Saving for Your First Home: Understanding the Basics

Saving a deposit while renting in Reservoir takes longer than you expect.

The amount you need depends on the property price, the loan structure you choose, and whether you qualify for government assistance. Buyers purchasing in Reservoir's unit market will reach their deposit target faster than those targeting houses, but both require planning around more than just the price you agree to pay.

How Much You Actually Need to Save

Your deposit is one part of the upfront cost. Settlement costs including conveyancing, building and pest inspections, and Victorian stamp duty add several thousand dollars to the total amount due at settlement. The stamp duty calculation depends on the property price and whether you qualify for the first home buyer duty exemption or concession.

Consider a buyer purchasing a unit in Reservoir at the current median. With a 10% deposit, that buyer would need the deposit amount plus settlement costs in verified savings or eligible gifts. Lenders require evidence that the deposit has been held in your account for at least three months, or that it originates from an acceptable source such as a family gift with a signed statutory declaration.

Buyers using the Australian Government 5% Deposit Scheme reduce the deposit requirement but still face the same settlement costs. The scheme removes Lenders Mortgage Insurance but does not cover legal fees, inspections, or stamp duty. Genuine savings remain a requirement for most participating lenders, even when LMI is waived.

Using the First Home Super Saver Scheme

The FHSS Scheme allows you to make voluntary contributions into your superannuation fund and release up to $50,000 toward a deposit. Concessional contributions are taxed at 15% rather than at your marginal rate, reducing the effective cost of saving if you are on a higher income.

You must apply for a determination from the ATO before signing a purchase contract. The determination specifies the amount you are eligible to release. Processing times vary, and buyers should apply at least 25 business days before they need access to the funds. The scheme works for both individual and joint applications, but each person must meet the eligibility criteria separately.

Released amounts can be used to cover deposit, stamp duty, or settlement costs. Buyers in Reservoir who have been salary sacrificing into super for several years may find this brings forward their purchase timeline by 12 to 18 months, depending on the contribution amounts and the property price they are targeting.

Victorian Stamp Duty Concessions for First Home Buyers

Victoria offers a full stamp duty exemption on properties valued up to $600,000, and a sliding concession on properties valued between $600,001 and $750,000. The concession applies to both new and established homes, provided the buyer moves in within 12 months of settlement and lives there for at least 12 continuous months.

In Reservoir, where the house median sits around $960,000 and the unit median around $671,000 according to CoreLogic data from June, buyers targeting units are more likely to access the full exemption. Buyers targeting houses will generally pay standard duty rates unless they are purchasing a smaller or older property below the $750,000 threshold.

Stamp duty on a property valued at $650,000 without the concession would be approximately $34,070. With the concession, duty reduces to around $7,070, a saving of $27,000. That difference can cover most settlement costs or form part of a larger deposit, reducing the loan amount and ongoing repayments.

Low Deposit Options Without LMI

The Australian Government 5% Deposit Scheme allows eligible buyers to purchase with a 5% deposit without paying LMI. Housing Australia guarantees the difference between the deposit and 20% of the property value. No income caps apply, and there are no annual place limits.

The scheme is available through participating lenders only. Buyers cannot apply directly to Housing Australia. Each lender on the panel sets its own credit criteria, loan features, and interest rates. Some offer offset accounts and redraw facilities, while others restrict these features on scheme-backed loans.

Property price caps apply. In Victoria, the cap for capital city and regional centres is $950,000. The cap for other areas is $650,000. Both the purchase price and the lender's assessed value must sit at or below the cap. Reservoir falls within the Melbourne metropolitan region, so the $950,000 cap applies. Buyers purchasing units will generally remain within the cap, while buyers targeting houses may exceed it depending on the property.

The scheme can be combined with the Victorian stamp duty concession and the $10,000 First Home Owner Grant for new homes. It cannot be combined with Help to Buy.

Gift Deposits and Genuine Savings

Lenders distinguish between genuine savings and gifted deposits. Genuine savings must be held in your account for at least three months and include funds such as salary deposits, term deposits, and shares. Gifted deposits are acceptable from immediate family members and require a signed statutory declaration confirming the funds are a gift, not a loan.

Most lenders require at least 5% of the purchase price to come from genuine savings, even when a family member is contributing a larger gift. A buyer purchasing a unit in Reservoir would need approximately $33,550 in verified genuine savings if using the 5% threshold, regardless of the total deposit being contributed.

Some lenders waive or reduce the genuine savings requirement for borrowers in certain professions, such as doctors and lawyers. These LMI waivers and policy exemptions vary by lender and are not advertised publicly. Buyers who have been living at home or paying below-market rent may struggle to demonstrate genuine savings unless they have been actively setting aside funds into a separate savings account over time.

What Pre-Approval Actually Tells You

Pre-approval confirms the amount a lender is willing to lend based on your income, expenses, and credit history. It does not lock in an interest rate, and it does not guarantee final approval once you nominate a property.

The assessment includes a buffer, typically 3%, added to the current interest rate to ensure you can service the loan if rates rise. Lenders also apply spending benchmarks to your disclosed expenses. If your stated expenses sit below the benchmark for your household size, the lender will use the higher figure in the assessment.

Pre-approval is valid for three to six months depending on the lender. If your financial position changes during that period, such as a change in employment or an increase in credit card limits, the lender will reassess. Buyers in Reservoir who receive pre-approval and then take several months to find a property should confirm the approval remains current before making an offer.

Call one of our team or book an appointment at a time that works for you. We work with first home buyers in Reservoir and across Melbourne's northern suburbs, and we'll make sure your deposit, loan structure, and government scheme eligibility are sorted before you start looking.

Frequently Asked Questions