How Much Do I Need To Save Up For My Deposit?

Market Insights
8 years ago
2 minutes

Buying a home is exciting, and to many it can be daunting, both financially and emotionally.

However, for first home buyers, the first hurdle, is saving up for the deposit. 

So how much should you save up before you approach the buying process?

There are two elements to this, and each element is equally as appealing no matter which side you fall on.

Firstly, the 20% figure, and how to get there.

We’ve all been told to save the 20% -  the magical number associated with saving. Saving 20% shows a few things; but primarily, it shows the lender that you can not only save, but also the lower your loan, the less likely you are to default.

The more money you have in the bank, the better your loan application will look. However, there can be a catch; some lenders differentiate savings from genuine attempts to non-genuine, meaning, that if you show that you have been putting money into your account for months and months on end, rather than just lumping a sum into your account before you apply, the chances of your loan application being successful increase significantly.

No longer can your parents just inject your savings account with the deposit - buyers now have to show that they can actually afford the repayments and have saved before.

The other side of the coin is Lenders Mortgage Insurance (LMI).

LMI is put in place for those who are purchasing a property with a loan that is greater than 80% of the property value. 

Now, the questions with LMI are: how much does it cost, and should I just save more instead to avoid the fee?

LMI can costs multiple thousands of dollars.

The table, below, shows the estimated payment you should expect for your loan:

LVR band

Loan amount up to


Loan amount 

$300,001 - $600,000

Loan amount 

$600,001 - $1,000,000

80.01% - 82%




82.01% to 84%




84.01% to 86% 




86.01% to 88%




88.01% to 90%




90.01% to 92%




92.01% to 94%




94.01% to 95%




(unlikely to be approved)

For instance, if you were to purchase a $749,000 property, and had only saved 10% ($74,900) then you’d be looking at an LMI payment of close to $15-16,000.

Yes, LMI is a substantial amount, but the purchaser needs to comprehend whether or not this fee will help them get into the market now, or whether they should wait and save the extra $74,900 to fit the 20% necessity.

If you decide to go through with LMI, then some institutions can put that payment back into your loan, so you are not forced to pay the hefty sum right before you buy.

Purchasing property is all about timing and matching your expectations with your realistic abilities. Some choose to take on LMI, where as others prefer to save up more and then re-approach the lender with more money in the bank.