How to Grow Your Home Loan Deposit

It’s common knowledge that your first home will likely be one of the biggest purchases you’ll ever make, so it’s important to do it right.

Saving money takes a significant commitment of time and effort, so people who have worked hard to save their money will want to make the most of it. Fortunately, there are a number of investment options available to help them grow their deposit while also making sure they maximise their returns.

How a bigger deposit is better for first homebuyers?

As a first-time home buyer, saving as much as possible will benefit you both now and in the future. A larger deposit allows more flexibility in the types of properties you might be able to afford;

Negotiating a lower interest rate requires you to have a large down payment. The larger your deposit, the less risk you represent to lenders. This gives you real bargaining power.

A smaller loan and lower interest payments mean you’ll pay less in interest over the lifetime of a loan. We have a Home Loan Repayments Calculator to help you see the difference.

If you have a deposit of 20% or more on your home loan, you can avoid paying lenders mortgage insurance (LMI).

A larger deposit gives you more options to get the right loan and save money in the long term.

There is a generous selection of financial support options available to first home buyers, including grants, loans, and savings incentives.

Using superannuation funds for a first home deposit

In 2017, the Federal Government introduced the First Home Super Saver Scheme (FHSS), which allows first homebuyers to use superannuation for a first home deposit.

First homebuyers can make voluntary super contributions of up to $15,000 per year (and $30,000 in total) to put towards the purchase of their first home. They can then withdraw these contributions — plus the returns the government estimates they have earned — and use them for their deposit.

One of the advantages of using superannuation to buy your first home is that your contributions are taxed at a lower rate, which means more of your money goes towards growing your deposit.

Are Deposit Bonds Helpful?

A deposit bond is an insurance policy used in place of a cash deposit between signing a contract of sale and settlement.

Just like a cash deposit, a deposit bond guarantees your commitment to the terms of an unconditional contract of sale.

A deposit bond allows you to defer paying the deposit until settlement.

Your LMI Group broker can assist you with more information and assess whether a deposit bond may help you to make an offer on your chosen property.

Stamp Duty Savings First Homebuyers

Some states and territories have schemes to help first homebuyers save money on stamp duty.

You can see our state-by-state breakdown of stamp duty savings or use My LMI group’s Stamp Duty Calculator to determine how first homebuyer incentives might help you save on stamp duty.