Example 1: 20% deposit
- $500,000 ÷ 0.80 = $625,000
- $625,000 - $500,000 = $125,000
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How much deposit you need to a buy a house varies based on your budget and the amount you can save up. Ideally, lenders like borrowers to save at least 20% of a property's purchase price as a deposit when approving your loan. But that's a lot of money – and a 20% deposit is an amount that some borrowers will be unlikely to save, especially once you budget for other costs like stamp duty and legal fees.
If you're able to pay the extra cost of lenders mortgage insurance (LMI) or you're a first home buyer eligible for the First Home Loan Deposit Scheme, then you could buy a property with just a 5% deposit. A smaller deposit means you have to borrow more money, which increases your monthly home loan repayments. However, this could be a small price to pay in order to get on the property ladder sooner.
How much deposit do you need to buy a house? Here's a simple example: For a $500,000 home, a deposit is likely to be between $25,000 (5%) and $100,000 (20%).
A low deposit home loan can help you get your dream home faster. But the catch is the extra cost of lenders mortgage insurance.
If your deposit size is anything under 20% you will generally have to pay LMI, which can add thousands of dollars to the cost of buying a home.
|House price||5% deposit (95% loan)||10% deposit (90% loan)||20% deposit (80% loan)|
The first step is to figure out how big a home loan you can comfortably afford. To do that, you can put your income and expenses into the borrowing calculator below. That will give you a rough guide to how much you might be eligible to borrow.
Now let’s work backwards to figure out the price range. Let's imagine your borrowing power suggests you can afford a loan of $500,000. What would a deposit look like?
So a 20% deposit would be $125,000 but a 5% deposit would be $26,316.
Stamp duty can add tens of thousands of dollars in costs along with your deposit. Luckily, there are stamp duty concessions and discounts for buyers in most states if you are buying your first property and it's a house to live in.
Different states and territories have different rules around stamp duty and many offer concessions to first home buyers.
You can also use the stamp duty calculator below to figure out how much you’ll have to pay.
Let’s assume you live in New South Wales. When you type $625,000 as the purchase price into the calculator, it shows you’d be liable for around $23,615 in stamp duty if you're not a first home buyer. If you are a first home buyer, you pay nothing in stamp duty. If you're an investor, the amount of stamp duty payable may be even higher.
There are a few other cost you may need to budget for, too, such as building and pest inspections, solicitor's fees and removalists costs. This can cost up to $3,000 or $4,000 (or more, depending on how far you're moving).
The extra cost of lenders mortgage insurance varies depending on your property's value and the amount you've saved. Genworth, one of the LMI providers in Australia, has a handy calculator you can check out which will provide you with an estimate of the LMI payable on different size home loans.
Here are a few example calculations (keep in mind these are only estimates and may not reflect the figure you will be liable to pay):
|House price||5% deposit||LMI estimate|
Susan Mitchell, CEO of Mortgage Choice, shares her expert insights for those who are keen to try and buy a property with a low deposit:
The federal government's First Home Loan Deposit Scheme lets eligible first home buyers purchase homes with just a 5% deposit saved. The government in effect guarantees a further 15% of your purchase, meaning you can avoid LMI while borrowing 95%. This can save borrowers thousands in LMI costs.
Learn more about the First Home Loan Deposit Scheme and find out if you are eligible.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
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