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Saving for a home loan deposit

The first step to buying a home is saving a healthy deposit. Get started with our savings tips for first home buyers.

The bigger your deposit, the smaller your loan will be and the less you’ll pay in interest. We recommend that you save as much as you can, 20% of the property price if possible.

To apply for a home loan, you need to show evidence of regular savings over a period of at least three months. This can include a mixture of cash, shares, equity in an existing property, Term Deposits, an inheritance or gifts.

If you have less than the normal 20% deposit, you may also need Lenders’ Mortgage Insurance, which protects us in the event that you default on repayments. It’s a one-off cost that’s added to your loan amount, so you don’t have to pay anything upfront.

Saving a deposit can be hard work, but it’s a great way to get into the habit of putting money away for mortgage repayments and will show lenders that you’re capable of managing your finances. Here are some tips to get you started:

1. Create a budget and stick to it as much as possible. The best way to save is to ‘pay yourself first’ by putting your savings into a separate account as soon as you get paid, so you’re not tempted to spend it

2. Cut back on unnecessary expenses, such as memberships you don’t use, bottled water or new clothes.

3. Now is the best time to look at your debt and work out how to pay it off as soon as possible. You may like to consolidate your debt to save on interest and fees, or start by paying off the debt with the highest interest rate first and work your way down

4. Saving can take time, but you don’t need to sacrifice your lifestyle. Factor in everyday costs, so you can still pay the bills and enjoy yourself

5. Make your savings work hard for you, by placing them into a high interest savings account that can’t be accessed easily. You’ll earn interest as you save, so you can apply for a home loan sooner

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