The amount you need varies based on several factors, including the property price, location, and your financial situation. In Perth’s current market, a $400,000 home might require anywhere from $20,000 to $80,000 as a deposit. Remember that smaller deposits usually mean paying Lenders Mortgage Insurance, which protects the lender if you default on your loan.
Good news for first home buyers in Western Australia – several government initiatives help reduce your upfront costs. The First Home Owner Grant, stamp duty concessions, and the First Home Loan Deposit Scheme significantly reduce how much you need to save before buying your first home.
The Quick Answer
- You can enter the Perth property market with as little as a 5-10% deposit, though 20% is ideal to avoid additional insurance costs.
- Your total upfront costs will include not just the deposit, but also stamp duty, legal fees, and building inspections.
- Government assistance programs significantly reduce the amount you need to save as a first home buyer in Western Australia.
What You Need to Know About Home Deposits
Standard Deposit Requirements
Most lenders in Australia typically ask for a 20% deposit of the property value when you’re buying a home. For a $500,000 property, this means saving $100,000 upfront. This standard requirement helps lenders reduce their risk.
However, many first home buyers in Perth purchase with much less. Some lenders accept deposits as low as 5%, which would be $25,000 for that same $500,000 property.
The deposit requirements differ between lenders. Major banks might be stricter, while smaller lenders sometimes offer more flexible options for first-home buyers.
Government initiatives like the First Home Owner Grant in WA contributes to your deposit funds, potentially reducing how much you need to save yourself.
What Affects The Size Of Your Deposit?
Several factors influence how much deposit you’ll need:
Property type and location: Houses in premium Perth suburbs typically require larger deposits than properties in developing areas.
Loan type: Owner-occupied loans often have lower deposit requirements than investment properties.
Your credit history: A strong credit score might help you secure a loan with a smaller deposit.
Employment status: Stable employment history makes lenders more confident about smaller deposits.
Property value: More expensive homes generally require larger deposits, both in percentage and dollar terms.
Your borrowing capacity also matters. Lenders assess your income, expenses and existing debts to determine how much they’ll lend you, which affects the deposit needed.
Implications of Deposits Below 20%
Saving a full 20% deposit isn’t always practical for first home buyers. The good news is you can still enter the market with less.
When your deposit is below 20%, you’ll likely need to pay Lenders Mortgage Insurance (LMI). This one-off premium protects the lender if you default on your loan. LMI can add thousands to your purchase costs; for a $500,000 property with a 10% deposit, it might cost $8,000-$15,000.
Low-deposit loans often come with higher interest rates. Even a small rate difference adds significant costs over your loan term.
However, buying sooner with a smaller deposit might make financial sense if property prices are rising quickly in your target area. The market growth could outweigh the additional costs of LMI.
Understanding Upfront and Ongoing Costs
Buying your first home involves more than just saving for a deposit. There are several other costs you need to budget for before and after making your purchase.
Stamp Duty and Additional Fees
Stamp duty is one of the largest upfront costs you’ll face when buying property in Australia. In Western Australia, this tax varies based on your property’s value. First home buyers in Perth may qualify for stamp duty concessions or exemptions on properties valued up to $530,000.
Besides stamp duty, you’ll need to budget for:
- Application fees: $500-$1,000 for your mortgage application
- Settlement fees: $200-$300 paid to your lender
- Registration fees: Around $270 to register your mortgage
Government charges also include title search fees and mortgage registration fees. These add thousands to your upfront costs, so factor them into your budget early.
Don’t forget council rates and strata fees if applicable. These ongoing costs begin immediately after settlement.
Lenders’ Mortgage Insurance Explained
Lenders Mortgage Insurance (LMI) protects your lender, not you, if you can’t repay your loan. It becomes payable when you borrow more than 80% of your property’s value.
For first home buyers in Perth with a 5% deposit, LMI can cost between $10,000 and $30,000, depending on your loan amount. This premium is usually added to your loan amount rather than paid upfront.
The LMI cost operates on a sliding scale:
- 5% deposit: Highest LMI premium
- 10% deposit: Reduced premium
- 15% deposit: Further reduced premium
- 20% deposit: No LMI required
Some lenders offer LMI waivers for certain professions like doctors, lawyers and accountants. Government schemes may also help you avoid LMI despite having a smaller deposit.
