Case Study: Emma and Jack — Should they use the 5% deposit scheme or put down more?
Background:
Emma and Jack are both 32, renting in Brisbane and eager to buy their first home. They’ve saved $120,000 together over the past five years. Their combined household income is $160,000 a year. They are looking at a house priced at $800,000.
They are eligible for the First Home Guarantee (5% deposit scheme) through a participating lender. The big question they are weighing up is whether to:
Use the scheme and only put down 5% ($40,000).
This would leave them with $80,000 in cash after settlement. Their loan would be $760,000.Put down 15% ($120,000) as a larger deposit.
This would leave them with no leftover savings. Their loan would be $680,000.
Scenario 1: Emma and Jack choose the 5% deposit option
The numbers:
Loan: $760,000
Deposit: $40,000
Monthly repayments (at 6% interest, 30-year term): approx. $4,560
Savings buffer left: $80,000
How it looks for them:
They are able to move into their home much sooner.
They still have $80,000 available for an emergency fund, furniture, and the renovations they know they will want within the first two years.
They feel comfortable that with two incomes they can handle the higher repayment.
Pros in their situation:
Keeping cash aside gives them peace of mind and flexibility.
They avoid LMI, which would have cost around $25,000 if they had taken a 5% deposit loan without the government guarantee.
They can use some of the cash buffer to reduce other debts, such as a small car loan, which immediately improves their cashflow.
Cons in their situation:
The larger loan makes their monthly budget tighter. Their repayments are $700 more per month than they would have been with a 15% deposit.
They are more exposed to interest rate rises and would need to keep that $80,000 largely untouched to feel safe.
If property prices dip in Brisbane, they risk being in negative equity in the short term.
Bottom line: This option suits them if they are disciplined enough to keep their $80,000 buffer untouched and want the flexibility of cash in hand for life’s curveballs.
Scenario 2: Emma and Jack choose to use their full 15% deposit
The numbers:
Loan: $680,000
Deposit: $120,000
Monthly repayments (at 6% interest, 30-year term): approx. $4,080
Savings buffer left: $0
How it looks for them:
Their monthly repayments are smaller, freeing up $480 per month compared to the 5% option.
They feel more secure knowing they own more of their home from day one.
However, they are nervous about having no leftover savings after settlement. Any surprise costs, such as repairs, could mean relying on a credit card or personal loan.
Pros in their situation:
They immediately reduce their loan size and save tens of thousands in interest over the life of the loan.
They are less likely to experience mortgage stress if interest rates climb.
They can access more competitive home loan products at lower interest rates.
Cons in their situation:
No emergency buffer means higher stress levels if something unexpected happens.
They may need to take on consumer debt to cover expenses, which could be more costly than the interest saved on the smaller loan.
Their dream renovation plans would have to be delayed for at least three years while they rebuild their savings.
Bottom line: This option suits them if their top priority is security and reducing debt, and if they are comfortable delaying renovations and going without a cash buffer for a while.
The comparison at a glance
What Emma and Jack decided
After talking to their broker, Emma and Jack chose to go with the 5% deposit scheme. They decided that having a strong cash buffer was more important than smaller repayments. They also plan to pay extra off their mortgage each month using part of their $80,000 savings, but still keep at least $40,000 aside for emergencies.
Their reasoning was that they wanted to feel financially safe with young children on the horizon. They are willing to accept higher repayments now in exchange for the flexibility of having money available when they need it.
Takeaway from this case study
This scenario highlights how the right choice depends on your priorities.
If you value flexibility and having a safety net, the 5% deposit scheme can work even if you already have more saved.
If you value long-term savings, lower repayments, and reduced risk, using your full deposit will likely make more sense.
The numbers are important, but equally important are your lifestyle plans, your risk comfort, and your family or business needs.
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