One of the biggest questions first home buyers ask is surprisingly simple: “How much money do I actually need saved before I can apply for a home loan?”
Some buyers assume they need a 20% deposit before they can even speak to a lender. Others hear stories about people buying with just a 5% deposit and wonder whether they’re already closer than they think. The reality sits somewhere in the middle.
Yes, lenders want to see savings and yes, your deposit matters. But the amount you need depends on several factors, including the property price, the type of loan you’re applying for, your income, and in some cases, how you’ve built those savings in the first place.
If you’re planning to buy your first home, here’s what you should know before lodging an application.
The Deposit Is Important, But It’s Not the Whole Story
One of the biggest misconceptions among first home buyers is that lenders only care about the size of your deposit. Of course, the deposit matters, it reduces the amount you need to borrow and lowers the lender’s risk. But lenders are also assessing something broader. They’re looking at your overall financial position, considering questions like —
Can you manage your money responsibly? Do you have a history of saving? Are your expenses under control? Do you have enough funds left over after settlement to cope with unexpected costs?
Buying a home isn’t just about getting approved, it’s about being able to comfortably manage repayments after you’ve moved in. That’s why lenders often spend just as much time reviewing bank statements and spending habits as they do calculating your deposit percentage.
Buying With a Smaller Deposit
Depending on the lender and your circumstances, it’s possible to purchase a property with a deposit well below 20%. Some buyers purchase with 10%, others buy with 5%.
Government support schemes have also helped many eligible first home buyers access the market sooner than they otherwise could. For some people, waiting until they’ve saved 20% makes sense. For others, spending another four or five years saving while property prices continue to rise may not be the best financial outcome. There’s no universal rule. The right approach depends on your personal situation, income, borrowing capacity, and long-term goals.
What matters is understanding what lenders require and ensuring you’re financially prepared for home ownership.
The Hidden Costs Many Buyers Forget
When people calculate their deposit, they often focus exclusively on the purchase price. But there’s a lot more to consider. Buying a property involves a range of additional costs that can catch first home buyers by surprise.
Depending on the property and location, you may need funds for:
- Conveyancing fees
- Legal costs
- Building inspections
- Pest inspections
- Loan establishment fees
- Moving costs
- Utility connections
- Stamp duty where applicable
- Home and contents insurance
Then there’s the reality of owning a property. The day after settlement, the house doesn’t suddenly become maintenance-free. Hot water systems can fail, air conditioners can stop working, fences might need repairs and appliances could break down. Most homeowners discover fairly quickly that having some money left in the bank after settlement is just as important as having enough for the deposit itself.
What Lenders Mean by “Genuine Savings”
This is one area that catches many first home buyers off guard. You might have enough money for a deposit sitting in your account, but lenders often want to understand where that money came from. This is where the concept of genuine savings comes in.
In simple terms, genuine savings are funds you’ve accumulated yourself and maintained over time. Lenders like genuine savings because they provide evidence of financial discipline. Saving money consistently over months or years demonstrates that you’re capable of managing your finances and putting money aside regularly. From a lender’s perspective, that’s often a positive indicator that you’ll be able to manage future mortgage repayments.
Think about it from their side – someone who saves $500 every fortnight for two years has demonstrated a pattern of financial behaviour. On the other hand, someone who received a large lump sum last week hasn’t necessarily demonstrated the same thing.
A ew other factors to consider –
First Home Super Saver Contributions
For eligible buyers, voluntary super contributions made through the First Home Super Saver Scheme may form part of a savings strategy.
Rental Payment History
Some lenders take a practical approach. If you’ve been consistently paying rent at a level similar to expected mortgage repayments for an extended period, this may support your application.
After all, regularly paying $700 per week in rent demonstrates financial capacity, even if your savings balance isn’t enormous.
What Doesn’t Always Count as Genuine Savings?
This is where things become slightly more complicated. Not every dollar available for your deposit will necessarily be considered genuine savings.
Common examples include:
Gifts From Family
Parental support is increasingly common among first home buyers. A gift can absolutely help strengthen your deposit position. However, lenders may not classify a recently received gift as genuine savings because you didn’t personally accumulate it over time.
Inheritances
Receiving an inheritance can significantly boost your purchasing power. But again, it doesn’t necessarily demonstrate an established savings pattern.
Personal Loans
Using borrowed funds to create a deposit is generally viewed differently from savings you’ve accumulated yourself.
Recent Asset Sales
Selling a vehicle, investment, or other asset can provide useful funds, but lenders may want additional evidence of genuine savings alongside the proceeds. This doesn’t mean these sources are bad. They can absolutely help you purchase a property. The distinction is simply that lenders may assess them differently.
So How Much Should You Have Saved?
This is the question everyone wants answered. Unfortunately, there isn’t a magic number.
Someone buying a $500,000 apartment will require a very different savings position compared to someone purchasing a $1.2 million family home.
As a general starting point, many buyers aim to have:
- At least 5% to 20% of the property’s value saved as a deposit
- Enough funds to cover purchase-related costs
- A financial buffer remaining after settlement
That last point is often overlooked. Many buyers focus entirely on getting approved and forget about life after approval. Having some savings left over can make a huge difference during the first year of home ownership.
Why Lenders Look Beyond the Numbers
A lender’s assessment isn’t simply a mathematical exercise. They’re not just checking whether you have enough money today. They’re trying to understand how you’ll manage the loan over the next 25 or 30 years. That’s why spending habits often come under scrutiny.
A borrower with a moderate deposit and strong financial management may sometimes present a lower risk profile than someone with a larger deposit but inconsistent spending patterns.
This is one reason buyers are often surprised by questions about everyday expenses. From the lender’s perspective, those details help paint a picture of long-term financial behaviour.
Building Savings Before Applying
If you’re planning to buy within the next year or two, there are a few practical steps worth considering.
- Start by creating a separate savings account dedicated solely to your home deposit.
- Automating regular transfers can help build consistency.
- Try to minimise unnecessary debt where possible.
- Keep records of your savings history.
- Avoid making large unexplained transfers between accounts shortly before applying.
- And perhaps most importantly, don’t assume you’re not ready until someone qualified has reviewed your situation.
Many buyers spend years chasing an arbitrary savings target without realising they may already meet lender requirements.
Final Thoughts
Saving for your first home can feel overwhelming at times. Property prices are high, deposits seem enormous, advice comes from every direction, and not all of it is accurate. The important thing to remember is that lenders aren’t only looking for a specific dollar figure. They’re looking for evidence that you’re financially prepared for home ownership.
A strong deposit certainly helps, but so does a consistent savings history, sensible spending habits, stable income, and a realistic understanding of the costs involved.
For some buyers, that may mean entering the market with a smaller deposit through an eligible scheme. For others, it may mean continuing to save to strengthen their position and increase their options. Every situation is different.
If you’re unsure where you stand, speaking with a mortgage broker like our team at Loanscope can provide clarity.
How Can Loanscope Help?
Navigating deposits, genuine savings requirements, and lender criteria can be challenging, especially for first home buyers. At Loanscope, we help simplify the process by assessing your financial position, explaining your options, and matching you with suitable loan solutions.
Whether you’re unsure how much you need to save, what qualifies as genuine savings, or whether you’re ready to apply, our team can provide clear, practical guidance to help you move forward with confidence.
Speak with Loanscope today to understand your borrowing potential and take the next step towards home ownership.
