Avoid these Deposit Mistakes for Your Home Loan

Understanding What Your Deposit Actually Needs to Include

Your deposit is more than just the percentage you put toward the property.

When lenders assess your application, they look at whether your deposit meets their requirements, which includes genuine savings held for a specific period and funds that can be verified. Consider a buyer in Epping who has saved diligently for two years, building up funds in a high-interest savings account while working full-time at the nearby Northern Hospital precinct. They have accumulated their deposit through regular payroll transfers, and can provide statements showing consistent growth over time. This is exactly what lenders want to see because it demonstrates both financial discipline and capacity to meet ongoing loan repayments. The buyer's deposit was accepted without question, and they moved to pre-approval within days of submitting their application.

Deposit requirements vary depending on whether you are purchasing as an owner occupier or investor, and whether you qualify for any government schemes. For most lenders, genuine savings means funds held in your name for at least three months in a standard savings account, term deposit, or shares.

The Genuine Savings Rule That Catches Most First-Timers

Genuine savings must be held in your account for at least three months before you apply.

This requirement exists because lenders want proof you can consistently set money aside, not just gather a lump sum right before applying. Funds that suddenly appear in your account, such as a recent cash gift or a tax refund deposited the week before your application, will not count toward genuine savings. If your parents transfer funds to you as a gift, most lenders will accept this as part of your deposit, but they will require a signed gift letter confirming the money does not need to be repaid. The three-month requirement still applies to any funds you have saved yourself.

In Epping, where many buyers work shift patterns in healthcare or manufacturing roles around the industrial precincts near Cooper Street, savings can take longer to accumulate. A buyer working rotating shifts might have variable income across pay cycles, which can make consistent saving harder to demonstrate. Lenders assess the overall pattern rather than expecting identical deposits every fortnight, but they do expect to see regular contributions over the required period.

How Lenders Mortgage Insurance Changes the Amount You Need

If your deposit is less than 20% of the property value, you will pay Lenders Mortgage Insurance.

Lenders Mortgage Insurance (LMI) protects the lender if you default on the loan, and the cost is typically added to your loan amount or paid upfront. The smaller your deposit, the higher the LMI premium. At a 10% deposit, LMI can add several thousand dollars to your upfront costs or loan balance. At a 5% deposit, that figure increases substantially. This does not mean you should avoid a smaller deposit if that is your only option, but you need to factor LMI into your borrowing capacity and your overall budget.

Some lenders offer LMI waivers for specific professions, including medical practitioners, accountants, and legal professionals. If you work in one of these fields, you may be able to borrow with a deposit as low as 10% without paying LMI. Other buyers may qualify for the Home Guarantee Scheme, which allows eligible first home buyers to purchase with a 5% deposit and no LMI. Whether you are buying a unit near Epping Plaza or a townhouse closer to the High Street retail strip, understanding your LMI position before you start searching helps you set a realistic budget.

When Gifted Deposits Are Accepted and When They Are Not

A gifted deposit from a parent or family member is generally accepted if it is genuinely a gift.

Lenders will require a statutory declaration or gift letter confirming the funds do not need to be repaid and that the person providing the gift has no interest in the property. If the funds are a loan, even an informal one, lenders will treat it as a liability and factor it into your borrowing capacity, which reduces the amount you can borrow. Some lenders also have limits on how much of your deposit can be gifted. For example, one lender may accept a 100% gifted deposit if you are purchasing with a guarantor, while another may require at least 5% to come from your own genuine savings.

If your family is contributing toward your deposit, have the conversation early about whether the funds are a gift or a loan, and get the documentation sorted before you apply. This avoids confusion later and ensures your application is not delayed because of missing paperwork.

What Settlement Costs Do to Your Savings Buffer

Your deposit is not the only upfront cost you need to cover.

Settlement costs include stamp duty, conveyancing fees, building and pest inspections, and loan establishment fees. In New South Wales, stamp duty varies depending on the property value and whether you qualify for any concessions. First home buyers purchasing a property may be eligible for stamp duty exemptions or reductions, depending on the property price. Beyond stamp duty, budget for conveyancing fees, which typically fall between a few hundred to over a thousand dollars, and inspection costs if you are purchasing an established property. If you are buying an apartment near Epping Station, you will also want to review the strata report, which may involve an additional cost.

Lenders assess whether you have enough funds to cover both your deposit and these settlement costs. If your savings only just cover the deposit, you may be asked to demonstrate how you will pay for the remaining costs. Some buyers use a gift from family to cover settlement, while others factor these costs into their loan amount where the lender allows it. Either way, lenders want to see that you have thought through the full financial picture, not just the deposit.

How the First Home Guarantee Affects Your Deposit Strategy

The First Home Guarantee allows eligible buyers to purchase with a 5% deposit and avoid paying LMI.

This scheme is available to first home buyers who meet income and property price caps, and it is administered through participating lenders. If you qualify, it substantially reduces the amount you need to save before purchasing, which can bring forward your purchase timeline by months or even years. The scheme has annual quotas, and places are allocated on a first-come, first-served basis, so timing your application matters. Some buyers in Epping have used the scheme to purchase units or townhouses in the area while continuing to rent elsewhere until settlement, which allows them to enter the market sooner without needing a 20% deposit.

Not all lenders participate in the scheme, so if you are considering this option, work with a broker who can identify which lenders are active participants and what their individual credit policies look like. Some lenders within the scheme have stricter serviceability requirements than others, even though the deposit requirement is the same across all participants. If you want to explore whether you are eligible, you can review more detail on the Home Guarantee Scheme or speak with someone who can assess your circumstances directly.

Why the Type of Property You Buy Affects Deposit Requirements

Lenders apply different deposit rules depending on the property type and location.

If you are buying an apartment in a high-rise building with more than 50% non-owner-occupied units, some lenders will require a larger deposit or may not lend at all. Similarly, properties in certain postcodes or those identified as higher risk may attract additional lending conditions. In Epping, most residential properties are standard security, but if you are purchasing a small studio apartment or a property with unusual features, your lender may ask for a larger deposit or apply a higher interest rate.

This is not about penalising certain buyers, but about how lenders assess risk. A two-bedroom apartment near the train station is typically viewed differently to a one-bedroom studio with no car space in a building where rental turnover is high. If you are considering a specific property and want to know whether it will affect your deposit or borrowing capacity, get advice before making an offer. This allows you to adjust your strategy if needed, rather than finding out after you have committed.

What Happens If You Cannot Meet the Genuine Savings Requirement

Some lenders will accept a smaller genuine savings component if you have a guarantor or strong rental history.

If you have been renting and can demonstrate that your rent payments have been made on time for the past 12 months, some lenders will accept this as evidence of your ability to meet regular financial commitments, even if your genuine savings do not meet the usual threshold. Similarly, if a parent or family member is willing to act as guarantor and use equity in their property to support your application, you may be able to proceed with a smaller savings buffer. A guarantor loan allows you to borrow with a smaller deposit, and in some cases no LMI, because the lender has additional security.

This approach is not without conditions. The guarantor must have sufficient equity in their property, meet the lender's age and income criteria, and be willing to take on the legal responsibility of the guarantee. It is a significant commitment, so it requires careful discussion and independent legal advice for the guarantor before proceeding. But for buyers who have strong income and repayment ability but have not yet saved a full deposit, it can be the difference between waiting another two years and purchasing now.

Call one of our team or book an appointment at a time that works for you. We will walk through your deposit position, work out what counts toward genuine savings, and identify which lenders suit your circumstances without requiring you to meet criteria that do not fit your situation.

Frequently Asked Questions