# The benefits of having a larger deposit

## Saving a large deposit means smaller interest repayments, no lenders mortgage insurance costs and easier home loan approval.

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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 benefits of saving a larger mortgage deposit

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, thatâ€™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 anyoneâ€™s language.

Here's a simple calculation:

• Property price: \$700,000
• 20% deposit: \$140,000
• Loan amount: \$560,000

But with a 30% deposit that changes:

• Property price: \$700,000
• 30% deposit: \$210,000
• Loan amount: \$490,000

Assuming a 30-year loan term and an interest rate of 2.00%, your monthly repayments are quite different in these scenarios:

• Monthly repayments with a 20% deposit = \$2,069
• Monthly repayments with a 30% deposit = \$1,811

Having a larger deposit in this case saves you \$258 a month or \$3,096 a year.

#### 5 more reasons saving a bigger deposit helps

1. No LMI costs. Youâ€™ll most likely need to cover the cost of lenders mortgage insurance if you have less than a 20% deposit saved and need to borrow more than 80% of the purchase price. As a general rule, LMI costs around 2% of the value of the loan. This is an extra expense youâ€™ll need to factor into your calculations when budgeting for a loan, so saving a larger deposit will allow you to avoid this additional cost.
2. Proof of savings. When you apply for a loan, a lender will usually ask for evidence of a regular savings history over 3 months or more. Known as genuine savings, this usually takes the form of a bank statement showing your regular contributions into a savings account. And if you have a deposit of 30% or more saved, youâ€™ll be able to provide excellent evidence of your savings ability and make your application more attractive in the eyes of a lender.
3. Increase your chance of approval. Lenders regard low deposit borrowers as higher risk. Having a big deposit makes you a safer bet and that increases your chances of getting your home loan application approved.
4. Increase your borrowing power. The more money you have saved, the less risk you represent to a lender. If your bank is confident youâ€™ll be able to comfortably service your loan, your borrowing capacity will increase and you may be able to borrow more.
5. Access special rates and deals. A larger deposit and a lower LVR mean that you may be able to qualify for special loan and interest rate deals that save you even more money. For example, the Mortgage House 50% LVR special is offered to borrowers who have a minimum 50% deposit saved, and it includes flexible features such as the ability to make unlimited extra repayments and a 100% offset account to minimise interest.

### Tips to actually save a larger deposit

• Develop a savings plan. Developing a realistic savings plan is a great way to start saving for a deposit. Work out how much money you need to save and then work out a budget. Work out how much money you can afford to put away each week and start building your balance.
• Make regular deposits. Set up a regular direct debit straight from your income into your savings account. This way, youâ€™ll be saving money without realising it, but you can always add in extra lump sums if circumstances allow.
• Consider a high interest savings account. Shop around for an online savings account that offers a great interest rate and minimal or no fees. You may also want to consider a term deposit so that your savings can earn a higher rate of interest.
• Cut back on expenses. If you work out a weekly budget, you should be able to find a few areas where you can cut back on expenses. Do you really need that gym membership you never use? Could you eat at home rather than dine out one night extra per week? Youâ€™d be surprised how much you can save once you put your mind to it.
• FHOG. If youâ€™re saving for your first home, remember that states and territories around Australia offer a range of grants and concessions to first-time buyers. The First Home Owners Grant (FHOG) offers useful financial support to many first home buyers, so check to see if youâ€™re eligible.

### How to determine your deposit size

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.

#### Understand home loan LVRs

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.

### Compare mortgages from across the market

\$
years
Name Product Interest Rate (p.a.) Comp. Rate (p.a.) Fees Monthly Payment

UBank UHomeLoan Fixed P&IHome 1Y Fixedâ‰¥ 20% Deposit

1.79%
2.18%
• App: \$0
• Ongoing: \$0 p.a.
\$540
Fix your mortgage for 1 year with a very competitive rate and no ongoing fees.

HSBC Home Value Loan P&IHomeâ‰¥ 30% Deposit

1.97%
1.98%
• App: \$0
• Ongoing: \$0 p.a.
\$554
\$3,288 refinance cashback offer
This competitive variable rate loan is available for borrowers with 30% deposits. Eligible refinancers borrowing \$250,000 or more can get a \$3,288 cashback. Terms and conditions apply.

loans.com.au Smart Booster Discount Variable Home Loan P&IHomeâ‰¥ 20% Deposit

1.85%
2.21%
• App: \$0
• Ongoing: \$0 p.a.
\$545
Get a low discounted variable rate loan. Requires a 20% deposit. Get your loan processed fast and settle within 30 days.

Macquarie Bank Basic Home Loan P&IHomeâ‰¥ 40% Deposit

2.14%
2.14%
• App: \$0
• Ongoing: \$0 p.a.
\$567
Apply for the Macquarie Bank Basic Home Loan - LVR â‰¤ 60% (Owner Occupier, P&I) and get a low variable interest rate, plus no application and ongoing fees. Requires a 40% deposit.

