Avoid These Saving Mistakes as a First Home Buyer

Couples buying their first home together face one recurring challenge: knowing when to stop saving and start applying.

You need enough to cover the deposit and settlement costs, access to schemes that reduce upfront requirements, and confidence that the lender will approve the amount you need. Getting those three elements aligned is harder than it sounds when one partner is focused on saving another few thousand and the other is ready to apply now.

Treating Every Dollar as Equal When It's Not

Not every dollar in your savings account carries the same weight. Lenders distinguish between genuine savings and non-genuine savings when assessing your deposit.

Genuine savings are funds held in your account for at least three months that you have accumulated through regular income, such as salary deposits or rental income. Non-genuine savings include one-off windfalls such as tax refunds, bonuses, or gifts that appeared recently without a clear pattern of accumulation. Most lenders require at least 5% of the purchase price to come from genuine savings, even if you are using a low deposit loan or the 5% Deposit Scheme.

Consider a couple who received a $20,000 gift from parents in early August and plan to use it alongside $10,000 they have saved over the past year. The lender may treat the gift as non-genuine savings unless it has been held in their account for three months or more. If they apply in late August, the entire $20,000 may be excluded from the genuine savings calculation, leaving them with only $10,000 in genuine savings. If they wait until early November, the gift is considered seasoned and becomes acceptable as part of the deposit.

Some lenders accept gifted deposits with a signed statutory declaration from the donor confirming the funds are a gift and not a loan. This can reduce or remove the three-month holding period, but policies vary between lenders. If you are relying on a gift, confirm the lender's policy before deciding when to apply.

Assuming You Need 20% Before You Can Buy

You do not need a 20% deposit to buy your first home. You can apply for a home loan with a deposit as low as 5% under the Australian Government 5% Deposit Scheme, which removes the need for Lenders Mortgage Insurance when you meet eligibility requirements.

LMI is a one-off insurance premium charged by the lender when your deposit is below 20% of the property value. It protects the lender, not you, and can add several thousand dollars to your upfront costs or be capitalised into the loan. The 5% Deposit Scheme guarantees the difference between your deposit and 20% of the property value, which means the lender does not charge LMI.

In Melbourne, the price cap for the scheme is $950,000 for properties in the capital city and regional centres. A couple purchasing a unit in Chadstone at $900,000 would need a deposit of $45,000 plus settlement costs. Without the scheme, that same couple would either need to save a full 20% deposit of $180,000 or pay LMI, which could range from $15,000 to $30,000 depending on the lender and loan structure. With the scheme, they avoid LMI entirely and can purchase sooner with the smaller deposit.

The scheme is available through participating lenders. Not all lenders offer the same loan features, so confirm whether your preferred loan structure, such as an offset account or split between fixed and variable rates, is available under the scheme before applying.

Ignoring Stamp Duty Concessions That Change the Timeline

Stamp duty concessions in Victoria can reduce or eliminate one of the largest upfront costs for first home buyers, but only if you understand how the thresholds work.

Victoria offers a full stamp duty exemption on properties valued up to $600,000 and a sliding scale concession on properties valued between $600,001 and $750,000. Above $750,000, the standard rates apply. The concession applies to both new and established homes, provided the property will be your principal place of residence. You must move in within 12 months of settlement and live there for at least 12 months.

A couple purchasing an established townhouse in Oakleigh at $650,000 would qualify for a partial concession, reducing their stamp duty bill from approximately $34,000 to around $10,000. If they had instead purchased at $595,000, the duty would have been eliminated entirely. That $55,000 difference in purchase price could mean the difference between needing $25,000 in settlement costs and needing $10,000.

If you are buying a new home valued under $750,000, you may also be eligible for the $10,000 First Home Owner Grant. The grant does not apply to established homes. You can use the grant alongside the stamp duty concession and the 5% Deposit Scheme, which gives you three separate layers of support if the property and your circumstances align.

Leaving Super Contributions Sitting When They Could Be Working Harder

The First Home Super Saver Scheme allows you to make voluntary contributions into your superannuation fund and later apply to release up to $50,000 toward your deposit. Contributions are taxed at 15% instead of your marginal income tax rate, which means you keep more of what you earn.

You can contribute up to $15,000 in any one financial year and release a total of $50,000 across multiple years. Both partners in a couple can use the scheme independently, which means a combined total of $100,000 can be accessed if both contribute the maximum amount over several years.

In our experience, couples who salary sacrifice into super early in their saving journey build a deposit faster than those who rely solely on a standard savings account. A person earning $80,000 per year who salary sacrifices $15,000 annually will have that amount taxed at 15% rather than their marginal rate of 32.5%. Over three years, that difference compounds.

You need to apply for a determination from the Australian Tax Office before you sign a purchase contract. The ATO will confirm the amount you are eligible to release, and the funds are paid to you after you provide evidence of a signed contract. The scheme works alongside other deposit sources, including genuine savings and gifted funds, but you cannot use it to meet the genuine savings requirement on its own.

Choosing the Property Before Checking Your Borrowing Capacity

You should know how much you can borrow before you start attending open homes. Your borrowing capacity depends on your combined income, existing debts, living expenses, and the lender's serviceability assessment.

A couple with a combined income of $140,000, no dependents, and minimal debt may be able to borrow a different amount depending on whether they have a car loan, buy-now-pay-later accounts, or a credit card with a high limit. Lenders assess your capacity to service the loan by calculating your expenses and applying a buffer to the interest rate, typically 3%, to ensure you can still afford repayments if rates rise.

Getting pre-approval before you make an offer gives you a confirmed borrowing limit and shows sellers that you are ready to proceed. Pre-approval is valid for three to six months depending on the lender and can be updated if your circumstances change. It does not lock you into a specific property, but it does confirm the maximum amount a lender is willing to provide based on your current financial position.

If your borrowing capacity falls short of your target purchase price, you have time to increase your deposit, reduce your debts, or adjust your search criteria before you fall in love with a property you cannot finance.

Splitting Savings Across Too Many Accounts Without a Clear Purpose

Holding your savings in multiple accounts can reduce transparency when a lender reviews your application. Lenders want to see a clear accumulation pattern, and funds scattered across several accounts, term deposits, and offset accounts make it harder to demonstrate genuine savings.

Keep your deposit in one or two clearly labelled accounts with consistent deposits over at least three months. If you are using an offset account linked to a parent's loan or a term deposit that matures shortly before settlement, confirm with your broker that the lender will accept those funds without requiring additional documentation or a longer holding period.

Some lenders ask for up to six months of statements on every account where deposit funds are held. If you have been moving money between accounts to take advantage of introductory interest rates, you may need to provide statements for each account in the chain to prove the funds originated from genuine savings.

Call one of our team or book an appointment at a time that works for you. We will review your savings structure, confirm your eligibility for applicable schemes and concessions, and prepare your home loan application so you can move quickly when the right property comes up.

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