Simple hacks to control your deposit and settlement costs

Your deposit gets you to the table, but the cash you need on hand also covers lender fees, conveyancing, strata reports, pest and building inspections, and stamp duty unless you qualify for an exemption.

In Paddington, where the median house price is now sitting at $3,622,500 according to CoreLogic, a buyer putting down 20% on a property at that median would need roughly $725,000 in deposit alone, plus at least another $15,000 to $25,000 for settlement costs depending on loan structure and whether you use a conveyancer or solicitor. If you are self-employed, showing proof of genuine savings and managing cash flow around tax time can add a layer of complexity that catches some borrowers off guard.

This article is for working professionals and self-employed buyers in Paddington who want to know where their money actually goes, which costs can be reduced, and how to structure a purchase so you keep as much cash working for you as possible.

What you actually pay at settlement beyond the deposit

You pay the balance of the purchase price, lender costs, government fees, and third-party disbursements.

Stamp duty is your largest cost. In NSW, a $3,622,500 property attracts approximately $181,000 in transfer duty under standard rates. First home buyers on an established home valued at $800,000 or less receive a full exemption, with a sliding concession up to $1,000,000. If you are not a first home buyer or the property exceeds the threshold, the duty is payable in full at settlement. Lender costs vary but typically include a $600 to $1,200 application fee, a valuation fee of $200 to $400 depending on property type, and a settlement fee of $300 to $600. Most lenders allow these to be capitalised into the loan, though that increases your total borrowing and the interest you pay over time.

Conveyancing or solicitor fees for a standard purchase range from $1,500 to $3,500 depending on complexity. Self-employed borrowers who structure purchases through a trust or company can expect legal costs toward the higher end of that range. Strata reports cost $150 to $300 for units, and combined building and pest inspections run $500 to $800 for houses. Council and water rates are adjusted at settlement based on the date of possession. Most buyers also set aside $2,000 to $5,000 for removalists, cleaners, reconnection fees and incidental costs that surface in the final week before moving in.

Consider a self-employed buyer purchasing a $3,600,000 terrace in Paddington with a 20% deposit. The buyer needs $720,000 for the deposit, $180,000 for stamp duty, $2,500 for conveyancing, $700 for building and pest, $1,000 in lender fees, and $3,000 for settlement incidentals. Total cash required is approximately $907,200. If the buyer has been saving through their business, their accountant may advise a director's loan or dividend structure to move funds from the company to the individual without triggering unnecessary tax, particularly if the purchase is timed around the end of financial year.

Deposit rules for owner-occupied and investment loans

Owner-occupied loans allow genuine savings, gifts from immediate family, equity from an existing property, or a combination of all three.

Genuine savings are funds held in your name for at least three consecutive months, shown on a bank statement or deposit account. Lenders typically want to see at least 5% of the purchase price as genuine savings, though some will accept the full deposit from non-genuine sources if you are borrowing at 90% LVR or below and can show strong income history. A gift from a parent or sibling is acceptable provided you can produce a signed statutory declaration confirming the funds are a true gift with no obligation to repay. Equity from an existing property can form part or all of your deposit; if you own a home in Double Bay valued at $2,000,000 with a $600,000 loan, you have access to approximately $1,000,000 in usable equity at 80% LVR, which can fund a deposit on a second property without selling the first.

Investment loan deposits follow the same rules, but lenders also assess rental income from the new property at 80% of market rent to allow for vacancy and management costs. If you are buying an investment property in Bondi Junction where median unit rent is $700 to $800 per week, the lender will assess $560 to $640 per week as income, reducing your serviceability slightly compared with an owner-occupied purchase where no offsetting income applies.

Self-employed borrowers are generally required to show stronger genuine savings than PAYG applicants, particularly if income has fluctuated across the most recent two financial years. A graphic designer earning $140,000 one year and $95,000 the next can still borrow, but the lender will average the two years and weight toward the lower figure. In that scenario, showing 15% to 20% genuine savings rather than the minimum 5% gives the credit assessor more confidence and can mean the difference between conditional approval and a decline.

