Are you a First Home buyer? How much deposit do you need to buy your first home?

April 4, 2016

 

If you ask your parents, they will probably tell you that you will need at least 20% deposit for your first home. Thankfully times have changed in the last 10-20 years and most lenders now only need 5% deposit. This means for a house price of $500,000 you will need $25,000 deposit. You may also need to have additional funds to cover the purchase costs like stamp duty, legal fees, etc.

The more savings you can put into the home, the better off you will be. Lenders look at what we call "loan to value ratio" or LVR, which is the loan amount divided by the value of the property. For example if you buy a home for $500,000 and borrow $450,000 then the LVR would be 90% ($450,000/$500,000).

Any loan with a loan to value ratio of 80% or more will result in lenders mortgage insurance. Lenders mortgage insurance allows you to borrow more than the 80% range. It protects the lender if you default on your home loan. Unfortunately although lenders mortgage insurance covers the lender it is a cost that is paid by the customer. It is a one off fee that is charged at settlement of the loan and some lenders will allow you to add the amount onto your home loan.

If you do not have the full 5% deposit there may be other others available such as guarantor loans. Feel free to contact us for any further information on these types of loans.

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