Understanding the Basics of Saving for a House Deposit

How Much Do You Actually Need to Save?

You need to save enough to cover your deposit plus settlement costs. The deposit depends on the property price and how much Lenders Mortgage Insurance (LMI) you're willing to pay, while settlement costs typically add several thousand dollars on top. For painters working as employees or running your own business, the real question is whether you can prove where the money came from and that it's genuinely yours.

Most lenders want to see a minimum 5% deposit that you've saved yourself, not gifted or borrowed. If you're buying with a 5% deposit, you'll pay LMI, which covers the lender if you default. LMI on a property purchased at $500,000 with a 5% deposit can cost anywhere from $10,000 to $15,000 depending on the lender and your circumstances. That cost gets added to your loan amount, so you don't need to pay it upfront, but you still need the deposit and other costs in cash.

At a 10% deposit, LMI drops significantly. At 20%, you avoid it altogether. For painters who've been putting money aside consistently, that saving on LMI can make a 20% deposit worth the wait, but it depends on how quickly property prices are moving and whether waiting costs you more than the insurance premium.

What Counts as Genuine Savings?

Genuine savings means money that's been sitting in your account for at least three months. Lenders want to see regular deposits and a pattern of saving, not a lump sum that appeared last week from selling a car or getting a tax refund. If you're self-employed and your income fluctuates, lenders pay closer attention to how you manage your money. They're looking for discipline, not just a healthy balance.

Money you've saved through your business counts, but you need to show it's been declared income. Cash deposits without a clear source won't help your application. If you've been banking your profits properly and can show consistent saving behaviour over several months, that works in your favour. For painters working as subcontractors, this is where having your accounts in order makes a real difference to what lenders will accept.

Gifts from family can top up your deposit, but most lenders still want to see at least 5% in genuine savings. A signed gift letter confirming the money doesn't need to be repaid is standard, and some lenders will ask for bank statements from the person giving the gift to confirm the funds exist. If your parents are helping with $20,000 but you've only saved $10,000 yourself on a $400,000 purchase, that still works as long as the genuine savings threshold is met.

Settlement Costs Beyond the Deposit

Settlement costs include stamp duty, legal fees, building and pest inspections, and any lender or application fees. Stamp duty varies by state and whether you qualify for first home buyer concessions. In New South Wales, stamp duty on a $500,000 property is around $15,000 unless you're eligible for a concession or exemption. In Victoria, it's similar, though concessions for first home buyers can reduce or eliminate it on properties under a certain threshold.

Legal fees for conveyancing typically run between $1,200 and $2,500. Building and pest inspections cost around $500 to $800 combined. Some lenders charge application or settlement fees, though many have reduced or scrapped these. If you're using a mortgage broker, there's no cost to you as the lender pays the broker, but it's worth confirming that upfront.

In total, settlement costs often add up to 3% to 5% of the purchase price if you're paying stamp duty, or around 1% to 2% if you're exempt. That's the money you need on top of your deposit, and it has to be available in cash at settlement. Consider a painter buying a $450,000 property in Queensland with a 10% deposit. You'd need $45,000 for the deposit, around $8,000 in stamp duty after concessions, and another $2,000 to $3,000 in other costs. That's roughly $55,000 to $56,000 in total, with $45,000 needing to be genuine savings or a combination of savings and a family gift.

How Self-Employed Income Affects Your Savings Requirements

If you're running your own painting business, lenders assess your income differently, and that affects how much you need to save. Most lenders want to see two years of tax returns to confirm your income, and they'll average your net profit after expenses. If your taxable income is lower because you've claimed every deduction available, that reduces your borrowing capacity, which might mean you need a larger deposit to buy the property you want.

Some lenders offer low doc options where you can declare your income using business activity statements or an accountant's letter, but these often require a larger deposit, usually 20% or more. The trade-off is less paperwork but more cash upfront. For painters who've been working for themselves for less than two years, a low doc loan might be the only option, and that means saving more before you can apply.

Your savings history also reassures lenders that you can manage a mortgage. If your income is variable but your savings have been consistent, that works in your favour. If your account balance swings wildly each month, lenders see risk. Keeping your business and personal finances separate and maintaining a steady savings pattern, even if it's $500 a month, builds a stronger application than sporadic larger deposits.

What About Government Schemes for Smaller Deposits?

The Home Guarantee Scheme lets eligible first home buyers purchase with a 5% deposit without paying LMI. The government guarantees the gap between your deposit and the 20% threshold, so the lender doesn't require insurance. If you qualify, that can save you tens of thousands of dollars, but the scheme has income caps, property price limits, and a limited number of spots each financial year.

For painters working as employees, the income cap is usually manageable, but if you're self-employed and have a partner also earning, you might exceed the threshold. The scheme also restricts which lenders you can use, and not all lenders participate. If you're eligible, it's worth exploring, but it's not a guarantee. Many painters we work with apply for the scheme but also prepare for a standard 5% deposit loan with LMI as a backup.

Another option is a guarantor loan, where a family member uses their property as security to reduce or eliminate your LMI. This lets you borrow with a smaller deposit, sometimes as low as 5% or even less, but it puts your guarantor at risk if you can't make repayments. It's a serious commitment on both sides, and you'll need legal advice before proceeding. The advantage is you can get into the market sooner without needing a massive cash deposit, but the responsibility doesn't disappear just because someone else is backing you.

How Long Does It Take to Save Enough?

That depends on what you earn, what you spend, and how much you need. A painter earning $70,000 a year after tax who can save $1,000 a month will have $36,000 saved in three years, enough for a 10% deposit on a $350,000 property plus some settlement costs. If you're targeting a higher-priced property or want to avoid LMI with a 20% deposit, you're looking at five to seven years of consistent saving unless your income increases or you receive help from family.

If you're self-employed and your income is higher but less predictable, setting a fixed savings amount each month and treating it like a bill helps. Automating transfers to a separate savings account the day after you get paid removes the temptation to spend it. Some painters use an offset account linked to an existing loan or set up a high-interest savings account with a bonus rate for regular deposits. The account type matters less than the habit.

Property prices also affect the timeline. If prices are rising faster than you can save, waiting for a 20% deposit might cost you more than paying LMI now. If the market is flat or falling, waiting and saving more might put you in a stronger position. That calculation is different for everyone, and it's worth getting pre-approval to see what you can borrow now versus in a year or two with a bigger deposit.

What Happens If Your Savings Fall Short?

If you've saved less than 5%, your options narrow. Some lenders will consider a 2% to 3% deposit if you have a guarantor, but that's not common for standard applications. If you're a few thousand dollars short, a family gift might bridge the gap, but you'll still need to show some genuine savings of your own.

Another scenario is when your deposit is enough, but your settlement costs exceed what you expected. If you've saved $50,000 for a $450,000 property and discover stamp duty and other costs will eat into your deposit, you might need to drop your purchase price or wait another few months to build the buffer back up. Running the numbers before you start looking at properties avoids that disappointment. A broker can give you a breakdown of all the costs involved based on the property price range you're targeting, so you know exactly what you need before you start shopping.

Call one of our team or book an appointment at a time that works for you. We'll run through your income, your savings, and what you can borrow, then map out what you need to get your application over the line. Whether you've been saving for years or you're just getting started, we'll make sure you're aiming at the right target and not wasting time or money on a plan that won't work.

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