How offset accounts reduce interest without locking up your deposit

An offset account linked to your home loan reduces the interest charged each day without requiring you to pay down the loan principal.

If you have a $2,900,000 loan on a variable rate and hold $100,000 in a linked offset, you are charged interest on $2,800,000. The $100,000 remains accessible, so you can draw it down for settlement costs on a second property, tax payments, or business working capital without refinancing or redrawing from the loan. For self-employed buyers who hold cash for quarterly BAS obligations or annual tax, an offset account means those funds reduce your interest bill until you need to pay the ATO.

Not all loan products include a full offset. Some lenders offer partial offset accounts that reduce interest by 50% or 70% of the balance held, which is less useful. Fixed rate loans rarely include offset functionality, or where they do, the offset only applies to a capped balance such as $50,000. If you are considering a split loan with part fixed and part variable, structure the variable portion to include the offset and park your cash there to maximise the benefit.

In our experience, Paddington buyers who maintain an offset with three to six months of repayments saved have more breathing room if income drops, a fixed rate expires at a higher revert rate, or an unexpected repair surfaces. Holding that buffer also improves your position if you want to refinance or access equity later, because the lender sees lower effective debt.

Using equity and guarantor structures to reduce upfront cash

Equity from an existing property or a guarantor can reduce or eliminate the need for a cash deposit, though both options increase total debt or involve a family member's property as security.

If you own an apartment in Rushcutters Bay valued at $1,200,000 with a $300,000 loan, you have access to $660,000 in equity at 80% LVR. That equity can be released through a top-up on your existing loan or a separate loan secured against the Rushcutters Bay property, and used as the deposit on a Paddington terrace. The advantage is you preserve cash for settlement costs, renovations, or business investment. The downside is you now carry debt against two properties, and if either property falls in value or your income drops, serviceability tightens.

A guarantor loan allows a parent or family member to use equity in their property to support part or all of your deposit, reducing your LVR to below 80% and removing the need for LMI. The guarantor's property is used as security for the shortfall only, not the full loan. Once you build enough equity in your own property, the guarantee can be released. We regularly see this structure used by Paddington professionals in their late twenties to early thirties who have strong income but limited savings due to high rent or HECS debt. The guarantor takes on risk, so it is important both parties understand the liability and have a clear plan to release the guarantee within two to three years.

You can explore guarantor arrangements in more detail through our guarantor loans page, and we can introduce you to a solicitor who can prepare the guarantee documentation and ensure everyone is independently advised.

Timing your purchase around tax, BAS and cash flow

Self-employed buyers benefit from aligning settlement dates with cash flow peaks rather than tax payment periods.

If your business turns over $2 million annually and you lodge quarterly BAS, your cash position swings significantly across the quarter depending on whether you have just paid GST and PAYG instalments or are midway through the cycle. Settling a property two weeks before a $40,000 BAS payment can leave you short on operating cash, forcing you to draw from a business overdraft or delay supplier payments. Settling four weeks after that same payment, when receivables have rebuilt, gives you more room to move.

The same logic applies to annual tax. If you are a sole trader or company director and your tax bill sits at $60,000 to $80,000 each July, avoid settling in late June or early July when that liability crystallises. Aim for settlement in August or later once the payment has cleared and your cash reserves have started to rebuild. Most contracts allow a standard 42-day settlement, but you can negotiate 60 or even 90 days if the vendor is not in a chain. Paddington vendors are often downsizing or moving interstate, and a longer settlement can appeal if it gives them time to find their next property or coordinate removalists.

Lenders assess your serviceability based on your most recent two years of tax returns, so if you have had a strong financial year and lodged early, lock in your pre-approval before the next year's lower income flows through. In a scenario where a Paddington consultant earned $180,000 in FY25 and expects $120,000 in FY26 due to a client contract ending, applying for pre-approval in September using the FY25 and FY24 returns gives you a higher borrowing capacity than waiting until November when the FY26 return is lodged.

NSW stamp duty exemptions and concessions that apply in Paddington

First home buyers purchasing in Paddington receive a full transfer duty exemption on properties valued up to $800,000, and a sliding concession on properties between $800,001 and $1,000,000.