Low Deposit Premiums vs. Larger Deposits
Entering the market with a small deposit often means paying premium costs. With a 5% deposit, you’ll likely face:
- Higher interest rates (typically 0.2-0.5% more)
- Lenders’ Mortgage Insurance premiums
- Fewer lender options are available to you
A larger deposit offers significant financial advantages. For a $500,000 Perth home, increasing your deposit from 5% ($25,000) to 20% ($100,000) could save:
- $15,000+ in LMI costs
- Approximately $50,000 in interest over a 30-year loan
- Around $140 on monthly repayments
Some buyers prefer to enter the market sooner with a smaller deposit rather than waiting years to save 20%, particularly if property prices are rising quickly in their target area.
Estimating Moving and Conveyancing Costs
Conveyancing is the legal process of transferring property ownership. In Perth, conveyancing fees typically range from $800 to $2,000, depending on the complexity of your purchase.
A good conveyancer will:
- Review your contract before signing
- Conduct property searches
- Handle settlement proceedings
- Ensure all legal requirements are met
Moving costs vary widely based on distance and volume. Budget for:
- Local moves: $300-$800 for a small home
- Professional packing: Add $500-$1,000 if needed
- Connection fees: $50-$200 for utilities at your new home
Don’t forget to budget for immediate purchases like blinds, appliances or furniture. Many first home buyers underestimate these costs, which easily add several thousand dollars to their initial outlay.
Building inspections ($400-$600) are optional but highly recommended to identify any issues before purchase.
Government Assistance for First Home Buyers in Australia
The Australian government offers several programs to help first home buyers enter the property market with lower deposits and financial support.
First Home Owner Grant
The First Home Owner Grant (FHOG) provides a one-off payment to eligible first-time buyers. In Western Australia, you can receive $10,000 when purchasing or building a new home. This grant applies to properties valued up to $750,000 in metropolitan Perth or $1 million in regional areas.
To qualify, you must:
- Be an Australian citizen or permanent resident
- Be at least 18 years old
- Have not owned property in Australia before
- Intend to live in the home as your principal place of residence for at least 6 months
The FHOG significantly reduces your upfront costs when building with WOW Homes. You’ll need to apply through the WA Office of State Revenue, and your conveyancer or mortgage broker helps with this process.
Home Guarantee Scheme and Eligibility
The Home Guarantee Scheme allows you to purchase a home with as little as a 5% deposit, without paying Lenders Mortgage Insurance (LMI). This saves you thousands of dollars in upfront costs.
The scheme includes three main programs:
- First Home Guarantee: For first home buyers
- Regional Home Guarantee: For people buying or building in regional areas
- Family Home Guarantee: For single parents with dependents
Eligibility criteria include:
- Income caps ($125,000 for singles and $200,000 for couples)
- Price thresholds that vary by location ($550,000 for Perth)
- Australian citizenship
You must apply through participating lenders, and places are limited each financial year. The 2024-25 allocation opened on 1 July 2024.
How Government Initiatives Impact Your Deposit
These government initiatives dramatically reduce your deposit requirements. Without assistance, you’d typically need a 20% deposit to avoid LMI. For a $500,000 home in Perth, that’s $100,000.
With the Home Guarantee Scheme, you can purchase with just a 5% deposit ($25,000 for a $500,000 home). The $10,000 FHOG further reduces your out-of-pocket expenses if you’re building new.
Some banks offer special first home buyer loans with deposits as low as 2% when combined with government schemes. This means you could potentially enter the property market with less than $15,000 saved.
Remember that different initiatives can be combined. By using both the FHOG and Home Guarantee Scheme together, you could minimise your upfront costs and get into your WOW Home sooner than you might think.
How WOW Homes Can Help First Home Buyers with Finance
At WOW Homes, we go beyond building beautiful homes we also help you get there financially. Our in-house finance specialists work closely with first home buyers to uncover finance solutions that fit your personal circumstances, even if you have low savings or a limited deposit. From low deposit home loans starting at just $1,500 to access to exclusive government schemes like the First Home Owner Grant and Keystart Home Loans, our team is here to guide you every step of the way. We handle the paperwork, explain your options clearly, and work with trusted lenders to get your finance approved faster.
With WOW Homes, it’s not just about how much deposit you need, it’s about how quickly and confidently you can step into homeownership.
Have More Enquiries About How Much Money You Need? Contact WOW Homes Today!
Understanding exactly how much you need to save for your first home can be confusing, but you don’t have to figure it out alone. At WOW Homes, we’re here to simplify the process and show you how government grants, low-deposit loans, and expert advice it’ll help you get into your new home sooner.
Contact us to get personalised guidance and start your homeownership journey with confidence.