How much deposit do I need?

The amount of your deposit is very important for several reasons:

100% loans typically no longer exist

Generally it’s no longer possible to get a loan for the whole of a property’s purchase price. Most lenders will want you to put down at least 5% of the purchase price of the property. The rest – generally up to 95% – may be financed using a home loan.

A larger deposit may mean a lower interest rate

The larger your purchase deposit, the less risk you represent to lenders, and this puts you in a better position to negotiate a lower interest rate.

Avoid paying Lender’s Mortgage Insurance

If you can put down a deposit of 20% or more than, you can often avoid paying what’s known as ‘Lender’s Mortgage Insurance’ (LMI). This protects the lender – not you, if you cannot repay your loan so it’s a cost worth avoiding if possible.

Pay less in the long run

The bigger your deposit, the less you have to borrow. That means lower regular repayments, and you’ll pay less in interest over the lifetime of the loan. Use our Loan Repayment Calculator to see how much you could save by having a larger deposit.

More loans to choose from

A bigger deposit can also give you a wider choice of loans, and that makes it easier to get a good deal on the right loan, letting you save even more in the longer term.

Posted in Advice, First Home Buyers, Home Loans, Property.