Example 1: 20% deposit
- $500,000 ÷ 0.80 = $625,000
- $625,000 - $500,000 = $125,000
The average Aussie home buyer saves a 20% deposit. But that's a lot of money. If you're able to pay the extra cost of lenders mortgage insurance (LMI) then you could buy a property with just a 5% deposit.
For a $300,000 home, a hypothetical deposit might need to be between $15,000 (5% deposit) and $60,000 (20% deposit), depending on the loan.
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 may have to pay LMI. This can add thousands to the cost of a home loan.
|House price||5% deposit (95% 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? It's fairly simple maths:
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. Inputting the $625,000 purchase price into the calculator, it shows you’d be liable for $23,615.00 in stamp duty if you're not a first home buyer. If you are, you pay nothing.
Now, there are a few other things you might want to budget for. Buying a house isn't as simple as writing a cheque for your deposit and stamp duty. You'll also have to pay for building and pest inspections, solicitor's fees and removalists. This can easily run you an extra $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 not final figures):
|House price||5% deposit||LMI estimate|
You don’t have to pay LMI in one go. It can be capitalised on your loan and you’ll pay for it with your regular home loan repayments. However, this will add a bit to your repayments. In the example we used above, you’d be looking at an additional $84 per month on top of your regular home loan repayment.
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