How much do I need for a deposit?
You need a deposit that's at least 5% of a property's value. But remember to factor in lenders mortgage insurance, stamp duty and other costs.
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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.
But a small deposit means you have to borrow more money. This increases your monthly home loan repayments. You also need to budget for other costs like stamp duty and conveyancing fees.
Read on to work out how much you need for a home loan deposit.
Deposit sizes explained
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.
Are there any downsides to buying property with a 5% deposit?
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)|
How do I determine my deposit size and borrowing amount?
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:
Example 1: 20% deposit
- $500,000 ÷ 0.80 = $625,000
- $625,000 - $500,000 = $125,000
Example 2: 5% deposit
- $500,000 ÷ 0.95 = $526,316.
- $526,316 - $500,000 = $26,316
So a 20% deposit would be $125,000 but a 5% deposit would be $26,316.
Don't forget to add stamp duty costs
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.
Don't forget other upfront costs
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).
Is it worth paying LMI to buy a property faster?
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|
Do I have to pay all my LMI costs upfront?
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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