If you’re a first-home buyer in Western Australia, you might be wondering, “How much deposit do I really need?” While the common belief is that you need a 20% deposit to buy a home, the reality is far more flexible.
With government initiatives, special loan programs, and lenders offering low-deposit options, owning your first home might be closer than you think.
Let’s break it down so you can understand exactly how much deposit you need and what your options are.
Do you really need a 20% deposit?
The idea of a 20% deposit comes from traditional lending practices—it’s the benchmark where banks will lend without requiring Lenders Mortgage Insurance (LMI).
LMI is an insurance premium you pay to protect the lender if you default on your loan. The catch? It can add thousands to your upfront costs.
But here’s the good news: you don’t always need 20%. First-home buyers in WA have access to programs and loan options that allow you to purchase with as little as 2% to 5% deposit.
Low-deposit home loan options in WA
1. Keystart low-deposit home loans
Keystart is a WA-based lender offering low-deposit home loans, specifically designed to help first-home buyers get into the market sooner.
- Deposit requirement: As low as 2% of the property value.
- No LMI: Keystart loans don’t require Lenders Mortgage Insurance, saving you thousands upfront.
- Income eligibility: Keystart has income limits depending on your household size and location, ensuring the program targets those who need it most.
Example: For a $400,000 property, a 2% deposit would be just $8,000. Compare that to a 20% deposit of $80,000—it’s a game-changer.
2. First Home Guarantee (Part of the Home Guarantee Scheme)
The First Home Guarantee allows eligible first-home buyers to purchase a home with as little as 5% deposit.
The federal government acts as a guarantor for the remaining 15%, which means you don’t need to pay LMI.
Eligibility:
- You must be a first-home buyer.
- The property must meet price caps, which are set regionally.
Example: If you buy a $500,000 home with 5% deposit, you’ll need $25,000 upfront instead of the $100,000 required for a 20% deposit.
Lenders Mortgage Insurance (LMI): What you need to know
If you’re not using a program like Keystart or the First Home Guarantee, most lenders will allow you to borrow with as little as 5% deposit, but LMI will apply.
The exact cost of LMI depends on:
- Your deposit size
- The value of the property
- Your lender’s insurance provider
While LMI adds to your costs, it’s worth weighing the pros and cons.
Paying LMI might allow you to enter the market sooner, potentially saving money if property prices continue to rise.
The First Home Owner Grant (FHOG): boosting your deposit
If you’re buying or building a new home in WA, you may be eligible for the First Home Owner Grant (FHOG), which provides a one-off payment of $10,000.
This grant can go directly toward your deposit or other upfront costs.
Eligibility:
- You must be purchasing or building a new home.
- The home’s value must be below the regional thresholds: $750,000 south of the 26th parallel or $1,000,000 north.
By combining the FHOG with a low-deposit loan, you could reduce your savings target significantly.
Also read: Understanding the first home buyers grant for WA
Practical tips to help you in saving for a deposit
While low-deposit options are available, having a larger deposit can give you more flexibility. Here are a few practical tips to help you save faster:
- Create a budget: Track your income and expenses to find areas to cut back and save more.
- Open a high-interest savings account: Park your savings somewhere that earns interest to grow your deposit faster.
- Reduce unnecessary debt: Pay down credit cards and personal loans to improve your borrowing power.
- Explore government assistance: Take advantage of programs like the FHOG and the First Home Guarantee.
Also read: Guide to stamp duty exemptions for WA first home buyers
How much deposit do you need? A quick recap
Here’s a simplified breakdown of deposit options for WA first-home buyers:
| Deposit Option | Deposit Required | LMI | Program |
|---|---|---|---|
| Keystart Low-Deposit Loan | 2% | Not required | Keystart |
| First Home Guarantee | 5% | Not required | Federal Government |
| Standard Loan with LMI | 5% – 10% | Required | Private Lenders |
| Traditional Loan (No LMI) | 20% | Not required | Standard Lending Practices |
As you can see, 20% isn’t the only path to homeownership. Programs like Keystart and the First Home Guarantee make it possible to buy sooner, even with a smaller deposit.
Final thoughts
Saving for a home deposit might seem overwhelming, but with low-deposit options, government assistance, and a clear strategy, it’s entirely achievable.
Whether you’re aiming for 2%, 5%, or more, understanding your options will put you on the right track.
If you’re unsure where to start, reach out to us. We’ll connect you with a dedicated mortgage broker who can help you navigate your options, access the best programs, and make your first home a reality.
