000 but once again, the criteria in each state differs so you’ll need to check if you’re eligible. 

First Home Super Saver Scheme

The First Home Super Saver Scheme (FHSS) allows first home buyers to save for a deposit in their superannuation fund. How it works is, individuals opt to have a portion of their pre-tax income salary sacrificed into their super, which is then taxed at the regular super rate of 15%. First home buyers can then access the funds they have contributed to use for a house deposit at a later date. 

Up to $15,000 in contributions can be made in one financial year and $30,000 in total, however if you’re buying a property with a partner who also meets the eligibility criteria, you can both utilise the FHSS, giving you $60,000 towards your purchase.

A mortgage broker is your personal trainer for home loans. Picture: Caroline McCreddie.

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Financial Fitness Boot Camp

Mortgage Choice’s Financial Fitness Boot Camp is a FREE online education tool for home buyers. With tips for first home buyers, investors, home upgraders and mum and dad investors, it’s the place to find the inspiration and advice you need to navigate the treacherous landscape of home buying. 

Guarantor loans

Your parents (or a kind, wealthy friend) can go guarantor on your home loan, meaning they agree to use the equity in their own property as security on the loan (or a portion of it) in the event that you can’t meet the repayments. In some cases, the lender will also look at your parents’ income to assess the serviceability of the loan.

“[Guarantor loans] are perfect for those who cannot raise a deposit fast enough and want to avoid mortgage insurance. This is extremely popular with parents offering equity in their own homes to assist their kids,” says Tim.

High-interest savings accounts or term deposits

Maximise your savings by keeping it in a high-interest savings account or term deposit. Look for a savings account with a high base and/or bonus interest rate that isn’t too easy to access and if you opt for a term deposit, make sure you won’t need the funds within the fixed time frame.

“Always shop around for the best term deposits and savings accounts with no fees,” says Tim.

This article was originally published on
22 Apr 2019 at 9:00am
but has been regularly updated to keep the information current.

Want to buy your first home but worried about the size of your deposit? We explore exactly what you’ll need to get a home loan and why it might not be quite as much as you think.

The starting point: the value of the property

As a starting point, the amount of any deposit you need will depend on the value of the home you intend to buy. That’s because banks are usually only prepared to lend a certain percentage of a property’s value – known as the loan-to-value ratio (LVR).  In other words, the more the home is worth, the bigger the deposit you’ll need to purchase it.

Do you really need to save 20% as a first home buyer’s deposit?

A lot of first home buyers are under the misapprehension that they’ll need to save 20 per cent of the purchase price of their home before they’ll be able to get a loan. But that’s simply not true. Many lenders will allow you to buy a home with as little as five per cent deposit, meaning they’ll lend you up to 95 per cent of the property’s value. In return for this, however, they’ll generally ask you to take out lenders mortgage insurance or LMI. So, if you choose to go down this path, you should factor in the cost of LMI when calculating your monthly repayments.

Using a guarantor as a first home buyer

If you don’t want to pay LMI but don’t have a 20% deposit, there is another alternative: using a close family member to act as guarantor. A guarantor is someone who puts up the equity in their own home as security against your loan. This gives the bank extra assurance they’ll be able to recoup their money if you can’t meet your mortgage repayments. That said, if you default the bank will also have the ability to sell the guarantor’s property, so it’s not something anyone should undertake lightly. A guarantor doesn’t necessarily have to guarantee the full amount of your loan. They can put up equity to cover just part of it – say to the 20% threshold so that the bank doesn’t require you to take out LMI.

Accessing the First Home Owner Grant (FHOG)

Most state and territory governments operate a First Home Owner Grant (FHOG) scheme that provides a one-off payment to first home buyers purchasing a home, as long as it’s new or off the plan and below a certain threshold. Lenders usually allow you to count this money – which ranges from $7,000 in the Australian Capital Territory to a massive $20,000 in regional Victoria – towards your deposit. Effectively that means you need to save less. And, if you live in the Northern Territory and purchase newly built home or build one yourself, you may even be entitled to receive an additional $20,000 – although this incentive is limited to the first 600 applications.

Stamp duty and other upfront costs

On top of this, most state and territory governments also offer stamp duty concessions or even waive it altogether for first home buyers purchasing homes below certain thresholds. Stamp duty is usually the most significant upfront cost you’ll face when buying a home other than the deposit. And it’s something you need to pay for out of your own funds – you can’t usually ask a bank to lend you the money. So, having this expense taken off your hands can make it much easier to save the deposit you need to purchase your new home.

Adding it all together…

All of this means you may be able to purchase a home for a much smaller deposit than you think. Say, for instance, you’re looking to buy your first home in New South Wales and it’s a newly built home that costs $550,000. The amount you need to save for a deposit could be: 5% x $550,000 = $27,500 First Home Owner Grant – $10,000 = $17,500 deposit required or around 3.2% of the purchase price. Alternatively, if you look to purchase a new build property for the same amount in regional Victoria your deposit could be even less: 5% x $550,000 = $27,500 First Home Owner Grant – $20,000 = $7,500 deposit required or less than 1.4% of the purchase price. In short, this means that far from needing to save a 20 per cent deposit, you could potentially get into your first home with very little deposit at all.

