How Much Deposit Do I Need To Buy A Home?
One Of The Most Common Questions First Home Buyers Ask
If you're thinking about buying your first home, you've probably heard that you need a 20% deposit.
The good news? That's not always the case.
While a larger deposit can provide more options and potentially reduce costs, many Australians enter the property market with less than a 20% deposit.
The right deposit for you will depend on your financial situation, the type of property you're purchasing and the lending options available.
What Is A Deposit?
A deposit is the amount of money you contribute towards the purchase price of a property.
For example:
If you're buying a home worth $700,000 and have saved a $70,000 deposit, you've saved 10% of the purchase price.
The remaining amount is typically borrowed through a home loan.
Why Is A Larger Deposit Helpful?
A larger deposit can offer several advantages, including:
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Borrowing less money overall
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Lower monthly repayments
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More lender options
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Potentially avoiding Lenders Mortgage Insurance (LMI)
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Greater equity from the beginning
That said, waiting years to save a 20% deposit isn't always the right strategy for everyone.
The best approach depends on your personal circumstances, goals and the current property market.
Do I Need A 20% Deposit?
While a 20% deposit is often considered ideal, many lenders allow borrowers to purchase property with a smaller deposit.
Depending on your circumstances, it may be possible to buy with:
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5% deposit
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10% deposit
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15% deposit
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20% or more
Every lender has different requirements, and there may also be government schemes available to help eligible first home buyers enter the market sooner.
What Is Lenders Mortgage Insurance (LMI)?
If your deposit is less than 20%, you may be required to pay Lenders Mortgage Insurance (LMI).
LMI protects the lender, not the borrower, and is often required when a higher percentage of the property's value is being borrowed.
While many first home buyers see LMI as something to avoid, paying LMI can sometimes allow you to purchase sooner rather than spending years trying to save a larger deposit.
Every situation is different, which is why understanding the numbers is important.
Not Sure Where You Stand?
Many first home buyers are surprised to learn they may already be in a position to purchase.
If you'd like to understand your borrowing power, deposit requirements and available options, Darren is here to help.
Straightforward advice to help you take the next step with confidence.
Speak With Darren Today
