Top Strategies to Save for a Home Loan Deposit

How Much Do You Actually Need for a Deposit?

You can enter the property market with as little as 5% of the property value, and in some cases even 2%, thanks to federal government schemes designed to help first home buyers. The amount you need depends on the property price, the scheme you qualify for, and whether you're willing to pay Lenders Mortgage Insurance.

For Melbourne first home buyers, the Australian Government 5% Deposit Scheme removes the need for LMI when you have a 5% deposit on properties valued up to $950,000 in metropolitan Melbourne or $650,000 in regional Victoria. Housing Australia guarantees up to 15% of the property value to your lender, which means the lender treats your application as though you have a 20% deposit. If you're a single parent or legal guardian, the threshold drops to just 2%.

The catch is that not all lenders participate in the scheme, and each lender has limited places. Applications are processed on a first-come basis by participating lenders, not by Housing Australia directly. In our experience, buyers who understand the eligibility requirements and move quickly when they find a suitable property have a much better chance of securing a place.

Government Schemes That Reduce the Deposit Barrier

The Australian Government 5% Deposit Scheme has no income caps and no annual place limits from 1 October 2025, which opens the door for many first home buyers who were previously excluded. The earlier version of the scheme had strict income thresholds and a fixed number of places each year, which meant many applicants missed out.

Consider a buyer who earns $95,000 a year and has saved $50,000. Under the previous scheme structure, they might have exceeded the income limit. Now, they can apply without that concern, provided the property they're purchasing falls within the applicable price cap and they meet the first home buyer criteria.

If you're looking at properties closer to the $1 million mark and your household income is under $165,000, the Help to Buy scheme is worth considering. The government contributes up to 30% of the purchase price for an existing home in exchange for an equity stake, which means you only need to borrow the remaining amount. You still need at least a 2% deposit, but your borrowing requirement drops significantly. The trade-off is that when you sell or refinance, the government receives its proportional share of any capital gain.

Savings Strategies That Actually Work

Most first home buyers underestimate how much they need beyond the deposit itself. You'll also need to cover stamp duty (unless you qualify for a concession or exemption), conveyancing fees, building and pest inspections, and lender application fees. In Victoria, first home buyers purchasing a property under $1 million are exempt from stamp duty if they meet the eligibility criteria, which can save tens of thousands of dollars.

One approach that works well is to set up a separate savings account that you can't access with a card. Automate a transfer from your main account on payday, even if it's just $200 a fortnight. Over two years, that's $10,400 without any additional effort. If you can increase that amount as your income grows or your expenses decrease, you'll reach your target faster.

Another option is the First Home Super Saver Scheme, which allows you to make voluntary contributions into your superannuation and then apply to release up to $50,000 to use toward your deposit. The advantage is that super contributions are taxed at 15%, which is lower than most marginal tax rates, so you keep more of what you earn. The scheme has specific rules about contribution limits and eligibility, so it's worth speaking to someone who understands how it works before committing.

What Lenders Look For Beyond the Deposit

Having the deposit is only part of the equation. Lenders also assess your savings history to confirm that you can manage money consistently over time. Most lenders want to see genuine savings, which means funds you've accumulated over at least three months through regular income, rather than a one-off gift or windfall.

If your parents or a family member are contributing to your deposit, that's usually acceptable, but the lender will ask for a signed declaration confirming the funds are a gift and not a loan. If the lender believes you'll need to repay the money, it affects your borrowing capacity because it's treated as an additional debt.

Your other financial commitments matter too. If you have a car loan, a personal loan, or credit card debt, the lender factors in those repayments when calculating how much you can borrow. In some cases, consolidating or paying down existing debt before you apply can improve your borrowing position. You can read more about that approach in our guide to debt consolidation home loans.

How Much You Can Borrow With a Small Deposit

Your borrowing capacity depends on your income, your expenses, and the size of your deposit. Lenders use a loan-to-value ratio to determine how much they're willing to lend. If you have a 5% deposit, your LVR is 95%, which means the lender is taking on more risk. Some lenders will lend at this level, especially if you're using a government guarantee, but others cap their maximum LVR at 90% or 85%.

As an example, if you've saved $50,000 and you're looking at a property in Oakleigh, you could potentially use the 5% Deposit Scheme to purchase a property at the eligible price cap without paying LMI. The lender assesses your income and expenses to confirm you can afford the repayments, and if everything checks out, you proceed to pre-approval.

If the property you want exceeds the scheme's price cap, you'll either need a larger deposit or be prepared to pay LMI. LMI protects the lender if you default on the loan, and the cost varies depending on your deposit size and the amount you're borrowing. It's typically added to your total borrowing amount rather than paid upfront, which means you'll pay interest on it over the life of the loan.

What to Do If You're Not Quite Ready

If you're close to your deposit goal but not quite there yet, it's worth speaking to a broker to understand exactly how much more you need and how long it will take. Sometimes the gap is smaller than you think, especially if you're eligible for a state-based grant or concession that you weren't aware of.

For Melbourne buyers who don't yet qualify for a scheme or who are still building their savings, a guarantor loan can be an option if a parent or family member is willing to use the equity in their own home to support your application. The guarantor doesn't hand over any cash, but they provide security to the lender, which allows you to borrow with a smaller deposit or avoid LMI. It's a significant commitment for the guarantor, so it's important that everyone involved understands the responsibility and has independent legal advice.

Call one of our team or book an appointment at a time that works for you. We'll walk through your current position, the schemes you're eligible for, and the most realistic path to getting you into your first home without waiting years to save a 20% deposit.

Frequently Asked Questions