November 17, 2017
Saving a deposit to buy a house can be daunting. The good news is you may be closer to purchasing a home than you think.
How much deposit do I need to save?
Many of our lenders will allow you to borrow up to 95% of purchase property value. This means you will only be required to produce a minimum deposit of 5% when purchasing an owner occupied home. This will need to be genuine savings though which you will need provide a 3-month history for, it cannot include any gifted money unless you have held it in your account for 3 months or more. Some of our lenders will allow you to borrow without genuine savings if you have a steady rental history, you will however still need at least 5% deposit but this can come from options such as a gift or the first home owners grant.
Another option to consider is to have a family member sign as guarantor. This means the equity they own in their property will be used as security for your loan and you will not need to provide a deposit but you will need to service for the entire loan amount of purchase price plus costs.
Why was I told I need 20%?
Many of our lenders will allow you to borrow over 80% of your property’s value however you will need to pay Lenders Mortgage Insurance (LMI). LMI is insurance that protects the lender but provides no protection for yourself. The lender will arrange the insurance and you will need to pay a once off charge. Some lenders will allow you to add this onto your loan to pay it off while others will require you to pay it upfront. You should take in to consideration that the lower your deposit is, the higher your LMI will be.
What are the additional costs?
There are always extra costs that occur when purchasing a home such as stamp duty, legal fees and establishment fees. These fees can differ for each person sue to things such as the lenders and your chosen solicitor or building and pest company. As a first home owner you will also be exempt from paying stamp duty which can save you quite a bit! It is important to remember that you will need to have the money to pay for these events on top of your required savings.
Come and visit us to see how close you are to being able to purchase your home.