For many aspiring homeowners, especially first-time buyers, the dream of owning a property can feel distant amidst rising property prices and a high cost of living. ‘Can I buy a house with a $20,000 deposit?’ is a significant concern for those eager to step onto the property ladder. Traditionally, the hefty deposit required has been a major hurdle. However, new government incentives and schemes in Melbourne, Victoria, are opening doors, making homeownership a tangible possibility for eligible buyers with a $20,000 deposit.

At the forefront of helping first home buyers navigate these opportunities is Capkon Melbourne. As expert mortgage advisors, they specialize in guiding individuals through the intricacies of government schemes and securing the right financial solutions to achieve their homeownership goals.

How Much Deposit Do You Need to Buy a House in Victoria?

Generally, the deposit required to purchase a house in Australia can be substantial. Traditionally, lenders often expect a deposit of at least 20% of the property’s value. This high deposit amount can be a significant barrier, particularly for first-time buyers who are also grappling with saving while paying rent and other living expenses.

In Victoria, as in the rest of Australia, the standard expectation for a home loan deposit has historically been around this 20% mark. For instance, to buy a $500,000 property, a traditional deposit would be $100,000. However, the landscape is evolving, especially in Victoria, thanks to government initiatives designed to make homeownership more accessible with lower upfront costs.

Government Schemes Making It Possible: First Home Guarantee (FHG)

The First Home Guarantee (FHG) scheme is a significant initiative by the Australian Government that aims to support eligible first home buyers in purchasing a home with a deposit as low as 5%. Under this scheme, a participating lender allows a first home buyer to purchase a property with a smaller deposit (between 5% and 20%) with the Government guaranteeing up to 15% of the loan. This effectively means that buyers can avoid paying Lenders Mortgage Insurance (LMI), which is typically required for loans with less than a 20% deposit.

Here are some key aspects of the First Home Guarantee (FHG) scheme:

• Income Caps: To be eligible for the FHG, there are income limitations in place. For the 2024-2025 financial year, the income caps are:
• Property Price Limits: There are also property price thresholds that vary depending on the state or territory and the region (metropolitan or regional). For Victoria, as of the latest information, the property price limits are:
  • Melbourne metropolitan area: $800,000
  • Regional Victoria: $650,000
• Application Process: Eligible first home buyers need to apply through a participating lender. Capkon Melbourne can assist in navigating this process and identifying suitable lenders.
• Other Eligibility Criteria: Applicants must be Australian citizens or permanent residents, genuinely intend to live in the property, and not have previously owned a property in Australia.

Example: Imagine Sarah, a first home buyer in Melbourne, finds a townhouse priced at $400,000. Under the First Home Guarantee, she could potentially purchase this property with a 5% deposit, which is $20,000. The government would then guarantee the remaining 15% of the loan, allowing Sarah to avoid the significant cost of Lenders Mortgage Insurance.

What Type of Properties Can You Afford with a $20,000 Deposit?

With a $20,000 deposit and leveraging schemes like the First Home Guarantee, the types of properties you can realistically afford in Melbourne often include:

• Small Apartments: Particularly in inner or middle-ring suburbs, smaller one or two-bedroom apartments can fall within the price limits of the FHG.
• Townhouses: In outer suburbs or regional areas of Melbourne, more affordable townhouses might be within reach.
• Units: Similar to apartments, units in various locations can be an entry point into the property market.
• Houses in Outer Suburbs: While houses in inner Melbourne are typically beyond this budget, exploring outer suburbs and growth corridors can reveal more affordable options. Areas like Melbourne’s West (e.g., Werribee, Tarneit), South-East (e.g., Pakenham, Clyde), and North (e.g., Craigieburn, Epping) often have properties that fit within the FHG price caps.

It’s crucial to research specific suburbs and property values within the eligible price ranges to understand what is currently available.

What Can You Buy With Different Deposit Amounts?

