Do I need a 20% deposit for a home loan?

February 24, 2017
Vanessa Grieves

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 deposit of 5% genuine savings when purchasing an owner occupied home. Some of our lenders will also allow you to borrow without genuine savings if you have a steady rental history, you will however still need a 5% deposit but this can come from options such as a gift.

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.


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. 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. 

Posted in: Home loans

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