How to: Save For a House Deposit While Renting

Saving for a house deposit while renting feels like a tall order, especially with rising house prices and the cost-of-living pressures in Australia. But even in challenging times, there are ways to make it happen with a good savings plan, smart spending habits, and a clear savings goal in sight.

This guide will walk you through practical tips to start saving for a new home, turning the dream of homeownership into a realistic goal.

Create a Realistic Budget for Your Financial Situation

One of the best ways to save for a house deposit while renting is to have a realistic savings plan that factors in your day-to-day living costs. List your essential expenses—rent, utilities, groceries, transport, and even those “small” recurring charges, like your gym membership and subscriptions. Tracking spending habits helps you see where adjustments can be made, and each small change can add to your deposit savings over time.

Consider setting up a high-interest savings account or a term deposit for your home loan deposit. These accounts offer better interest rates than a standard bank account, meaning your deposit grows faster without extra effort.

Set a Specific House Deposit Goal

Research how much you’ll need for a house deposit, as Australian lenders generally require between 10% to 20% of the property price. Having a concrete savings goal keeps you motivated and gives you a clear target for deposit savings. You might also qualify for the First Home Owner Grant (FHOG), which offers support to first-home buyers in Australia.

You may also want to look into using a guarantor—often a family member who can help you secure a loan without needing as high of a deposit. This option can significantly reduce the time it takes to meet your home deposit target.

Consider the First Home Super Saver Scheme (FHSS)

For first-home buyers, the First Home Super Saver (FHSS) scheme can make it easier to save up. The FHSS allows you to make extra superannuation contributions, which can later be withdrawn to buy your first home. The scheme provides tax benefits, and even though the funds are in your super, they’re still accessible for a home purchase.

Reduce Rent Where Possible

Renting is a major expense, but some flexibility in your rental property can make a difference. Consider options like moving in with a family member, relocating to a more affordable rental area, or splitting the rent with roommates. If you’re saving on rent, put the difference directly toward your house deposit savings.

Alternatively, think about “rentvesting,” where you continue to rent in your desired location but purchase a more affordable property to get into the real estate market. Rentvesting allows you to build equity and save without paying high prices associated with popular areas.

Manage Debt Before Diving Into Home Loan Applications

High-interest debt from sources like a credit card or personal loans can hinder your ability to save effectively. Focus on paying off high-interest debt first (or reducing it substantially) so that you can allocate more money toward your house deposit. Reducing debt also positively impacts your credit score, which can improve your borrowing capacity and interest rate options.

If you have multiple debts, consider tackling high-interest debts first (like your credit card or car loan). Clearing these debts frees up cash for savings and helps you build a stronger financial profile for future lenders.

Automate Your Savings Habits

One of the easiest ways to boost your deposit savings is to automate them. By setting up a regular, automated transfer from your main bank account to a high-interest savings account, you can consistently build up your home deposit without having to think about it. Over time, these small contributions add up and make a significant impact on your deposit.

Look Into Potential Side Hustles

A side hustle can accelerate savings by adding an additional income stream. Consider taking on freelance projects, teaching, or even offering pet-sitting services. Be mindful not to overwork yourself, but know that even a modest side hustle can significantly boost your savings goal.

Micro-investing platforms like Raiz or Spaceship can also help make the most of small contributions. Although not a replacement for a savings account, these platforms may give you modest returns to grow your deposit savings passively over time.

Limit Impulse Buys and Day-to-Day Expenses

When you’re working toward homeownership, shifting your spending habits is key. Limiting non-essential spending, like frequent takeaways or unnecessary online purchases, helps free up money that can go directly into your house deposit. You might consider the “30-day rule”: before making a significant purchase, wait 30 days and see if it’s still a priority.

Familiarise Yourself with Additional Costs

As first-home buyers, it’s essential to understand the full picture of costs beyond just the house deposit. Be prepared for expenses like stamp duty, which can vary depending on the property value and state in Australia. Lenders Mortgage Insurance (LMI) may also be required if your deposit is less than 20%. LMI protects the lender in case the borrower defaults on loan repayments and adds to the overall cost of your home loan.

Talking with a mortgage broker can help you better understand these costs and navigate your loan options. Brokers can often help find competitive home loan options, taking into account your specific financial situation and offering advice on how to reduce your repayments.

Celebrate the Small Wins

Achieving your savings goals can be a lengthy journey, and it’s essential to stay motivated by celebrating milestones. Every deposit increase, however small, brings you closer to homeownership. Treat each increment as a victory—it’s one step closer to making your dream home a reality.

Though saving for a house deposit while renting in Australia’s current property market may feel challenging, the dream of owning your first home remains achievable with a focused plan. Every small action—from choosing a high-interest savings account to adopting good savings habits—helps bring your goals within reach. And while it may take time, remember that every bit you save today builds the foundation for your future.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult a qualified financial advisor or mortgage broker for guidance suited to your personal financial situation.

Joshua Chadwick

SENIOR EDITOR