This article was originally published on
23 Oct 2019 at 12:14pm
but has been regularly updated to keep the information current.

100% home loans aren’t common. The truth is that before they approve a mortgage, most lenders like to see a deposit – even if it’s just five per cent. But there still are ways you can get a home with no deposit at all. For instance, if you’re a first home buyer, you may be able to use money from a government scheme, such as a first home owner grant or HomeBuilder instead of saving a deposit. You may even be able to use your superannuation if you’re contributing money to the First Home Super Saver Scheme. Alternatively, if you have a family member willing to help you out, you may be able to get a 100% home loan by using a guarantor on your loan.  

How does the no deposit home loan work?

Most people buy a home by paying a deposit and using a home loan to finance the rest of the property’s value. The deposit represents the part of the home you own (known as equity), while the home loan represents the amount you need to still pay off. A standard deposit for a home loan is typically 20%, but it’s possible to get a loan with far less than this saved. When you buy a home, most lenders will expect you to have at least five per cent of the purchase price before they give you a loan. That means they’ll lend you a maximum of 95% of the property’s value, which is also known as having a loan-to-value ratio (LVR), of 95%. For instance, if you’re buying a home valued at $500,000, a bank will usually expect you to have savings of at least $25,000 before giving you a loan. Even then, they’d ask you to take out lenders mortgage insurance (LMI), which adds to the cost of your repayments but protects the bank if you default.  To avoid LMI, you’d need savings equivalent to at least 20% of the purchase price, or in this instance, $100,000. A no deposit home loan would mean you’re borrowing 100% of the value of the home, so you own no equity in the property at all.  Banks are reluctant to allow this because it makes the loan a riskier proposition for them.  However, even if you have no deposit, there may be other options available to you.  

1.  Use a guarantor

A guarantor is someone who uses the equity in their home as security for your home loan. In other words, even though the mortgage will be against the home you’re buying, the bank takes an interest in another property to reduce their risk. When you use a guarantor, some lenders may let you borrow up to 105% of the value of the property you’re buying (i.e. you may be able to borrow enough to cover stamp duty and other upfront costs, as well as the property). That said, if you default on your home loan, the bank has the right to recoup any loss from the guarantor, including by selling the guarantor’s property. To help reduce the risk to the guarantor, some lenders now also allow partial guarantees. Find out more about who can be a guarantor.  

2. Use a first home owner grant (FHOG)

Most states and territories help first home buyers get on the property ladder by giving them a first home owner grant (FHOG) they can put towards the cost of their first home, so long as it meets certain criteria. Usually, this means buying a new apartment or home under a certain value, or building your own place to live. For instance, the NSW government currently offers a $10,000 grant to first home buyers purchasing a newly built home under $600,000 or building their own home valued under $750,000. The Victorian government offers a grant of $10,000 to first home owners buying a metropolitan property valued under $750,000 and a $20,000 grant for a regional property under this threshold, so long as the property is less than five years old. These grants come on top of generous stamp duty concessions and exemptions and lenders will often let you count your FHOG as part of your deposit, meaning you potentially may not need to have saved any money towards your home. However, this is rare. Most lenders will want to see at least some evidence of  ‘genuine savings’. The Commonwealth government’s First Home Loan Deposit Scheme can’t be used as a deposit, but could help you avoid LMI by guaranteeing the difference between your deposit and 20% of the home’s value. Read more about whether you qualify for the first home owner grant in your state or territory.  

3. Use the federal HomeBuilder grant

The Commonwealth government’s HomeBuilder scheme provides a $25,000 grant to people buying or building a new home. To be eligible, the contract must be signed between 4 June 2020 and 31 December 2020 and the property’s value (including house and land) must be under $750,000. You also must earn less than $125,000 if you’re applying as an individual and $200,000 if you’re applying as a couple. Depending on your State or Territory, some lenders may allow you to use this towards your home deposit.  

4. Use your superannuation

Did you know that in some circumstances you can use your super towards a home deposit? The Commonwealth Government’s First Home Super Saver (FHSS) Scheme lets you make extra contributions to your superannuation, which you can then withdraw and use towards a home deposit. This gives you the advantage of only paying the 15% superannuation tax rate on the money you’re saving towards your home rather than your marginal rate of tax. The FHSS comes with strict criteria, including limits on how much you can contribute. You’ll also need to apply to have your money released. However, there’s no limit on the type of home you can buy with this money – it doesn’t have to be new or under a certain threshold.  

5. Use a gift

With property prices so high, it’s not uncommon for first home buyers to receive a helping hand from parents or other close family members. Many lenders will let you use the gift you receive as part of your deposit. However, to satisfy them that you’ll be able to keep meeting your repayments, some may still want to see that you have genuine savings outside of any gift. This is especially true if your deposit is 10% or less.  

Buying a home with no deposit

While banks are reluctant to offer 100% home loans, first home buyers still have options. Some or even a combination of several of the schemes outlined above may help you get on the property ladder without having saved a deposit at all.

This article was originally published on
27 Nov 2020 at 2:01pm
but has been regularly updated to keep the information current.