How much do I need for a deposit?
When you’re home-hunting, a question on many would-be home buyers lips is: “How much?” Knowing how much you can afford in monthly repayments, combined with how much of a deposit you’ll need is key to knowing if you can start imagining your life in the new place.
So – how much do you need for a deposit? We answer below.
The amount of money you will need for a deposit will depend on the lender and their lending criteria. The good news is that some lenders offer loans that allow you to borrow up to 90% or 95% of the loan-to-value ratio (LVR), which is the amount of money you can borrow, relative to the price of the property. However, if you are borrowing more than 80% LVR – so you have less than a 20% deposit - most lenders will require you to take out Lenders Mortgage Insurance.
The amount you save for a home deposit is an important factor for several reasons, including:
A larger deposit may mean a lower interest rate
The larger your deposit, the less risk you represent to lenders, and this puts you in a better position to negotiate a lower interest rate.
Avoid paying Lender’s Mortgage Insurance
If you can put down a deposit of 20% or more then you can often avoid paying what’s known as ‘Lender’s Mortgage Insurance’ (LMI). This protects the lender – not you - if you cannot repay your loan, so it’s a cost worth avoiding if possible.
Pay less in the long run
The bigger your deposit, the less you have to borrow. That means lower regular repayments, and you’ll pay less in interest over the lifetime of the loan.
100% loans typically no longer exist
Generally it’s no longer possible to get a loan for the whole of a property’s purchase price. Most lenders will want you to put down at least 5% of the purchase price of the property. The rest - generally up to 95% - may be financed using a home loan.
Financial support for first home buyers
As a first home buyer, you may be entitled to a range of government grants and concessions that vary according to which state or territory you are in. Your Aussie Broker can outline what the requirements are to see if you might be eligible.
Do you know how much of a deposit you’ll need for your dream home? Chat to Aussie today.
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- Chapter One : Getting started
- Chapter Two : Your Dream Home
- Chapter Three : Money Matters
- Chapter Four : Ways to Purchase
- Chapter Five : Understanding Interest Rates
- Chapter Six : Understanding Home Loans
- Chapter Seven : Lending Sources
- Chapter Eight : Getting Your loan
- Chapter Nine : Choosing a Home
- Chapter Ten : Steps to Settlement