Here’s a table illustrating the types of properties potentially accessible with varying deposit amounts and the role of government schemes:

Deposit Amount	Example Property Price	Required Scheme	LMI Payable?	Notes
$10,000	$300,000	Guarantor Loan or Shared Equity	Yes (unless scheme used)	Very limited options, often requires support
$20,000	$400,000	First Home Guarantee	No	Most common for FHBs under this scheme
$50,000	$500,000	Standard Loan	Possibly No	Access to potentially better interest rates

Avoiding Lenders Mortgage Insurance (LMI) with Less Than 20% Deposit

Lenders Mortgage Insurance (LMI) is a one-off insurance premium that lenders typically require when a borrower has a deposit of less than 20% of the property’s purchase price. It protects the lender, not the borrower, in case the borrower defaults on the loan. LMI can add a significant cost to your home loan.

Government-backed schemes like the First Home Guarantee are invaluable because they allow eligible buyers to purchase a home with a deposit as low as 5% without having to pay LMI. The government acts as a guarantor for the portion of the loan above 80%, mitigating the risk for the lender.

Real Savings Example:

• On a $400,000 property with a 5% ($20,000) deposit, the LMI could potentially range from $4,000 to $10,000 or more, depending on the lender and the borrower’s circumstances. By utilizing the First Home Guarantee, this significant cost can be avoided.
• On a $500,000 property with a 10% ($50,000) deposit, even though the deposit is higher, LMI might still be applicable without the FHG, potentially costing several thousand dollars.

Alternative Paths: Shared Equity and Guarantor Options

Besides the First Home Guarantee, other avenues can help first home buyers with smaller deposits:

• Victorian Homebuyer Fund: This is a shared equity scheme offered by the Victorian Government. Under this fund, the government contributes up to 25% of the purchase price in exchange for an equivalent share in the property. This significantly reduces the buyer’s upfront deposit requirement, potentially down to as little as 5% plus costs. Eligibility criteria and property price caps apply. This scheme can be particularly beneficial for those who meet the criteria but might not qualify for the FHG or prefer a shared equity model.
• Guarantor Loans: With a guarantor loan, a family member (usually parents) uses the equity in their own property to guarantee part of your loan. This can allow you to borrow the full purchase price without a deposit or LMI. However, it’s a significant financial commitment for the guarantor and requires careful consideration.

Breaking Down the Costs Beyond the Deposit

While the deposit is a major upfront cost, buyers need to be aware of other expenses involved in purchasing a property:

• Stamp Duty (Transfer Duty): This is a state government tax calculated on the property’s purchase price. In Victoria, first home buyers may be eligible for stamp duty concessions or exemptions depending on the property’s value. For properties under a certain threshold (currently $600,000 for an exemption and up to $750,000 for a concession), significant savings can be achieved.
• Conveyancing Fees: These are legal costs associated with the transfer of property ownership. They cover tasks like reviewing contracts, conducting searches, and settlement processes. Fees can range from $800 to $2,500 or more.
• Bank Fees: Lenders may charge various fees, including application fees, valuation fees, and settlement fees. These can vary between lenders.
• Building and Pest Inspections: It’s highly recommended to get independent building and pest inspections before purchasing a property to identify any potential issues. These can cost between $300 and $500 each.
• Other Potential Costs: These might include loan establishment fees, mortgage registration fees, and initial insurance premiums (building and contents).

Full Cost Breakdown Example (Approximate) for a $400,000 Home with a $20,000 Deposit (using FHG):

• Deposit (5%): $20,000
• Stamp Duty: Assuming eligibility for a first home buyer concession (check current thresholds), this could be significantly reduced or even nil. Without a concession, it would be a substantial cost (e.g., potentially around $14,000 – $20,000 without concessions, but this varies).
• Conveyancing Fees: $1,500 (estimate)
• Bank Fees: $500 (estimate)
• Building and Pest Inspections: $800 (combined estimate)
• Total Upfront Costs (with potential stamp duty concession): Approximately $22,800

It’s crucial to factor in all these additional costs when planning to buy a home. Capkon Melbourne can help you understand and estimate these expenses.

How Much Should You Save Each Month?

