But first timers using the government’s First Home Loan Deposit Scheme have fast-tracked their saving time to just 13 months.
How does that work?
The Domain First-Home Buyer Report 2020 calculated the time it would take to save a 20% deposit for an entry-level home, based on an average-earning couple aged 25 to 34 years old.
In Brisbane, that’s four years and six months to save a 20% deposit for a house, or three years and three months for a unit.
But many first timers have slashed their wait time thanks to a government scheme which lets you purchase with a smaller deposit – and avoid the penalty of lenders mortgage insurance (LMI).
When you borrow more than 80% of the value of your home from a bank they will charge you LMI which protects the bank if you can’t make your repayments. So you can save a smaller deposit sooner, but you’ll pay for pricey LMI.
However under the First Home Loan Deposit Scheme you can borrow up to 95% of the value of your property and the government essentially goes guarantor – so the banks don’t charge you LMI.
Not surprisingly the scheme has proved very popular and it can now be tricky to secure a spot this financial year.
The Adviser reported this month that all spots offered by the non-major lenders participating in the scheme have been allocated to buyers. But some places may become available again if borrowers withdraw or their place expires before they secure a home.
So talk to your bank or mortgage broker if you haven’t already.
Meanwhile, if you’re committed to saving a full 20%, here’s how long it takes in Australia’s major capital cities.
- Sydney, $680,000, 6 years 6 months
- Melbourne, $600,000, 6 years
- Brisbane, $450,000, 4 years 6 months
- Sydney, $585,000, 5 years 7 months
- Melbourne, $424,500, 4 years 3 months
- Brisbane, $328,000, 3 years 3 months