Owning a home is a dream for many Australians. And while you can work on bringing your dream to life by creating a Pinterest board, visiting open homes and trawling the internet, one of the first ‘real’ considerations prospective home owners have to make is how much deposit they will need.
The ideal deposit for a home is 20%. The major reason is that once you cross that threshold, you no longer need Lenders Mortgage Insurance. This insurance is required for lower percentage deposits as it acts as protection for the lender if the borrower is unable to pay their mortgage.
With a deposit of 20% or greater, you will also have more leverage to negotiate a good interest rate with your bank and will be subject to less strict approval criteria in general.
For many people though, saving a deposit of 20% will take time and you will have to weigh that up against property value increases over that period. You may decide that a deposit of 10% or in some cases 5% is more achievable to buy the right house in the right area.
Mortgage brokers and banks will work with smaller deposits but they will be subject to Lenders Mortgage Insurance and additional loan criteria.
I always advise purchasers speak with a professional in this area to get the best advice for their situation. I am very happy to put you in touch with some excellent advisors if required.
A final word of advice is that regardless of the deposit amount, buyers will need to have a separate amount saved for purchasing costs and should allocate upwards of $5000 here.
