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First-Home Buyers: Buy now or keep on saving a bigger deposit?

Article By Janik Hrabovcak | | Financial Planning
How much deposit is needed for a first home? How do you know when you’ve saved enough? Should you delay buying your first home in order to save a bigger deposit?

The larger your deposit, the less you need to borrow to purchase your first home. However, average house prices today are at levels that make it difficult for young people to save a decent enough deposit.

It pays to go in armed with the right information so that you are aware of your options…

How much do you need for a house deposit?

These days, a lot of lenders allow you to have a 5% home deposit. However, this generally attracts lender’s mortgagee insurance (LMI).

If you wish to avoid paying LMI entirely, you’ll most likely need a deposit of 20% or more. For most people, that unfortunately means more time in building up the deposit to avoid the LMI.

LMI costs vs. saving a larger deposit

As an example, to purchase a $500,000 property with only $25,000 (5%) deposit, the estimated premium for LMI might be $15,700*. However, this premium does reduce the closer you get to a 20% deposit.

As a general guideline, for the average Brisbane buyer it takes about 4.5 years to save $105,950, which would be the 20% deposit covered^.

Should you save a bigger home deposit?

This is a tricky question to answer; on one hand, waiting to save for a bigger deposit usually means that you need to borrow less when it comes time to purchasing your first home.

On the other hand, the time it takes to save a bigger deposit may be accompanied by an increase in value of the property market – more than the premium costs of the LMI itself!

Factors to consider in your decision

It’s not as simple as a plain mathematical calculation.

There are many factors that can influence or perhaps even force the timing of your first home purchase. These include:

  • Your stage in life (i.e. are you enjoying life a bit too much in your 20s and spending all of your pay check?)
  • The area you live in – is it realistic to purchase where you wish to live, as opposed to where you can afford to purchase a home?
  • Do you have the luxury of time to save, or is starting a family a higher priority?

These are just a few of the many factors affecting your first-home buying decision.

Rather than just asking a friend, you should speak with a financial adviser who can help you devise a strategy tailored to your needs. It is possible to still enjoy the ‘now’ without sacrificing the future…

For a no-obligation chat with an Altitude financial adviser about buying your first home, please contact us here.



This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different and you should seek advice from your financial planner who can consider if the strategies and products are right for you. For more information contact Altitude Advisers on (07) 3209 2300.

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