How Much Deposit Do I Need for a Home Loan?

In the past, it was possible to borrow 100% of a house’s value and not even have to pay a deposit.
Now, lenders are a lot stricter and acquiring a loan without a deposit is much more difficult.

So, how much of a deposit do you need?

The total amount of your home loan deposit will depend on a wide range of factors and can vary greatly depending on the property or land you are looking to purchase.

Most major banks are comfortable with loaning borrowers up to 95% of a property’s value, but you will need to have impeccable employment and financial history.

Therefore, you would need to pay at least a 5% deposit; however, it is likely that you will have to pay more. This would mean a deposit of $25,000 for a $500,000 home.

To give yourself the best chance of a low deposit home loan it is important to have a strong income, proven savings, a good credit history, minimal debt, stable employment and good asset position.

Lender’s Mortgage Insurance (LMI)

It is worth keeping in mind that if you take out a low deposit home loan you will more than likely need to pay for Lender’s Mortgage Insurance.

Lenders feel unsafe when loaning out more than 80% of a property’s value, so Lender’s Mortgage Insurance is there to protect them from the risk they take on.

Standard practice for most lenders and buyers is to put down at least a 20% deposit. This saves you from a lot of the extra costs associated with lower deposits and gives you a good chance of having your home loan approved.

Overall there is no clearly defined amount you need for a home loan deposit; it depends on many factors that are related to both you and the lender.

If you would like to learn more about home loans or how much deposit you may need for your dream home, contact us today.