How much deposit do I need to get a home loan?

February 13, 2014
Steve Pratt

Get in to your own home with as little as five percent 

When buying property, most lenders will require a minimum deposit of at least 5% of the purchase price in “genuine savings” to buy your own home or 5-10% in the case of investment properties.  

Genuine savings  

Genuine savings in general means that the savings have been built up and-or held over the last 3 months. Lenders use this as a gauge of your ability to repay your loan. Where the deposit has come from a lump sum such as a gift or inheritance, some lenders will take into consideration your rental history.

This low-deposit type of loan will however require Lenders Mortgage Insurance (LMI) which is required for any loans above 80% of the property value. As your deposit size increases, the cost of LMI decreases.

Saving a home loan deposit may seem to be a significant challenge for potential buyers when juggling it with the cost of day-to-day living and trying to maintain an enjoyable lifestyle.

However the simple act of saving each month is considered favourably by lenders and can be taken in to consideration as part of the genuine savings mentioned earlier. It is important to remember that the more money that you have to contribute towards the deposit, the less money you will have to borrow and repay with interest.  

Savings tips to help buy your first home  

There are many different ways that you could boost your savings, and reach that dream of purchasing your own home sooner. Call us at Mortgage Choice in Noarlunga and your local broker Fiona can meet with you to discuss a savings plan and help you keep on track.  

Here are a few of our simple tips for saving for your home loan deposit:

  • Be realistic about your goals: In order to make your savings plan work, it is important to allow yourself a treat every now and then and to reward yourself when you hit key milestones. This helps to keep your savings momentum going.
  • Save a percentage of each pay check: Try saving 10% of each pay. It might mean that you will have to stop buying your lunch each day, but it will be well worth it in the long run.
  • Eliminate a few little luxuries: Try cutting back on eating out in restaurants, or putting your subscription TV on hold temporarily. The savings you could make on these small luxuries over just one year can be much more than you think.
  • Review your current debts:  Existing debts are not all bad. The key is whether you can repay both your existing debt as well as your new loan and still have money left over to live on. Before paying off any existing debts, talk to Fiona Manley at Mortgage Choice about a savings plan. We will assess your overall financial situation and help you develop a plan to get to your deposit goal.
  • Find a high interest savings account or term deposit: By investing your money into a high interest savings account you could be regularly earning interest on your savings. These accounts often cannot be accessed via ATM or EFTPOS, which should also help to reduce any impulse spending.
  • Rent a room: If you are currently renting you could share the costs by asking a friend to move into your spare room to help you pay the rent. This means you will be able to split your weekly expenses and put the savings towards your deposit. You may even consider moving back home with mum and dad to save in the final few months.

Let our local team help guide you through the process.

Give Fiona Manley a call on 0421 360 205.

Or visit for more information.

Posted in: Tips

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