Help with your deposit
Saving for your deposit for a home loan can be an important part of your next property purchase. Most lenders will require you to prove you have a minimum amount to put towards the deposit for your next home before they lend to you, but you can also benefit from having a larger deposit.
The information below can help you understand the importance of the deposit, and also give you a few ideas on how you can achieve your savings goal for your deposit.
The general rule is the bigger deposit you can put down, the better. This sounds pretty obvious but there are some important differences between having 10% and 20% deposit.
Firstly, most lenders now require you to have at least a 5% deposit, which must be made up of savings or cash, rather than a loan. But if you can put down a deposit of 10%-20%, this will often get you a lower interest rate on your loan, because there is less risk involved for the lender.
Ideally you should put down a deposit of 20% or more, so that you can avoid paying what's known as 'Lender's Mortgage Insurance' (LMI). This is an insurance policy for the lender against you not paying your mortgage. Although you pay the initial premium, it only covers the lender not you, so the faster you can get to a 20% deposit and avoid paying for it the better for you.
Also, obviously the more you can put down as a deposit, the less you'll have to borrow and therefore the less interest you'll pay over the lifetime of the loan.
Use our Repayments Calculator to see the kind of difference it makes when you have different levels of deposit.
Traditionally, putting money away regularly into a high interest savings account has been a good way of saving for your deposit. Another way to potentially accelerate your saving is to consider a First Home Savers Account, where the government may make contributions to your savings goal.
While the government doesn't have any rules around how you should use your First Home Owners Grant (FHOG), the grant itself is usually paid to you post settlement, after you've bought the property. Some lenders may allow you to use the FHOG as part of your deposit, but this is normally considered on a case-by-case basis.
The equity in your property can be classified as a genuine savings deposit in the situation whereby the property is held in the borrower's name. For more information how to do this please make a free appointment with an expert Aussie Broker.
The assessment a lender runs on your ability to service a home loan depends on a range of factors, including the ability meet repayments, existing debts, liabilities as well as your deposit amount. Your lender or an accredited Broker can help you assess your situation and see what may be getting in the way of your application – this free service is part of your free appointment with an expert Aussie broker.
Aussie offers a range of handy tools and calculators to help you reach your goal of saving for your deposit. The Loan Repayments Calculator can show you how different deposit amounts can change how much you may pay in interest and repayments of the life of your loan. The First Home Savings Calculator can help you determine how much you could save by using a First Home Savers Account. The Budget Planner Tool and the General Savings Calculator may also be helpful for assessing your personal financial situation.
If you have any more questions about saving for your deposit, try Ask Aussie or book your free appointment with an expert Aussie Broker.
When you have found the right property and need a deposit to secure the purchase, Deposit Guarantee can help by providing a short or long term guarantee.
A Deposit Guarantee is an ideal substitute for the cash deposit required when purchasing a residential property and can be issued for all or part of the deposit amount required, up to 10% of the purchase price. This means when you are purchasing a residential property, you do not have to pay the deposit in cash when the contracts are signed, you simply pay the full purchase price to the vendor at settlement. As long as you have the funds available at settlement, you are in the position to buy your perfect property as soon as you see it, and don't need to wait to arrange the deposit in cash.
To find out how a Deposit Guarantee can work for you, make a free appointment with an expert Aussie Broker today.