The magic number generally recommended is a minimum 20 per cent of the total property value being purchased as a deposit. This will give borrowers a Loan to Value Ratio (LVR) of 80 per cent and lets them avoid the extra Lenders Mortgage Insurance (LMI) expense charged at higher LVRs. 

A down payment or deposit is usually required as little lenders will lend the complete value of the property. In this article, we talk about a few simple strategies to help you save enough cash to pave the way into your dream home.

Set the amount you need to save within a specified time period. Look up online property listings in the area you are looking to purchase to give you an indication of how much a 20 per cent deposit would be. The timeframe of this savings goal is extremely important and often easily overlooked. Saving up $100,000 in 2 years rather than 5 years is a much more difficult task, but can be all the difference as property prices could change in those 3 years delayed.

Understand that deposits are not built overnight, and can take months or years of discipline and sacrifice. It won’t always be easy but remember why you’re saving in the first place. The image of you living in your own house can keep you motivated to push through in the long-run.

As you are building up your cash reserves, it is very tempting to leave all your money in a savings account that earns little to no interest. It could be very motivating to see the actual savings number growing more and more, but it may be worthwhile putting cash in term deposits or government bonds that are normally deemed as no risk. Ensure that the maturation date of these financial instruments align with your goal so your cash is not tied up when you need it most. If you decide to stick to a savings account to be more liquid, there is no harm in shopping around for the bank with the best savings rate. You may even find an alternative promotion rate with your current bank that will earn you more interest savings.

Pay yourself first. Once you receive your income, set aside the amount you want to save and live with the rest. For us, it works better than saving whatever is left after all your periodic expenses. Depending on where you bank, you can even set it up to automatically transfer funds from your transaction account into your savings account.

When applying for a home loan, lenders look at all the debts under your name. With this in mind, closing off a few debts before your application can not only help you save for the deposit, but increases your borrowing capacity down the line. Generally speaking, prioritising the payment of high-interest debts like credit cards or personal loans can be advantageous.

There are many ways to make incremental savings, and these small savings compounded over time can make a big difference. Comparing prices between your Coles, Woolies or Aldi, making use of receipt coupons, shopping the sales, locking in fuel prices all do their part.

For most Australians without their own home, rent is typically the largest expense draining their reserves. It could be difficult moving out of a rental property especially if you’ve stayed there for extended periods, but downsizing or looking for cheaper alternatives can be instrumental in building up the down payment you need. On the other hand, if both parties are willing, moving back in with mum and dad can greatly accelerate your timeline.

It comes full circle to goal-setting. Breaking down your savings target into smaller, achievable milestones can help maintain your focus and make the journey more rewarding.

With a well executed plan and a few simple strategies, saving up for a down payment can be well within your reach. Remember that every dollar saved brings you one step closer to that homeownership dream.

Any advice provided is general in nature and should be considered in line with your financial situation, needs and objectives.