How much deposit do I need?
The size of deposit you save to buy your home makes a big difference to the interest rate and the other costs you potentially pay on your home loan.
Waiting to save a deposit of 20% or more achieves two possible wins:
The bank may give you a better interest rate because you represent a lower investment risk for them.
You can avoid paying Lender’s Mortgage Insurance (LMI) because your loan-to-value ratio (LVR) is 80% or less.
So, should you save up 20% of the purchase price before applying for a home loan? Or should you dive in with the bare minimum 5% deposit, even if it means you pay thousands of dollars for Lender’s Mortgage Insurance (LMI)?
First home buyers looking at current property prices in Australia’s most popular cities can be left feeling they may never get in if they wait longer. It’s certainly frustrating to see your deposit savings “shrinking” as prices rise. Some property experts advise for this reason that you should stop renting and start paying interest with the absolute minimum deposit, even if you have to pay LMI to do so.
Buying a house is one of the biggest decisions you’ll ever make. If you need some help raising the funds for a bigger deposit – and you are buying a newly-built home that no one has lived in before – the government’s First Home Buyers Grant is available in each state and territory.
Whether you’re well on your way to a 20% deposit or just scraping together a 5% deposit, we can help you find a loan with both the price and features to suit your needs as a home buyer.
Still need some help working out how much you need to save for a deposit? Try our savings goal calculator.