Buying your first home will most likely be the biggest purchase you’ll ever make, as well as one of the most important steps you’ll take in your life. Understandably you’ll want to get the most out of the money you’ve saved up and the more you can put down for a deposit, the better a position you’ll be in as a first home buyer.
Don’t worry, you don’t necessarily need a big deposit to buy a first home – and if you’re not in a position to save for a sizeable deposit, explore our options for low deposit, no deposit and 5% deposit first home loans, as well as options for low-income first home buyers.
That said, it’s true that if you can manage to save more, it’s a good idea to aim for this. A 20% deposit is a good target for a first home buyer as it’s a typical threshold at which a number of benefits are unlocked for you.
Why a bigger deposit is better for first home buyers
Here are some ways that saving more for a deposit will benefit you in the big picture when you buy your first home:
Negotiate a better interest rate: The larger your purchase deposit, the less risk you represent to lenders. This puts you in a better position to negotiate a lower interest rate.
Pay less in the long run: The bigger your deposit, the less you have to borrow. That means lower regular repayments, and you’ll pay less in interest over the lifetime of the loan. Use our Home Loan Repayment Calculator to see how much you could save by having a larger deposit.
Avoid paying lender’s mortgage insurance: If you can put down a deposit of 20% or more, you can often avoid paying what’s known as lender’s mortgage insurance’ (LMI). LMI protects the lender, not you, if you cannot repay your loan – so it’s a cost worth avoiding if possible.
More loans to choose from: A bigger deposit can also give you a wider choice of loans, and that makes it easier to get a good deal on the right loan, letting you save even more in the longer term.
If you’re not sure how to begin saving for a deposit, be sure to use Aussie’s Budget Planner to help organise your finances and track your spending every month. And take a look at our First Home Buyer Budget Basics for some tips, tricks and encouragement as you start on the path of saving for a deposit.
As with any journey, planning your route is the only way you can hope to reach your destination. Your local Aussie broker can be a helpful traveling companion as you plan your savings journey. Make an appointment to discuss your goals and find out how Aussie can help you get there.
Navigate to the next article.
Ready to keep learning?
Over 25 years of home loan expertise, delivered to you monthly.
Take the next step to buying your first home.
- Chapter One : Getting started
- Chapter Two : Your Dream Home
- Chapter Three : Money Matters
- Chapter Four : Ways to Purchase
- Chapter Five : Understanding Interest Rates
- Chapter Six : Understanding Home Loans
- Chapter Seven : Lending Sources
- Chapter Eight : Getting Your loan
- Chapter Nine : Choosing a Home
- Chapter Ten : Steps to Settlement