The amount you need to save each month to reach a $20,000 deposit depends on your current financial situation, income, and expenses, as well as your desired timeline. Here are some practical monthly saving tips:

• Create a Budget: Track your income and expenses to identify areas where you can cut back and save more.
• Set a Savings Goal: Determine a realistic timeframe to save $20,000 and calculate the required monthly savings. For example, saving $555 per month would take approximately 36 months.
• Automate Savings: Set up automatic transfers from your transaction account to a dedicated savings account each payday.
• Reduce Discretionary Spending: Look for non-essential expenses you can reduce, such as dining out, entertainment, or subscriptions.
• Explore Additional Income Streams: Consider part-time work or selling unwanted items to boost your savings.
• First Home Super Saver (FHSS) Scheme: This scheme allows eligible individuals to save for a home deposit within their superannuation fund. You can make voluntary concessional (before-tax) and non-concessional (after-tax) contributions, which are then taxed at a lower rate within the super fund. When you’re ready to buy your first home, you can apply to release these contributions (along with associated earnings), up to a specified limit ($50,000 total contributions from 1 July 2017). This can potentially accelerate your savings due to the tax benefits.

Savings Timeline (Examples):

• Solo Buyer: To save $20,000 in 2 years (24 months), you would need to save approximately $833 per month. Over 3 years (36 months), it would be around $555 per month.
• Couple: A couple saving together can pool their resources and potentially reach the $20,000 goal faster. If each person saves $417 per month, they could reach $20,000 in 24 months.

Common Mistakes to Avoid as a Low-Deposit Buyer

Navigating the property market with a lower deposit requires careful planning to avoid potential pitfalls:

• Overstretching Finances: It’s crucial to borrow an amount you can comfortably afford, considering not just the mortgage repayments but also ongoing costs like rates, insurance, and maintenance.
• Ignoring Hidden Costs: As mentioned earlier, stamp duty, conveyancing, and other fees can add up significantly. Failing to budget for these can lead to financial strain.
• Skipping Pre-Approvals: Getting pre-approved for a home loan is essential. It gives you a clear understanding of your borrowing capacity and strengthens your position when making an offer.
• Not Researching Government Schemes: Many first home buyers miss out on valuable schemes like the FHG or the Victorian Homebuyer Fund due to a lack of awareness.
• Choosing the Wrong Property: Focusing solely on price without considering factors like location, potential for capital growth, and ongoing maintenance costs can lead to regret.
• Not Seeking Professional Advice: Engaging a mortgage broker like Capkon Melbourne can provide invaluable guidance and help you navigate the complexities of the market and available schemes.

Can You Use Your Super for a House Deposit?

Yes, under the First Home Super Saver (FHSS) scheme, eligible first home buyers can access voluntary superannuation contributions (both concessional and non-concessional), along with associated earnings, to help with a home deposit.

Eligibility:

• You must be a first home buyer (you or your spouse/partner has not previously owned property in Australia).
• You must be at least 18 years old.
• You must not have previously released funds under the FHSS scheme.
• The funds must be from voluntary contributions made since 1 July 2017.

Contribution Limits:

• You can contribute a maximum of $15,000 in total voluntary contributions under the scheme in any one financial year.
• The total amount of eligible voluntary contributions that can be released is $50,000 per individual.

Withdrawal Rules:

• Once you are ready to buy a home, you can apply to the Australian Taxation Office (ATO) to release these funds.
• The released amount will include your eligible contributions and any earnings on those contributions (taxed at your marginal rate minus a 30% offset).
• The released funds must be used to purchase a home that you intend to live in.

Important Advice: Before making decisions about using your superannuation for a home deposit, it is highly recommended to consult with a mortgage broker or your superannuation fund to understand the potential benefits and implications for your circumstances.

Why Work with Capkon Melbourne’s Loan Advisors?

