How Long It Takes to Save a Deposit (and How to Fast-Track It)
Saving a deposit for your first home can take a significant amount of time. In fact, it currently takes Australians around five to six years on average to save a deposit. But why wait that long when there are strategies that can help you fast-track your way into the property market? Here are four practical ways to potentially reduce the time it takes to save for your home.
1. Buy with Less Than a 20% Deposit
Many first-home buyers aim for a 20% deposit to avoid paying Lenders Mortgage Insurance (LMI). However, it’s possible to enter the market with a 5% or 10% deposit, although you’ll likely have to pay LMI. While LMI adds to your overall borrowing costs, it can help you buy sooner rather than later, especially as property prices continue to rise.
If you’re curious about LMI and whether buying with a smaller deposit is the right choice for you, we’re here to help you explore the pros and cons of this option. Read more about Lenders Mortgage Insurance (https://www.moneysmart.gov.au/borrowing-and-credit/home-loans/lenders-mortgage-insurance).
2. Consider Using a Guarantor
Another way to fast-track your deposit savings is by using a guarantor. A guarantor—often a family member—can use the equity in their home to provide additional security for your loan. This not only helps you avoid LMI but also increases your borrowing capacity.
A guarantor doesn’t need to provide cash. Instead, their equity acts as the security a lender needs. But, of course, this arrangement comes with risks, so it’s important to carefully consider this option with your guarantor. Find out more about using a guarantor (https://www.moneysmart.gov.au/borrowing-and-credit/borrowing-basics/guarantors).
3. First Home Guarantee: Buy with Just a 5% Deposit
Can’t rely on a guarantor? You might still be able to buy a home with a 5% deposit through the First Home Guarantee (formerly the First Home Loan Deposit Scheme). Under this initiative, the government guarantees up to 15% of your loan, which allows you to avoid LMI. The scheme helps first-home buyers enter the market sooner without the full 20% deposit.
However, spaces are limited, so if you’re eligible, acting quickly is crucial. For more details on the First Home Guarantee, check out the government’s overview (https://www.nhfic.gov.au/what-we-do/support-to-buy-a-home/first-home-guarantee/).
4. Supercharge Your Savings with the First Home Super Saver Scheme
The First Home Super Saver Scheme is another way to fast-track your deposit. This scheme allows you to make voluntary contributions to your superannuation, which are taxed at a lower rate. You can then withdraw these contributions (up to $50,000 for individuals, or $100,000 for couples) to use toward your home deposit.
By leveraging the tax advantages of super, you can accelerate your savings while still planning for your future. Learn more about the First Home Super Saver Scheme (https://www.ato.gov.au/individuals/super/in-detail/growing-your-super/first-home-super-saver-scheme/).
Why Acting Now Can Save You More in the Long Run
It may be tempting to wait until you’ve saved the ideal deposit, but delaying your home purchase could actually work against you. As property prices continue to rise, you may find that your dream home becomes less affordable the longer you wait. By fast-tracking your savings with these strategies, you could enter the market sooner and potentially save yourself thousands of dollars.
Whether you’re buying or refinancing, we’re here to support you every step of the way. You can book an obligation-free appointment CLICK HERE and let us help you find the best path toward home ownership.
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*Disclaimer: The content of this article is general in nature and is presented for informative purposes. It does not constitute tax or financial advice. Consider your personal circumstances and seek professional advice before taking any action.*
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