How Much Do You Need For A House Deposit?

Saving up enough money for a house deposit is the first step towards buying your own home. 

But how much do you actually need to save? The figure relevant to you depends on a number of factors. In some scenarios applicants can borrow up to 95 per cent of their prospective property value leaving just 5 per cent for deposit plus purchase costs. 

However, many banks and lenders recommend having at least 8 per cent plus purchase costs as a minimum saved up.

Having a higher deposit will work in your favour for a number of reasons:

  1. A large deposit shows that you are a great saver and could increase your chances of getting your loan application approved with prime lenders
  2. More deposit means borrowing less, which means there’s more chance of paying less interest over the life of your loan. 
  3. If your deposit is less than 20 percent, you may need to pay Lenders Mortgage Insurance. 

Here is an example of the deposit you’ll need depending on your house price purchase:

House price5% deposit20% deposit
$450,000$22,500$90,000
$650,000$32,500$130,000
$850,000$42,500$170,000
LMI required?YesNo

How much is Lenders Mortgage Insurance?

Lenders Mortgage Insurance is a one-off, non-refundable, non-transferrable premium that’s added to your home loan. It’s calculated based on the size of your deposit, loan to valuation bracket and how much you borrow. These calculations are very important as being a dollar can cost you thousands of dollars in extra insurance.

LMI protects the bank against any loss we may incur if you are unable to repay your loan.

Let’s have a look at how much LMI you’re likely to pay if you have a deposit less than 20 per cent:

House price5% depositLMI estimate
$450,000$22,500$14,364
$650,000$32,500$27,849
$850,000$42,500$36,418

Government assistance schemes such as the First Home Owner Grant, HomeBuilder Grant and the federal government’s First Home Buyer Deposit Scheme may also assist with your deposit and help lower fees on the transaction. 

The best place to start is to contact your mortgage broker. They can assess your income and your savings to work out what price range you should be looking at to purchase and what your loan options are. This way you’ll know that it’s unique to you and you can start house hunting with confidence. 

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