Given the median house price in Paddington is $3,622,500, most house buyers do not qualify for any concession. However, units in Paddington are available between $900,000 and $1,100,000, and a first home buyer purchasing at $950,000 would receive a partial concession, reducing duty from approximately $38,000 to around $15,000. You must move into the property within 12 months of settlement and live there as your principal place of residence for at least 12 continuous months to retain the concession. If you move out early or rent the property within that period, Revenue NSW can claw back the concession with interest.

The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with a 5% deposit without paying LMI, provided the purchase price is at or below $1,500,000 in Sydney and regional centres. A first home buyer purchasing a $1,100,000 unit in Paddington with a 5% deposit of $55,000 can access the scheme, with Housing Australia guaranteeing 15% of the property value to bring the effective LVR to 80%. The scheme has no income cap and no annual place limit, and applications are made through participating lenders rather than directly to Housing Australia.

If you are not a first home buyer, no stamp duty relief applies. A $3,600,000 Paddington terrace will attract approximately $180,000 in transfer duty regardless of whether you intend to live in the property or lease it out. Foreign buyers face an additional 8% surcharge on the purchase price, bringing total duty to approximately $468,000 on the same property.

How lenders assess deposit sources for self-employed borrowers

Lenders want to see funds accumulated over time, not transferred in a lump sum days before the application.

If you move $150,000 from a business account to a personal savings account two weeks before applying for a loan, the lender will ask for a paper trail showing where the funds originated. Acceptable sources include retained earnings shown on your company financials, a director's loan you have been repaying over the previous 12 months, or proceeds from the sale of a business asset such as a vehicle or equipment. Unacceptable sources include funds borrowed from a private lender, a cash injection with no supporting documentation, or a deposit from a client that inflates your balance temporarily before being moved again.

We regularly see self-employed buyers hold cash in their business account rather than a personal savings account to manage tax flow, then draw down a director's loan a few months before purchasing. That structure is fine, provided your accountant prepares a loan agreement, the funds sit in your personal account for at least three months, and the business financials show the loan as a liability. If the business is a trust, distributions must be shown on a distribution minute and the funds must move to the beneficiary's account in the same financial year they are declared.

In a scenario where a Paddington architect holds $200,000 in a business offset account and wants to use it as a deposit, the cleanest path is to declare a dividend or distribution, pay any resulting tax, move the funds to a personal account, and wait three months before applying. That timeline allows the funds to season as genuine savings and avoids the lender questioning whether the business can afford to lose the working capital.

What to do if you are short on cash at settlement

You can request a larger loan amount, negotiate a longer settlement, or access equity from another property.

If you have exchanged contracts on a $3,600,000 property with a planned 20% deposit and realise two weeks before settlement that you are $30,000 short, your options are limited. The cleanest solution is to increase your loan from 80% LVR to 85% LVR, which brings your deposit down from $720,000 to $540,000 and releases $180,000 to cover the shortfall and settlement costs. The downside is you now pay LMI, which on a loan of that size can add $15,000 to $25,000 to your costs, and your interest rate may be slightly higher due to the increased LVR.

Alternatively, if you own another property with available equity, you can arrange a top-up or line of credit against that property and draw the funds at settlement. That keeps your new loan at 80% LVR and avoids LMI, but increases total debt and requires the equity loan to be serviced alongside the new purchase loan. If your income can support both, it is often the lower-cost option.

If neither option works, you can approach the vendor and request an extension to settlement, offering to pay occupation fees if they agree. Occupation fees are typically calculated at the daily interest cost on the balance owing, which on a $2,880,000 balance at a variable rate of 6.5% works out to approximately $512 per day. A 14-day extension would cost around $7,200, which is still less than the LMI premium on an 85% LVR loan.

Call one of our team or book an appointment at a time that works for you. We work with Paddington buyers and self-employed borrowers across the eastern suburbs, and we can walk you through deposit structuring, equity release, and timing strategies that keep your cash working where it is most useful.

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