Top Strategies to Build Your Deposit for a Home Loan

How Much Deposit Do You Actually Need?

Most lenders require a deposit of at least 5% of the property value, though putting down 20% or more eliminates the need for Lenders Mortgage Insurance.

Consider a buyer looking at property in Traralgon. At current median values for a three-bedroom house in the area, a 20% deposit would put you past the LMI threshold, meaning you avoid the additional premium that applies when your loan to value ratio sits above 80%. If you are purchasing with a 10% deposit, the lender will typically require you to cover the LMI premium as part of settlement, which can add several thousand dollars to your upfront costs depending on the loan amount and your LVR.

The distinction between genuine savings and non-genuine savings matters more than many buyers expect. Lenders want to see that you have accumulated your deposit over time through regular contributions to a savings account, term deposit, or offset account. Funds that appear suddenly, such as a tax refund, bonus payment, or short-term loan from a family member, may not be treated as genuine savings unless they have been held in your account for at least three months. In our experience, buyers who rely on a single large deposit from a recent sale or windfall can find themselves needing to provide additional documentation or wait longer before applying to satisfy serviceability criteria.

What Counts as Genuine Savings?

Genuine savings are funds you have saved over a period of at least three months, held in your own name, and accumulated through regular deposits or retained earnings.

Lenders assess genuine savings by reviewing your bank statements and transaction history. A pattern of consistent deposits into a savings account, even if the amounts vary, demonstrates financial discipline and capacity to manage repayments. Funds held in a term deposit, shares you have owned for more than three months, or equity in property you already own can also count, depending on the lender. Gifts from family members are generally acceptable, but most lenders require you to show at least 5% of the purchase price from your own genuine savings before they will consider a family gift as part of the deposit.

As an example, a buyer in Morwell looking to purchase with a 10% deposit might have $20,000 saved over 18 months, plus a $15,000 gift from parents. The lender would treat the $20,000 as genuine savings and the $15,000 as a non-genuine contribution. Provided the buyer meets serviceability requirements and the combined deposit reaches 10%, the application can proceed, though LMI will apply. The key issue is that without genuine savings making up at least 5%, some lenders will decline the application outright or require a higher deposit.

Lenders Mortgage Insurance and How It Affects Your Deposit

LMI is a one-off premium charged when your deposit is less than 20% of the property value, calculated on a sliding scale based on your loan amount and LVR.

If you are borrowing at 90% LVR, the LMI premium will be higher than if you are borrowing at 85% LVR. The premium is not a government charge or a fee that protects you as the borrower. It protects the lender in the event you default on the loan, but you pay the cost. In most cases, the premium can be added to the loan amount rather than paid upfront at settlement, though this increases the total amount you are borrowing and the interest you pay over the life of the loan.

Some buyers across Gippsland choose to pay LMI rather than wait another year or two to save a 20% deposit, particularly if property values are rising or if they are currently paying rent at a similar level to what their mortgage repayments would be. That decision depends on your circumstances, but it is worth running the numbers with a broker who can show you the premium for your specific loan amount and borrowing capacity before you commit.

How the Australian Government 5% Deposit Scheme Works

The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with a deposit of as little as 5%, with Housing Australia providing a guarantee to the lender of up to 15% of the property value.

This means you can reach a combined deposit and guarantee of 20% without paying LMI. No income caps apply, and applications are made through participating lenders rather than directly to Housing Australia. The property price cap for regional Victoria, which includes Gippsland, is $650,000 for areas outside Geelong. Both the purchase price and the lender's assessed value must sit at or below that cap for the scheme to apply.

In a scenario like this, a first home buyer in Sale looking at a property valued at $580,000 would need a 5% deposit of $29,000, which must include genuine savings of at least 5%. The scheme covers variable, fixed, and split loan structures depending on the lender, and because you avoid LMI, your upfront costs are lower than they would be with a standard 5% deposit loan. The scheme cannot be combined with Help to Buy, but it can be used alongside the Victorian FHOG and stamp duty concessions where eligible.

Using Equity from an Existing Property

If you already own property, you can use the equity in that property as part or all of your deposit for a new purchase.

Equity is the difference between what your property is worth and what you owe on it. For example, if your home in Warragul is valued at $650,000 and you owe $400,000, you have $250,000 in equity. Lenders will typically allow you to borrow against up to 80% of the value of your existing property, which in this case would be $520,000. Subtracting the $400,000 you still owe gives you access to $120,000 in usable equity, which can be used as a deposit on an investment property or a new home loan without needing to sell your current home.

Using equity means you do not need to have cash savings, but you do need to meet the lender's serviceability assessment for both loans combined. If you are moving from one owner-occupied property to another, you may also need bridging finance to cover the period between purchasing the new property and settling the sale of the old one. A broker can structure the loans and timing to avoid unnecessary holding costs.

State and Territory Grants for Gippsland Buyers

Victorian first home buyers can access a $10,000 grant for new homes valued up to $750,000, and stamp duty relief on both new and established homes.

The stamp duty exemption applies in full to properties valued up to $600,000, with a concession available on properties valued from $600,001 to $750,000. If you are purchasing an established home in a town like Moe or Trafalgar, the stamp duty saving can be substantial, particularly if the property sits within the exemption threshold. You must move into the home within 12 months of settlement and live there as your principal place of residence for at least 12 continuous months to retain the concession.

These concessions can be used alongside the Australian Government 5% Deposit Scheme, meaning a first home buyer in regional Victoria can combine a 5% deposit, no LMI, the $10,000 grant if purchasing a new home, and a full or partial stamp duty exemption depending on the property value. The eligibility criteria and application process are managed through the State Revenue Office Victoria and your conveyancer, but your broker can confirm your eligibility and help you plan the structure of your home loan application to take full advantage of the available schemes.

Call one of our team or book an appointment at a time that works for you to discuss your deposit options and loan structure.

Frequently Asked Questions