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How to save for a house deposit

Saving for a house deposit is one of the biggest challenges to owning a home. But don't let that hold you back.

Once you have an idea of how much you'll need as a down payment, there are a few things you can do to make saving for your house deposit easier.

In this article, we'll discuss some practical steps you can take to save for a house deposit and how to calculate what you'll need.

1. Determine how much to save for a house deposit

Most people set a target of saving 20% of the property price. You need to plan for other costs, such as conveyancing and legal fees, that might unexpectedly arise. At HSBC, there are certain circumstances where we can lend up to 90% of the value of the property. However, a deposit of less than 20% will require you to take out Lender's Mortgage Insurance (LMI). You should always think beyond the minimum deposit for a home loan. 

If you're a first home buyer, you may be eligible for the First Home Owner Grant (FHOG) and first home buyers stamp duty concession. Availability varies depending on state and location. 

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2. Set a budget to track your spending and cut costs

Once you've figured out how much to save for a house deposit, set up a budget. Cutting costs doesn't always have to be painful. For example, if you pick up a latte on your way to work 5 days a week, you could switch to making it at home instead. This small change could save you up to $1,200 a year ($5.00 x 5 = $25.00/week or $100/month).

Another way to save money every month is to: 

  • Look around for discounts and welcome offers on things like gym memberships and mobile phone plans
  • Compare energy offers and insurance providers

savings plan calculator can be helpful when building a budget and even to see how the small amounts you save can add up with interest over time.

Saving up for a deposit can seem daunting. Break it down into steps to make it a more manageable goal.

3. Reduce and consolidate your debts

Having outstanding debts can be a challenge when you're saving for a house deposit. Consider a credit card balance transfer or consolidating any high-interest debts into a single loan with lower interest rates to help you pay them off faster. This simplifies your payment schedule because you won't have to worry about multiple payment dates, fees or interest rates.

Debt consolidation has another benefit, too: if you have fewer debts, banks are more likely to look favourably at you when the time comes to apply for your home loan.

4. Use a savings account

One great way to ensure you meet your savings goal is to set up a designated savings account for your house deposit. Leaving your savings sitting in your everyday transaction account can make it too easy to spend. 

When comparing accounts, you might want to consider the following to maximise your savings:

Bonus interest savings account

Some savings accounts reward you for putting money in the bank. For example, you'll get a monthly bonus with the HSBC Bonus Savings account when your balance increases by $300 or more per month (excluding interest) – up to a maximum of $5 million[@Accounts-300-higher-bonus-interest]. To make it easier, you can even set up a regular payment to automatically send a percentage of your salary each month. 

Term Deposits

By locking away a minimum of $5,000 for anywhere from 1 month to five years, you get the certainty of a fixed interest rate for that entire length of time. However, keep in mind your property purchase timeline to avoid potential break costs for early withdrawals. 

Explore more: The seven steps to buying your home

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