How much deposit do you need for a home loan?

Wondering how to manage the mental gymnastics required to work out how much deposit you need? Hitting the magic figure of between 5% and 20% may be quicker and easier than you think with the right information.

Getting your deposit together

Whether buying or building, getting the funds together for the deposit is a key part of the home-buying process. So it’s important to know what you need and how to get there without any unnecessary stress.

Typically, banks and other lenders require you to provide 20% of the property price’s cost as a deposit in order to give you a home loan. Based on your profile, the condition of the market and other criteria, some lenders may be willing to lend you money even with a 5% deposit. However, this may attract extra costs such as lender’s mortgage insurance. Your bank or trusted mortgage broker will be able to help you determine your deposit target. 

Dealing with lenders

Did you know that having a larger deposit may help you negotiate a lower interest rate? Don Crellin, Managing Director of Resolve Finance, says that a lot more lenders today will adjust the interest rate they charge based on how much deposit you have. “If you’ve got a deposit of 20 per cent or more, you can generally get a more favourable deal,” he says.

But you may still be able to negotiate a competitive rate direct from a lender, even if your savings are close to the minimum deposit for a home loan. Your mortgage broker will be able to provide more detailed information.

“Not all lenders’ assessment processes are the same, and they change quite regularly, so a mortgage broker can help you navigate through this,” says Don Crellin.


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Understanding other costs

Before you develop a savings plan, make sure you have considered all possible extra costs involved with buying a house.

These can include:

  • Conveyancing fees
  • Legal fees
  • Bank fees
  • Stamp duty
  • Lender’s mortgage insurance

Start budgeting

With a full picture of the costs involved, you will be able to set a savings target. There are a number of budget planning calculators that can help you save what you need.

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