How Much Deposit Do I Need For A Home Loan

How Much Deposit Do I Need To Buy?

When buying a house, some lenders will accept a deposit for as little as 5 percent (5%), and some will require a 5 to 10 percent deposit for a home or investment loan, depending upon the property location and price of the property. However, sometimes a deposit of less than 20 percent may mean, additional lenders loan insurance or Lenders Mortgage Insurance Premium (LMI) will be required. An example where the lender may not require a deposit for a home loan purchase is where you have enough equity in another property where you can use this available equity within the property towards the new property purchase.

Alternatively, you may not have the full 5 percent deposit saved to meet the lenders Genuine Savings Policy due to a high weekly rental payment which these historical rental payments can be acceptable by several lenders as a means to show 5 percent genuine savings requirements as long as you can find the balance of the required 5 percent deposit plus approximately another 1 to 3 percent to cover any additional costs, government cost, legal and lender costs.

How Much Deposit Amount Is needed To Purchasing A Property?

Previously, a deposit of 20 percent of the property price was required by the real estate agent or vendor to show your intention to purchase a property. With current real estate market sales, First Home Buyers don’t have such a large deposit to secure a purchase, therefore, real estate agents or vendors are prepared to rest on a smaller deposit to start the property negotiations. If required ask us closer to the time of making an offer as to what deposit amount will be required and make sure you have it available at the time you make an offer on the day. (Also within the finance clause on a Queensland Real Estate Contract, ask the real estate agent for a 21-day finance clause, since majority of lenders only work 9 to 5 Monday to Friday, 21 days for finance means 15 business days and a 14-day finance clause means 10 business days. Trying to obtain finance within 10 business days can be stressful on the purchaser if the lender’s approval times have blown out i.e., due to their aggressive marketing campaigns, holiday seasons, etc… so we suggest obtaining a 21 days (15 business days) finance clause.)

As we mentioned earlier above, a 5 percent deposit is the minimum amount required as a deposit for a home loan, however, a deposit to secure a purchased is negotiated with your real estate agent. Real estate agents will require a 10 to 20 percent deposit to secure the purchase, however, if you indicate that you only have a small deposit or no deposit since you are borrowing the whole amount from the lender as you would with a Guarantor Loan, you may secure the purchase with a few thousand dollars.

I Don’t Want To Pay Any Lenders Mortgage Insurance

A few lenders do offer facilities for a loan amount up to 85 percent (85% LVR) of the property value with No Lender Mortgage Insurance premium (LMI) payable. This means you only need to provide a deposit of 15 percent (15%). The lender will pay the LMI premium to the mortgage insurer to establish the facility on your behalf. If your loan is above $500,000 this could save you thousands of dollars, and the Mortgage Insurance Premium won’t have to be capitalised into the loan amount which would add additional interest cost and repayments over the term of the loan and the existing loan amount.

If you’re a Professional in your industry or a Medical Health Professional in a specialised field of practice you may be eligible to for a No Lenders Mortgage Insurance Premium up to 90% of the purchase of your new home, investment property or refinancing your existing mortgage from one of our lenders. (To read more follow these links.)

Establishing loan facilities with a 20 percent deposit requires No Lenders Mortgage Insurance unless it is a Low Documentation Loan (LoDoc) as a LoDoc loan facilities above 60 percent incur’s Lenders Mortgage Insurance premium at the clients cost or even the lenders cost.

I Need A Higher Mortgage Capitalisation Loan.

If you need to add in the loan insurance or what is called in the industry, Capitalised Lenders Mortgage Insurance Premium to 99 percent (99%) of the loan, we may have a lender to help.

If you only have a minimum deposit to cover the 5 percent (5%) genuine savings policy and need a higher loan to capitalise the Lenders Mortgage Insurance to 99% you may be in luck. These type of leaders are few and far between in this current market who can offer these type of higher loan borrowings, therefore the interest rates are higher, as lenders categorise them as Risk of Rate Loans, the higher the risk the higher the interest rate.

Typically, the interest rate loadings are 0.15% to 0.25%, depending on the Loan To Value Ratio’s (LVR) at 85% to above 90% LVR’s.

The main point to remember here, even though you are paying a slightly higher interest rate, you won’t be paying that interest rate for the whole term of the loan. As your property increases in value over time, you can contact us to have a Loan Check Up or a Loan Review to see if you are eligible to have a rate review with your current lender or if required to refinance your loan to another lender with more competitive interest rates to minimise the interest and loan repayments.

Deposit When Purchasing An Investment Property

When buying investment property, many people will leverage on the equity in their home. This means that the lender may lend you 100 percent (or 110 percent) of the home loan amount, as it will utilise your home as security. However there are also a range of other home or investment loans on the market that do not require a deposit, but the interest rate for these products may be much higher than for regular loans.

An example of this type of available home loan is an Equity Finance Mortgage. The Equity Finance investor provides the 20% deposit and you are not required to make any regular repayment for up to 25 years. The investor will recoup the 20 percent originally borrowed plus up to 40 percent share of any increase in the value of the property when the property is sold.

Deposit For Off The Plan Purchase

When it comes to purchasing an investment property, if you don’t have spare cash lying around for a deposit, as most people don’t, you may be able to use a deposit bond. Deposit bonds are issued by insurance companies and provide a guarantee to the vendor that the deposit will be paid usually at settlement time. The cost of a deposit bond is approximately two to three percent of the value of the deposit. For example, you might be planning on buying an off the plan house for $300,000. A 10 percent deposit on this property would be $30,000, so the deposit bond would cost $600. If you need to get a deposit bond, let us know and will be able to assist you.

Not all vendors, builder or agents will accept a deposit bond, so you will need to check with the real estate agent whether they will accept a deposit bond.