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How Much Do You Need for a House Deposit?

By Abodable October 31, 2022, Read time: 5 min

A lot is happening in the Australian property market at the moment, and understandably prospective buyers concerned with housing affordability have one big question: “How much do I need for my house deposit?” We’ll aim to tackle that question in this article.

Key Takeaways:

● Housing affordability is a problem; but,

● First home buyers can still enter the market; and,

● It’s important to put things into perspective in this property market

👋  Check out the calculator at the bottom to play with mortgage repayment numbers!


The Problem

We’ve seen a lot of upset in the property market across Australia in the past two years, and right now everyone is closely watching every new move and announcement from the Reserve Bank of Australia (RBA), and how interest rates are affecting housing affordability.

This is only complicated by the additional fees that can come with buying a house, such as lenders' mortgage insurance (LMI), stamp duty, and solicitor fees, to name a few.

Understandably, a lot of millennials, and soon-to-be Gen-Z, are facing issues of not being able to enter the housing market.


The Average Deposit Amount

The median house price in Australia tipped $1 million in 2022, which would equate to an ideal deposit of at least $200,000, to not pay LMI. That’s a LOT, right? For Millennials and Gen-Z, this would be more than the entire price their parents’ first house cost. It seems an impossible dream, so many are coming under the 20% threshold and finding ways to incorporate their LMI bills into their mortgage repayments. Let’s say a Millennial finds a home worth around $700,000 (yes, they still exist!) - it’s not their dream home, but it’s a foot in the door. A 10% deposit would be $70,000. That’s still a lot of money, but it’s a heck of a lot better than $200,000.


How Abodable is trying to help

Our entire model is based on improving housing affordability to help Millennials and Gen-Z get their foot in the property market door. We do this by giving you, the buyer, the commission refund that comes from selling new property. On average, we give about $20,000 back to the buyer. Keeping that in mind, remember the case we mentioned before? So, a prospective buyer is looking at a house for $700,000. With the First Home Owners Grant (FHOG) being about $10,000 (depending on which state you’re buying), combined with the commission refund from Abodable which you can use towards your deposit, this brings the overall deposit amount down to about $40,000.

It’s still a lot of money, we get that, but it does make that goal of owning a house more attainable. One of the biggest hurdles in the property market is just getting your foot in the door; once you’re in, you have more options and things generally get easier.


So, how much then?

Always try to aim for 20% for your house deposit - but 10-15% can be enough to afford your home. You may not have the required nest egg to avoid paying LMI, but that doesn’t mean you won’t be able to afford your mortgage repayments. There are so many factors that go into buying a house - in time you may be able to turn your owner-occupied dwelling you only had a 10% deposit for into a place you rent out and can turn over a nice amount of passive income to pay itself off. This is all to say that, just because you don’t have the full 20%, doesn’t strictly mean it’s not the right time to buy. As of writing, there’s currently a government LMI scheme to help first-home buyers not pay LMI with deposits as low as 5%. You can check it out here.


Putting it all in context (TL;DR)

Housing affordability is absolutely an issue right now. Housing prices have skyrocketed in the last two years, and servicing a long (paying off your house) has increased, as has the cost of living; however, wages aren’t seeming to keep up with these rising costs. This means it takes the average Australian a lot longer to save for a house deposit, but it doesn’t make it impossible.

It’s important to frame the perspective that owning a home is still achievable, but it could just a little longer than expected. It’s also important to have realistic expectations - you shouldn’t necessarily expect your first home to be your ‘forever home’. Most people enter the market with something more modest that they can afford, grow some equity, perhaps even sell their first property and buy something they want in due time when they have a larger deposit.

Have a look at the simple calculator below to see what your mortgage repayments may be. It doesn’t include LMI in the calculator, but it’s a quick way to know how you can manage your monthly repayments.