Common Mistakes When Saving Your Deposit

The deposit figure most buyers get wrong

Most Brisbane buyers calculate their deposit based on the purchase price alone. The actual amount required includes stamp duty, legal fees, building and pest inspections, and lender costs that can add between $15,000 and $40,000 to the upfront requirement depending on the property value and your eligibility for concessions.

Consider a buyer purchasing in Carindale at the current median who expects to need a 10 per cent deposit. If they have saved that 10 per cent but nothing more, they will be short by the full amount of the settlement costs. Lenders assess genuine savings as funds held for at least three months in your name, which means a last-minute transfer from family or a quick top-up from a personal loan will not count toward serviceability. The loan application proceeds, but the settlement cannot complete without those additional funds in place.

Why lenders distinguish between genuine savings and gifted deposits

Lenders assess your application based on your demonstrated capacity to save and service the loan. Genuine savings are funds you have accumulated over time and held in your own accounts for at least three months. A one-off gift or bonus payment may form part of your deposit, but most lenders require at least 5 per cent of the purchase price to come from genuine savings unless you are accessing a scheme for first home buyers such as the Australian Government 5% Deposit Scheme or Help to Buy.

If you are relying on a family gift to make up the difference, the lender will ask for a statutory declaration confirming that the funds are a gift and not a loan. If the funds are a loan, even an informal one, that changes your debt position and may affect how much you can borrow. Some lenders will accept a guarantor arrangement where a parent or family member uses equity in their own property to support your application, but that requires separate legal advice and a clear exit strategy.

How deposit size changes your interest rate and borrowing power

Your deposit affects both the loan structure and the home loan interest rate you are offered. Borrowers with a deposit of 20 per cent or more avoid paying Lenders Mortgage Insurance and typically qualify for better pricing. A borrower with a 10 per cent deposit will pay LMI, which can range from a few thousand dollars to over $20,000 depending on the loan amount, and may be offered a higher rate due to the increased risk weighting applied by the lender under APRA's prudential standards.

Deposit size also affects your borrowing capacity because the lender assesses serviceability based on the total loan amount including any capitalised LMI. If you are borrowing close to your maximum capacity, the additional cost of LMI may push you over the limit. In that scenario, waiting a few more months to increase your deposit from 10 per cent to 15 per cent could improve both your rate and your borrowing power, even without an increase in your income.

What counts as genuine savings in Queensland

Genuine savings must be held in your name for a minimum of three months and must be verifiable through bank statements or account records. Acceptable sources include funds in a savings account, term deposit, offset account linked to an existing loan, or shares held in your name. Funds received as a gift and then held in your account for three months can qualify as genuine savings from that point forward, but the initial deposit will still be classified as a gift.

Rent paid consistently over time can also demonstrate savings capacity, even if you do not have a large balance in your account, because it shows you can afford regular payments at or above the expected loan repayment. Some lenders will accept verified rent payments as evidence of serviceability, particularly if you are currently paying more in rent than the expected home loan repayment. This is relevant for renters in suburbs such as Capalaba or Wynnum, where rental costs have increased but median property values remain within reach for buyers with a smaller deposit.

How LMI premiums are calculated and when you can avoid them

LMI is a risk-based premium charged when your deposit is less than 20 per cent of the property value. The premium is calculated on a sliding scale based on your loan-to-value ratio and the loan amount. A borrower with a 10 per cent deposit will pay a higher premium than a borrower with a 15 per cent deposit, and the premium is also higher for investment properties than for owner-occupied purchases.

The premium can be paid upfront at settlement or capitalised into the loan amount. Most borrowers choose to capitalise the cost, but that increases the total amount borrowed and the interest paid over the life of the loan. You can avoid LMI by saving a 20 per cent deposit, using a guarantor, or accessing a government scheme that provides a guarantee in place of the additional deposit. LMI does not provide any benefit to you as the borrower. It protects the lender in the event that you default and the property is sold for less than the outstanding loan balance.

Stamp duty concessions and how they reduce your upfront requirement

Queensland first home buyers purchasing an established property receive a stamp duty concession that reduces the upfront cost by up to $17,350 for properties valued under $710,000. The concession phases out for properties valued between $710,000 and $800,000, and does not apply to properties at or above $800,000. For new homes and vacant land, a full duty concession applies with no price cap, reducing transfer duty to nil on the residential land component.

If you are purchasing a property valued at $650,000 in Runcorn or Tingalpa, the stamp duty concession can reduce your settlement costs by more than $15,000, which may allow you to proceed with a smaller deposit or retain a larger buffer for post-settlement expenses. You must occupy the property as your principal place of residence, and at least one applicant must be an Australian citizen or permanent resident for contracts entered into from 1 August 2026.

The 5 per cent deposit scheme and how it works with participating lenders

The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with a deposit of as little as 5 per cent without paying LMI. Housing Australia provides a guarantee to the participating lender for up to 15 per cent of the property value, bringing the combined deposit and guarantee to 20 per cent. The scheme has no income cap and no annual place limit, but the property must be valued at or below the cap for your location. In Queensland, the cap is $1,000,000 in Brisbane, the Gold Coast, and the Sunshine Coast, and $700,000 in other areas.

Applications are made through a participating lender, not directly to Housing Australia. The panel includes major banks and a range of non-major lenders, and each lender sets their own credit policy and serviceability criteria within the framework of the scheme. If you are approved under the scheme, you can choose a variable, fixed, or split rate structure depending on what the lender offers. The scheme cannot be combined with Help to Buy, but it can be used alongside Queensland's stamp duty concessions and the First Home Owner Grant where applicable.

When a smaller deposit costs more over the life of the loan

Borrowing with a smaller deposit means paying interest on a larger loan amount for a longer period. A buyer who borrows 95 per cent of the property value will pay significantly more in total interest than a buyer who borrows 80 per cent, even if both loans are on the same interest rate and term. The difference becomes larger if the 95 per cent loan also attracts a higher interest rate due to the increased LVR.

If you capitalise the LMI premium into the loan, that cost is also subject to interest over the life of the loan, which can add several thousand dollars to the total repayment. Refinancing to remove LMI once you have built sufficient equity is possible, but it involves additional costs including discharge fees, application fees, and potentially a valuation fee. For buyers who can afford to wait a few more months to increase their deposit, the long-term saving often exceeds the short-term benefit of entering the market sooner.

Frequently Asked Questions