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A 20% deposit is considered the standard size in Australia. This lets you avoid paying lenders mortgage insurance (LMI). But you could save a deposit above 20%. While most people can't afford to do this, with house prices so high, it is possible and has some advantages. The bigger your deposit the less you have to borrow. And this means you pay less interest.
The biggest benefit of having a deposit above 20% is that you borrow less money. If you can save up a 30% deposit, for example, that’s 30% of the purchase price of a property you can pay off straight away. That means that you borrow less from the bank and pay a whole lot less interest over the life of the loan, which is a big win in anyone’s language.
Here's a simple calculation:
But with a 30% deposit that changes:
Assuming a 30-year loan term and an interest rate of 2.00%, your monthly repayments are quite different in these scenarios:
Having a larger deposit in this case saves you $258 a month or $3,096 a year.
Check out our full guide to saving a house deposit
You should have a rough idea of the deposit you need to save. You can determine this by looking at how much you have already saved, how much you can realistically save before you buy and the rough price range of properties you are looking at.
You can also just work out your budget for a property and work backwards. Let's say you are willing to buy a property worth $650,000. Then a 20% deposit will be $130,000.
In the fine print explaining the features of mortgage products, you may have seen the words "maximum LVR" followed by a percentage. LVR stands for loan-to-value ratio, which is a figure that expresses the amount of money you are allowed to borrow on the loan relative to the purchase price of the property.
If you see a loan with an LVR of 80% that means you can borrow 80% of the property's value. In other words, you must have a 20% deposit.
Many Australian lenders offer loans with a maximum LVR of up to 90% or 95%, which means you would need to have a 10% or 5% deposit saved respectively. However, you would also need to budget for a number of other fees that apply when you buy a home, including conveyancing fees, stamp duty and home loan application fees.
For more information about deposit size and what works for you, check out this page on deposit sizes.
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I want to buy my sister’s half of a inherited house witch is morgage free what is the best way.
Hi Terry,
I’m not sure if you want some guidance around getting a loan, or the legal/logistics of transferring the property ownership?
If you need to buy out your sister’s portion of the house with a home loan, you can compare the latest home loan offers.
If you’re asking about the legal/official transfer of title, this is a fairly straightforward process but there area a number of steps involved, so it could be worth working with a professional. A conveyancer or lawyer can help you file all of the correct and necessary paperwork to facilitate the legal transfer, at a cost of around $500-700.
Hope this helps!
Many thanks
Sarah