Saving a deposit feels like the main barrier to buying your first property, but how you structure that deposit and what government support you qualify for can change the timeline completely.
This matters across North East Melbourne suburbs like Eltham, Greensborough, and Macleod where median property prices sit between $700,000 and $900,000, and equally in regional areas where the First Home Buyers entry point might be lower but the available support differs. Understanding which deposit pathway suits your situation and what government schemes apply determines whether you're looking at another 18 months of saving or submitting an application in the next few months.
The Deposit Question That Changes Everything
Most people assume they need 20% saved before applying for a home loan, but several pathways exist for those with smaller deposits.
The First Home Loan Deposit Scheme allows eligible buyers to enter the market with a 5% deposit without paying Lenders Mortgage Insurance (LMI), which would otherwise add thousands to your upfront costs. This government guarantee means a lender can approve your application with less deposit than they'd normally require. There's also a Regional First Home Buyer Guarantee for properties outside major cities, which opens up options in areas like Diamond Creek or Warrandyte where you might find more affordable stock.
Consider a buyer with $45,000 saved, looking at a $650,000 unit in Bundoora. Under the deposit scheme, they could proceed immediately rather than waiting another year to reach the traditional 10% or two years for 20%. The alternative is using a low deposit home loan option with LMI included, where you pay an insurance premium but retain control over timing and property choice without competing for a limited number of guarantee spots.
What Actually Counts Toward Your Deposit
Your deposit can include genuine savings, a gift from immediate family, or funds from the First Home Super Saver Scheme where you've made voluntary super contributions specifically for this purpose.
Lenders assess not just the total amount but where it came from and how long you've held it. Genuine savings need to show a consistent pattern over at least three months. A gift deposit from parents is acceptable, but you'll need a signed declaration stating the funds don't need to be repaid. In our experience, buyers who assume any money in their account counts as savings run into delays when the lender requests additional documentation showing the funds weren't borrowed or transferred in last week.
The First Home Super Saver Scheme lets you withdraw up to $50,000 of voluntary contributions plus earnings for a property purchase. This takes planning because the contributions need to occur over at least two financial years, but it's particularly useful if you're still 12 months away from buying and want your savings to work harder than they would in a standard offset account.
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Government Support Beyond the Deposit Guarantee
First home buyer stamp duty concessions in Victoria can save you between $8,750 and the full stamp duty amount depending on the property value and location.
For properties up to $600,000, eligible buyers pay no stamp duty. Between $600,000 and $750,000, a concession applies. This directly affects affordability in areas like Heidelberg or Ivanhoe where you might find older apartments or townhouses within that range. Regional buyers sometimes qualify for the First Home Owner Grant of $10,000 on newly built properties or substantially renovated homes, which stacks with stamp duty relief but doesn't apply to established properties in metropolitan Melbourne.
Understanding which support you're eligible for changes your target property type and location. Someone buying a $720,000 townhouse in Watsonia would receive a stamp duty concession worth approximately $15,000, while someone purchasing at the same price point in a regional area on a new build could access both the concession and the grant.
How Interest Rate Structure Affects Your Budget
The choice between a fixed interest rate and variable interest rate changes both your repayment amount and your flexibility over the loan term.
A variable rate moves with the market and typically comes with features like an offset account or unlimited additional repayments. A fixed rate locks your repayments for one to five years but usually restricts how much extra you can pay without penalties. For buyers stretching their budget, fixed rates provide certainty. For those with irregular income or expecting pay increases, variable rates with offset accounts let you reduce interest while maintaining access to funds.
As an example, someone purchasing a $750,000 property in Greensborough with a $600,000 loan might fix $400,000 for three years and keep $200,000 variable with an offset. This gives repayment certainty on the majority of the debt while preserving flexibility on the rest. The structure you choose during your first home loan application affects both what you pay monthly and what options you have if circumstances change.
Getting Pre-Approval Before You Search
Pre-approval tells you exactly what you can borrow and shows sellers you're a qualified buyer when you make an offer.
The application process examines your income, expenses, existing debts, and credit history to determine your borrowing capacity. Lenders calculate this differently, which is why the same buyer might get approved for $680,000 with one lender and $720,000 with another. Getting this sorted before attending opens or making offers means you're not scrambling to arrange finance after finding a property you want.
We regularly see buyers who've found their ideal property only to discover they can't borrow enough or that their casual employment structure needs a specialist lender. Running through a proper application with supporting documents upfront removes that uncertainty. You'll need payslips, tax returns if you're self-employed, bank statements, and details of any other debts or commitments. The process takes a few days to a week depending on how quickly you can provide what's needed.
What Happens After Your Application Is Approved
Once a lender formally approves your home loan, you have a set period to find a property and exchange contracts before that approval expires.
Typical pre-approval lasts three to six months, though this varies by lender. During that window, you can make offers knowing your finance is arranged, subject only to the property valuation meeting the purchase price. If the valuation comes in lower than what you've agreed to pay, you'll either need to renegotiate, increase your deposit to cover the gap, or walk away if the contract allows.
This period is when having your deposit structure and government scheme eligibility confirmed matters most. If you've been allocated a spot under the deposit scheme but then purchase a property that doesn't meet the criteria, you lose that guarantee and need to arrange LMI or increase your deposit. Being clear on all conditions before you start looking saves you from finding the right property only to discover it doesn't fit your approval.
Buying your first home involves more moving parts than most buyers expect, but understanding deposit pathways, government support, and approval requirements puts you in control of the timeline. Call one of our team or book an appointment at a time that works for you to work through your specific situation and what options apply.
Frequently Asked Questions
Can I buy a property with only a 5% deposit?
Yes, through the First Home Loan Deposit Scheme if you're eligible, which lets you purchase with a 5% deposit without paying Lenders Mortgage Insurance. Alternatively, you can use a standard low deposit loan with a 5% or 10% deposit but you'll need to pay LMI.
What government support is available for first home buyers in Victoria?
Victorian first home buyers can access stamp duty concessions on properties up to $750,000, with no stamp duty on properties up to $600,000. Regional buyers may also qualify for the $10,000 First Home Owner Grant on new or substantially renovated properties.
How long does pre-approval last for a home loan?
Pre-approval typically lasts between three and six months depending on the lender. This gives you time to search for a property with confidence that your finance is arranged, subject only to property valuation.
Can I use money gifted from my parents as a deposit?
Yes, a gift deposit from immediate family is acceptable to most lenders. You'll need a signed declaration confirming the money is a genuine gift that doesn't need to be repaid.
Should I choose a fixed or variable interest rate for my first home loan?
Variable rates offer flexibility with features like offset accounts and unlimited extra repayments, while fixed rates provide repayment certainty for one to five years. Many buyers split their loan between both to balance certainty and flexibility.
