How to Save a House Deposit in Australia: A Step-by-Step 2026 Guide
Saving a house deposit is the single biggest financial challenge facing Australian first home buyers. At median property prices in Sydney ($1,100,000) or Melbourne ($850,000), a 20% deposit requires $220,000 or $170,000 — life-changing sums that take a decade to accumulate on average incomes. But the 20% benchmark is not the only path. Lenders Mortgage Insurance, the Home Guarantee Scheme, the First Home Super Saver Scheme, and government grants have created multiple entry points into homeownership at deposits below 20%. This guide maps every option and identifies the fastest credible path to purchase for different income and savings situations.
How Much Deposit Do You Actually Need?
| Deposit % | Deposit Amount | LMI Required? | LMI Approximate Cost |
|---|---|---|---|
| 5% (Home Guarantee Scheme) | $40,000 | No (govt guarantee) | $0 |
| 5% (standard loan) | $40,000 | Yes | $25,000–$35,000 |
| 10% | $80,000 | Yes | $12,000–$18,000 |
| 15% | $120,000 | Yes (reduces significantly) | $4,000–$8,000 |
| 20% | $160,000 | No | $0 |
Lenders Mortgage Insurance (LMI) protects the lender (not you) if you default on a high-LVR loan. It is a significant upfront cost — $25,000–$35,000 at 5% deposit on an $800,000 purchase. It can be capitalised into the loan (increasing your total debt) or paid upfront. LMI is not a reason to avoid buying — if you can service the loan, the cost may be justified by entering the market earlier rather than continuing to save while property prices potentially rise.
The Fastest Paths to Deposit
1. The First Home Super Saver Scheme (FHSS): Contribute up to $15,000 per year as voluntary concessional or non-concessional contributions to your super, then withdraw up to $50,000 total (plus deemed earnings) for a home deposit. The tax benefit: concessional contributions are taxed at 15% inside super rather than your marginal rate — saving 24% on a $50,000 contribution for a 39% marginal rate earner. That is a $12,000 tax saving on the deposit accumulation alone.
2. The Home Guarantee Scheme: The federal government guarantees the shortfall between your 5% deposit and a 20% deposit, allowing you to borrow without paying LMI. Places are limited (35,000 per year across all guarantee types as of 2026). First Home Guarantee: 5% deposit, any eligible FHB. Regional First Home Buyer Guarantee: 5% deposit, regional properties. Family Home Guarantee: 2% deposit, single parents. See our guide to first home buyer grants and schemes for eligibility details.
3. Family guarantor: A parent or family member uses equity in their own property as additional security for your loan, reducing your deposit requirement to 0–5% without paying LMI. The guarantor's property is at risk if you default — this is a significant liability for the guarantor and should be entered into with full understanding of the risk and preferably with the guarantor receiving independent legal advice.
4. Buying with another person: Co-purchasing with a partner, sibling, or friend effectively doubles the savings capacity. Two people each earning $70,000 (combined $140,000) can save a $100,000 deposit in 2–3 years rather than 5–6 years for a single income. Joint ownership requires clear legal agreement on ownership proportions, responsibilities, and an exit strategy if one party wants to sell.
Maximising Your Savings Rate
The deposit target is fixed (or close to it). The variable you control is your savings rate. On $80,000 net income, saving $2,000/month instead of $1,000/month halves your timeline from 8 years to 4 years for a $96,000 target. The difference between a 10-year deposit journey and a 4-year one is not usually income — it is expense management.
| Monthly Savings | Years to $120,000 | With 5% interest on savings |
|---|---|---|
| $1,000 | 10.0 years | 8.5 years |
| $1,500 | 6.7 years | 5.8 years |
| $2,000 | 5.0 years | 4.4 years |
| $2,500 | 4.0 years | 3.6 years |
| $3,000 | 3.3 years | 3.0 years |
| $4,000 | 2.5 years | 2.3 years |
Where to keep deposit savings: a high-interest savings account paying 4.5–5.5% p.a. is the right choice — safe, liquid, and generating a meaningful real return. Do not put your deposit in shares — you cannot afford a 25% market decline in the 12 months before you need the funds. Stability and accessibility trump returns at this stage.
The Upfront Costs Beyond the Deposit
First home buyers frequently budget for the deposit and forget the additional upfront costs. Underestimating these costs is a common mistake that can delay settlement or require emergency borrowing. Budget separately for:
- Stamp duty: $0 (if eligible for FHB exemption) to $38,000+ depending on state and price
- Conveyancing: $1,200–$2,600
- Building and pest inspection: $400–$700
- Mortgage application and valuation fees: $0–$1,000
- Moving costs: $1,000–$5,000
- Immediate repairs and furnishing: $5,000–$20,000
- Lenders Mortgage Insurance (if applicable): $4,000–$35,000
For a $700,000 purchase with a 10% deposit and no stamp duty exemption, total upfront costs could be $30,000–$50,000 beyond the deposit. Save enough buffer to cover all costs without depleting your entire deposit.
Frequently Asked Questions
- Should I use the FHSS scheme?
- Yes, for most first home buyers on a marginal rate of 32.5% or higher. The tax saving on concessional contributions is significant, and the scheme allows up to $50,000 to accumulate inside the lower-tax super environment. The catch: the funds must be used within 12 months of withdrawal for a first home purchase, and if not used (purchase falls through), the amount must be recontributed to super or an income tax assessment applies. Plan your FHSS withdrawal to align with your realistic purchase timeline.
- Can I use a gift from parents as part of my deposit?
- Yes, most lenders accept gifted deposits from immediate family members. You will need a statutory declaration confirming the money is a gift (not a loan) with no expectation of repayment. Lenders may require the gifted funds to be in your account for 3 months (genuine savings requirement for some products) — check this with your broker or lender before relying on a late gift.
- Is it better to save 20% or buy earlier with LMI?
- It depends on property price growth. If property prices grow at 7% p.a. while you save, waiting 3 extra years to reach 20% on an $800,000 property means the property is now $980,000 — requiring $196,000 for 20% instead of $160,000. You spent 3 years saving an extra $40,000 while the target moved by $36,000. In rising markets, entering earlier with LMI can be cheaper than waiting for 20%. In flat or falling markets, waiting for 20% is better. No one knows which scenario will prevail — individual modelling with a financial adviser is the right approach.
