How much do you need for a house deposit?
The big question on many first home buyers’ lips is: “How much?” Knowing how much deposit you need can be the starting point that helps you plan for enjoying life in your new place.
So – how much do you need for a deposit?
The amount of money you need for a deposit depends on the lender and their lending criteria. Some lenders let you borrow up to 90% or 95% of your home’s value, so you may only need to save a 5% deposit to have your loan approved. This would mean if you wanted to buy a property worth $500,000, you may only need to provide a deposit of $25,000.
However, while you’re probably super keen to get into your own home, there are good reasons to aim for a bigger deposit. For one, it means you need to borrow less, and this helps you save with lower regular repayments, and a lower interest cost over the lifetime of the loan.
With a larger
Your deposit is likely to be made up of cash savings but that’s not the only deposit option many lenders will accept.
The First Home Owner Grant can also count towards your deposit. Friends and family may want to contribute to your savings with a helping hand of cash, and a gifted deposit is accepted by a number of lenders.
Another option is to use a guarantor. This is where a family member uses the security in their home to guarantee all or part of your loan. It can be a way of getting the thumbs up for a home loan even if you have a small deposit.
Lenders Mortgage Insurance (LMI)
If you can put down a deposit of 20% or more, you can often avoid paying what’s known as ‘Lender’s Mortgage Insurance’ (LMI). This protects the lender – not
Loan to Value Ratio (LVR)
Loan to value ratio is one of those terms you might hear when people talk about home loans. But what is it? LVR is the amount that you borrow - represented as a percentage of the value of the property you're buying. Say for example you borrow $400,000 for a property worth $500,000, your LVR would be 80%, which means you wouldn't need to pay LMI.
When you’re ready to apply for a home loan, it pays to gather some key pieces of paperwork. Your broker will need to sight two forms of ID – driver’s licence, passport or birth certificate.
You’ll also need:
- Bank statements showing evidence of genuine savings
- Recent statements for any credit cards you might have
- Most recent PAYG payment summary from your employer or tax assessment, and
- Your two most recent pay slips.
If you’ve found a place you want to buy, bring along a copy of the sale contract. Or if you’re building a brand new home you’ll need a copy of the construction plan, specifications and builder’s fixed price tender documents (if available) – including builder’s licence number, insurance, and council approved plan.
To understand how much deposit you need for your first 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