Athena Variable Home Loan P&IHomeâ‰¥ 40% Deposit

1.89%
1.89%
• App: \$0
• Ongoing: \$0 p.a.
\$548
Owner occupiers with 40% deposits or equity can get this competitive variable rate loan. No upfront or ongoing fees.

IMB Fixed Rate Home Loan P&IHome 2Y Fixedâ‰¥ 20% Deposit

2.27%
2.69%
• App: \$449
• Ongoing: \$6 per month
\$577
A 2 years fixed with the competitive features.

Nano Variable Home Loans P&IHomeâ‰¥ 25% Deposit Refi Only

1.99%
1.99%
• App: \$0
• Ongoing: \$0 p.a.
\$555
Competitive rate with zero fees, fast approval and a 100% free offset account. Refinance only, 25% deposit required.

Well Home Loans Equity Plus P&IHomeâ‰¥ 40% Deposit

1.82%
1.85%
• App: \$250
• Ongoing: \$0 p.a.
\$543
Borrowers with 40% deposits or equity can get this low variable rate loan. 100% offset account included.

OneTwo Variable Rate Home Loan P&IHomeâ‰¥ 20% Deposit Refi Only

1.99%
1.89%
• App: \$0
• Ongoing: \$0 per month
\$555
A low variable rate loan for owner-occupier refinancers living in metro NSW/VIC. Get rate discounts as you repay the loan.

Yard Variable Home Loan P&IHomeâ‰¥ 20% Deposit

1.99%
2.02%
• App: \$0
• Ongoing: \$0 p.a.
\$555
A very low variable rate loan for home buyers with an optional offset account (\$120 annual fee). 20% deposit required.

86 400 Own Home Loan Fixed P&IHome 1Y Fixedâ‰¥ 20% Deposit

1.94%
2.55%
• App: \$250
• Ongoing: \$250 p.a.
\$552
Fix to this very competitive rate for one year. This loan requires a 20% deposit.

Bluestone Prime Home Loan P&IHomeâ‰¥ 30% Deposit

2.23%
2.25%
• App: \$0
• Ongoing: \$0 p.a.
\$573
Bluestone's Prime is a competitive variable rate home loan for borrowers with 30% deposits.

loans.com.au Smart Booster Discount Variable Home Loan P&IHomeâ‰¥ 20% Deposit

1.99%
2.47%
• App: \$0
• Ongoing: \$0 p.a.
\$555
Home buyers can get a very low discounted variable rate for the first year. Requires a 20% deposit. Add an offset sub-account for an additional 0.10% on your interest rate. Get your loan processed fast and settle within 30 days.

ME Flexible Home Loan Fixed with Members Package P&IHome 2Y Fixedâ‰¥ 20% Deposit

2.29%
3%
• App: \$0
• Ongoing: \$395 p.a.
\$578
\$3,000 cashback when refinancing a loan of \$250,000 or more. Other conditions apply. Lock in a competitive rate for owner occupiers for two years. Comes with a 100% offset account.

Well Home Loans Balanced Fixed Home Loan P&IHome 1Y Fixedâ‰¥ 10% Deposit

1.99%
1.90%
• App: \$250
• Ongoing: \$0 p.a.
\$555
Owner occupiers can get a sharp fixed rate for the first year, plus an offset account. Available with a 10% deposit.

IMB Budget Home Loan P&IHomeâ‰¥ 20% Deposit

2.19%
2.25%
• App: \$449
• Ongoing: \$0 p.a.
\$570
A low-rate, no-frills home loan for borrowers with a good deposit and unrestricted repayments.

Macquarie Bank Basic Fixed Home Loan P&IHome 3Y Fixedâ‰¥ 30% Deposit

3.09%
2.41%
• App: \$0
• Ongoing: \$0 p.a.
\$641
Get a low interest rate and a mortgage with flexible, basic features. No application or ongoing fees. Requires a 30% deposit. Refinancers can switch with a convenient digital application.

Nano Variable Home Loans P&IInvestmentâ‰¥ 25% Deposit Refi Only

2.29%
2.29%
• App: \$0
• Ongoing: \$0 p.a.
\$578
Investors can refinance this no-fee variable rate loan. You will need a 25% deposit. Fast online approval.

loans.com.au Green Home Loan IOHomeâ‰¥ 10% Deposit

2.08%
2.39%
• App: \$0
• Ongoing: \$0 p.a.
\$562
Construction Loan: A competitive variable rate loan available for the construction of an energy-efficient home.

Well Home Loans Balanced Fixed Home Loan P&IHome 2Y Fixedâ‰¥ 10% Deposit

2.27%
1.95%
• App: \$250
• Ongoing: \$0 p.a.
\$577
A low fixed mortgage with an optional 100% offset account. Not available for construction purposes.
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