Capkon Melbourne’s loan advisors possess specialised expertise in assisting first home buyers in Victoria. They play a crucial role in making the dream of homeownership a reality by:

• Identifying Eligibility for Schemes: Capkon’s advisors have in-depth knowledge of the First Home Guarantee, the Victorian Homebuyer Fund, and other relevant incentives, helping you determine which schemes you qualify for.
• Handling Application Processes: Navigating the application processes for these schemes and home loans can be complex. Capkon provides guidance and support to ensure a smooth and efficient process.
• Finding the Right Loan Providers: With access to a wide network of lenders, Capkon can help you find loan products that suit your financial situation and take advantage of available schemes.
• Providing Personalised Advice: Understanding that each buyer’s situation is unique, Capkon offers tailored advice and solutions to meet your specific needs and goals.
• Achieving Better Negotiation Outcomes: Their experience and market knowledge can assist in negotiating favorable loan terms and conditions.

By partnering with Capkon Melbourne, first home buyers gain a significant advantage in navigating the property market and leveraging opportunities to buy a home with a lower deposit.

Is Now the Right Time to Enter the Market?

In summary, the answer to the question ‘Can I buy a house with a $20,000 deposit?’ In Melbourne , yes, it is indeed possible for eligible first home buyers, primarily through leveraging government schemes like the First Home Guarantee and potentially the Victorian Homebuyer Fund. These initiatives significantly reduce the traditional deposit burden and help avoid the costly Lenders Mortgage Insurance.

Given the availability of these schemes and the ongoing efforts to support first home buyers, now can be an opportune time to enter the property market, especially while the allocated spots for these guarantees are still available. However, it’s crucial to be well-prepared, understand all the associated costs, and seek expert advice to make informed decisions.

Take Action Now! Contact Capkon Melbourne today to explore your options, determine your eligibility for government schemes, and take the first step towards owning your dream home with a $20,000 deposit.

Frequently Asked Questions

Can I use my super for a house deposit?

Yes, through the First Home Super Saver (FHSS) scheme, eligible first home buyers can release voluntary super contributions (up to $50,000 in total) and associated earnings to help with a home deposit. Eligibility and withdrawal rules apply.

How much should I save monthly for a $20,000 deposit?

The required monthly savings depend on your timeline. Saving $555 per month would take approximately 36 months to reach $20,000. A shorter timeframe would require higher monthly savings.

Is it better to save more or buy sooner?

This depends on individual circumstances, market conditions, and property price trends. Buying sooner with a scheme like the FHG can get you into the market earlier, potentially benefiting from capital growth. However, saving a larger deposit can lead to better loan terms and lower repayments in the long run. It’s best to weigh your options and seek financial advice.

What costs come on top of the house deposit?

Additional upfront costs include stamp duty, conveyancing fees, bank fees, building and pest inspections, and loan establishment fees. These can add a significant amount to the initial outlay.

Does a bigger deposit give me a better interest rate?

Generally, yes. Lenders often offer lower interest rates to borrowers with larger deposits (typically 20% or more) as it signifies lower risk for them.

Can I get a home loan with bad credit and a small deposit?

It can be challenging to secure a home loan with bad credit and a small deposit. Lenders typically view this as higher risk. Addressing credit issues and potentially increasing your deposit will improve your chances. Seeking advice from a mortgage broker who specializes in this area can be beneficial.

How do I know if I qualify for the First Home Guarantee?

You need to meet specific eligibility criteria related to income, property price limits, and your status as a first home buyer. Capkon Melbourne can help you assess your eligibility.

What’s the minimum deposit for buying a house in Victoria?

While traditionally 20% was expected, government schemes like the First Home Guarantee allow eligible buyers to purchase with a deposit as low as 5%. The Victorian Homebuyer Fund may also allow for a 5% deposit plus costs.

What is the minimum deposit to buy a house in Australia?

Generally, without government support, the minimum deposit is often around 5% plus LMI. However, schemes like the FHG specifically aim to reduce this barrier for eligible first home buyers.

Can I buy a house with a $10,000 deposit in Australia?

Buying a house with a $10,000 deposit is very challenging without significant support, such as a guarantor loan or a shared equity scheme. The First Home Guarantee typically requires a minimum of 5% of the property price, which would exceed $10,000 for most properties.

How much deposit do you need for a $300,000 house in Australia?

Without any schemes, a 20% deposit would be $60,000. However, under the First Home Guarantee, you might need as little as 5%, which would be $15,000 for a $300,000 property, plus other costs.