Buying Your First Home: Timing, Savings and Equity

Quick Look

Focus: What first home buyers in Australia need to know about timing, saving, and using equity

Key Takeaways :

You typically need at least a 5–20% deposit plus extra for upfront costs
Government schemes can lower the upfront savings required for a deposit
Equity builds slowly but can become a powerful financial tool later
Reading Time: ≈ 7minutes

Introduction

Buying your first home is a major milestone—and often one of the biggest financial decisions you’ll make. But with rising house prices, high interest rates, and tight lending rules, it’s natural to wonder: When is the right time? How much do I need? Can I even afford it?

The truth is, timing the market isn’t nearly as important as being financially prepared. This article walks you through the key numbers and practical steps to help you feel more confident—whether you’re six months or six years away from getting the keys.

Context & Problem

Property prices in Australia remain high, even as growth slows in some areas. In 2024, the median house price in Sydney was around $1.1 million, while in Brisbane it was closer to $800,000 (CoreLogic, March 2024). That makes saving a deposit a big hurdle — especially for first home buyers without help from family.

Strategy & How To

Here’s a practical guide to preparing for your first home purchase—step by step.

1. Understand how much you need

Most lenders want at least a 20% deposit to avoid paying Lenders Mortgage Insurance (LMI).But some loans allow you to borrow with as little as 5% deposit, especially if you’re eligible for a government scheme.

Example:

Buying a $600,000 home
20% deposit = $120,000
5% deposit = $30,000 (but likely to pay LMI unless you qualify for a Federal Govt exemption)

Don’t forget upfront costs:

Stamp duty exemption (State Govts): Subject to value limits and eligibility conditions.
Conveyancing/legal fees: $1,000–$2,000
Inspections: $400–$800
Loan setup or broker fees: Often waived, but not always

2. Explore first home buyer support

There are several programs that may reduce how much you need to save:

First Home Guarantee (Federal Govt): Allows eligible buyers to purchase with just 5% deposit and no LMI.
First Home Super Saver Scheme (FHSSS-Superannuation): Lets you withdraw up to $50,000 of voluntary super contributions to use as a deposit.
Stamp duty exemption (State Govts): Subject to value limits and eligibility conditions.
First Home-Owners Grant (State Govts): NSW, Vic, WA, Tax $10,000; Old, SA $15,000;up to limited values and conditions apply. Grants typically apply only to new homes, including newly built properties, off-the-plan purchases, or substantially renovated homes.
Check eligibility carefully on official sites like moneysmart.gov.au or your state revenue office. Most grants require applicants to be Australian citizens or permanent residents, aged18 or over, and to occupy the home as their principal place of residence for a minimum period, typically 12 months within six to twelve months.

3. Build a strong savings track record

Most lenders look for genuine savings—money you’ve saved consistently over 3–6 months. Even if your parents gift you money or act as guarantors, the bank still wants to see that you can manage your own finances.

Tips to strengthen your application:

Avoid late bill payments or buy-now-pay-later debt
Reduce credit card limits (even unused ones count against you)
Keep your job stable during the pre-approval process-

4. Plan for affordability, not just approval

Banks assess your borrowing power based on income, expenses and existing debts, but just because you’re approved for $650,000 doesn’t mean you should borrow it. Use the 3% buffer rule—could you still afford repayments if interest rates rose by 3 percentage points? This is roughly the test lenders apply (APRA guideline, updated 2021).

Example :

Loan of $500,000
6% interest = ≈ $3,000/month
9% interest = ≈ $4,000/month

Make sure your budget can handle the higher number.

5. Understand equity and how it builds

Equity is the difference between what your home is worth and what you owe on it. It grows overtime through:

Loan repayments(reducing the loan)
Market growth(if your property increases in value)
Improvements(like renovations or upgrades)

Equity can later be used to

Fund renovations
Buy an investment property
Refinance to a better loan

But early on, your equity will be low. Don’t rely on fast gains—plan for steady progress.

Case Study

Ben and Alisha, 28 & 29 – Saving Smarter with Super

Situation :

Saving on two moderate incomes ($60k and $75k), aiming for a $650,000 townhouse in Melbourne’s west.

Strategy :

Used First Home Super Saver Scheme (FHSSS) to withdraw $30,000 (refer to the article in our library on this)
Saved an additional $20,000 in a high-interest savings account
Applied through the First Home Guarantee to avoid Loan Mortgage Insurance (LMI)

Outcome:

Bought with a 7.7% deposit
Total up front cost:≈$55,000including stamp duty and fees
Paying $3,300/ month in loan repayments at 6.2% interest
Still have emergency savings and a plan to make extra repayments

Common Questions & Misconceptions

Do I really need a 20% deposit?

No—many first home buyers purchase with 5–10%, especially with government schemes. But under 20% often means you’ll pay LMI unless you’re exempt

What ’ s LMI and why does it matter?

Lenders Mortgage Insurance protects the bank, not you. It can cost $10,000+ and is usually added to your loan balance.

Is it better to buy now or wait?

There’s no perfect time. Focus on being financially ready—with stable income, manage able debt, and a clear savings plan.

Can I use my super to buy a home?

Not directly. But under the First Home Super Saver Scheme, you may be able to withdraw voluntary super contributions (up to $50,000) for a deposit. This is separate from the usual super balance.

Can I use equity to buy another property straight away?

Usually not. It takes time (and repayments) to build equity. But over 3–5 years, you may have enough for refinancing or future investing.

Conclusion

Buying your first home is a journey—and it starts with getting your finances in order, understanding your options, and being realistic about what you can afford. With the right support, even a modest income and a small deposit can get you started.

Every repayment builds your equity. Every saving builds your confidence. And every step forward—no matter how small—gets you closer to owning a home.

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Your risk profile and property preferences
Your usable equity and borrowing capacity
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Book a discovery call with Planning IQ today and take the first confident step towards comprehensive wealth management.

Disclosure: General information only. Consider your objectives, financial situation and needs, and seek professional advice before acting.

How We Keep It Trustworthy

Every article includes a Review & Fact Check section below—so you know exactly where our facts come from, what’s uncertain, and whether there’s any bias.

1. Fact References

Property prices: CoreLogic Housing Report (March 2024) Deposit and LMI thresholds: Money Smart, ATO, lender policies First Home Guarantee and FHSSS: Australian Government Housing Australia and ATO (updated July 2024) Borrowing capacity and 3% buffer: APRA lender guidance (2021), Money Smart calculators Stamp duty concessions: State Revenue Offices (NSW, VIC, QLD) — accurate as of April 2025

2. Unverified or Inconclusive Items

Case study is illustrative and based on typical buyer scenarios—not real individuals

3. Time Sensitivity

Scheme eligibility rules, property prices, and interest rates are subject to change; review annually

4. Bias Assessment

Article is neutral and educational, with soft promotion of third-party tools (moneyGPS, Planning IQ) clearly marked at the end