What Can Count Towards A Deposit?

What you can use, besides your savings, to secure a deposit on a house.

When it comes to getting a deposit together for that first home, it makes good financial sense to aim for an 80% or lower LVR (loan to value ratio). Why? Because it can save you around $25,000 over the life of a typical $350,000 home loan; that includes avoiding the cost of Lender’s Mortgage Insurance, which can be well over $10,000.

If you can’t quite manage to amass a 20% deposit from your savings, there are other strategies you can consider.

Here are three things you can use for a deposit:

1. First Home Owners Grant (FHOG)

Using a First Home Owners Grant for a deposit is great if you’re buying or building a new house or unit, although in some places it can be used for established homes as well. Most states and territories offer grants of $10,000, but some offer more, such as the Northern Territory which has a generous $26,000 grant.

The value of the grant you’re eligible for can depend on who you are, where you live and what you are buying. You can read a summary of what is available state by state here.

Out of the 74 lenders CANSTAR rates for first home buyers, 50 institutions allow customers to use a First Home Owners Grant as a deposit.

It’s also possible to combine the FHOG with other government incentives for first home buyers, including the First Home Loan Deposit Scheme (FHLDS), which launched on 1 January, 2020. It’s a new government measure in which the Australian Government guarantees 10,000 low-deposit loans a year for eligible low- and middle-income earners who have saved up a deposit of as little as 5% of a property’s value.

If you’re currently considering a home loan, the comparison table below displays some of the variable rate home loans on our database with links to lenders’ websites that are available for first home buyers. This table is sorted by Star Rating (highest to lowest), followed by comparison rate (lowest-highest). Products shown are principal and interest home loans available for a loan amount of $350K in NSW with an LVR of 80% of the property value.

Before committing to a particular home loan product, check upfront with your lender and read the applicable loan documentation to confirm whether the terms of the loan meet your needs and repayment capacity. Use Canstar’s home loan selector to view a wider range of home loan products.

*Comparison rate based on loan amount of $150,000 and a term of 25 years. Read the Comparison Rate Warning


2. Using a guarantor

A guarantor is someone that is willing to take on the responsibility of paying off a loan if you’re ever unable to meet the repayments. If you’re lucky enough to know people that trust you enough to let you use them as security for a home loan, they can be your guarantor. Typically, these people are the borrower’s parents, as some banks only allow family members to act as guarantor.

Having a guarantor means you don’t have to pay lenders mortgage insurance. It also means you can borrow up to 100% of the property price.

If your guarantor is especially generous, many lenders will even allow them to provide the deposit themselves. Read more about some pros and cons of parents going guarantor.

3. Using a financial gift as a deposit

Some parents like to give their children money for a deposit as a gift. Many lenders allow this, however, certain conditions usually apply, such as keeping the gift money in an account for a set period of time. The lender might also require a written statutory declaration stating that the money is a gift.

How many institutions allow these deposit methods?

Of course, not all banks will accept one of these methods as counting towards a deposit and a lower LVR. The following table lists some of the options available for first time buyers and the number of institutions who provide those options, based on CANSTAR research:

 Deposit Option No Yes Total No% Yes%
FHOG counts as deposit 24 50 74 32.43% 67.76%
Financial gift as a deposit 6 68 74 8.11% 91.89%
Guarantor can provide deposit 27 47 74 36.49% 63.51%

Source: Canstar, September 2016 Home Loans Star Ratings. Based on average variable interest rate and a loan of $350,000 taken over 25 years.

Learn more about Home Loans

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