Your Home Loan Deposit

Your home loan deposit is your contribution towards owning your new home.

The size of your first home deposit will determine how much you can be able to borrow to buy your first property.

It's never too soon to seek advice and start planning your first home purchase.

How much do I need to save?

This will usually depend on the purchase price of the property that you want to buy.

You can buy a first home with as little as a 5% deposit, plus the costs of buying a home, but this will mean that you pay Lenders Mortgage Insurance.

To avoid the extra cost of Lenders Mortgage Insurance (LMI) you'll need to either save 20% of your property purchase price for your first home deposit, or take out a home loan with a family guarantor.

If you're ready to get started, the first step you should take is to plan how much you're going to borrow, and set your savings target.

To get an idea of how much you can borrow based on your current income, you can start by using this borrowing calculator.

With an idea of how much you'll spend for your first home purchase, you can set your savings goal and use the savings target calculator to work out how long it's going to take to reach your goal.

What counts towards your Home Loan Deposit?

Home Loan lenders look for evidence of ‘genuine savings’ as a guide to how much you will be able to afford in your regular mortgage repayments.

Genuine savings is considered to be the money that you put aside regularly for at least 3 months, usually into a designated savings account.

Most lenders will require you to have at least 5% of the value of your new home saved for a deposit.

What counts as Genuine Savings?

1. Proof of consistently paid rent

Some lenders will accept your rental history as proof of genuine savings, subject to certain conditions: You must be renting when you apply for the home loan, with your lease through a registered property manager or real estate agent, and you have a minimum of 12 months rental at a single property.

You’ll need other proof of savings as well as a stable rental history, such as a savings account or gift of money held for 3 months.

2. Gifts of money

Your family or parents can help you get your home deposit together sooner with a gift of money.

If you do have some money given to you for your house deposit, you’ll need a statutory declaration that states that the money is a gift from an immediate family member and that it does not need to be repaid.

You’ll need to hold the money in a savings account for 3 months for it to become genuine savings.

3. Investments, shares or equity in other property.

Genuine savings can also include money in the form of:

  • Term deposits held for 3 months
  • Shares held for at least 3 months
  • An inheritance or gift held for 3 months
  • Equity in an existing property.

Why save a large first home deposit?

With a larger your first home deposit, you'll have a smaller home loan.

If can save up 20% of the value of the property, you won’t have Lenders Mortgage Insurance (LMI) added to your home loan.

LMI is an insurance premium the banks use to allow people to buy with a small deposit, that protects them from the risk that the mortgage might not be repaid.

It essentially covers you where you would otherwise need a large home deposit, allowing you to purchase sooner and then build equity in your home.

Are there any other first home purchase options?

There are plenty of options for buying your first home without a full 20% home deposit.

Lenders are recognising that it's getting harder to get into the first home ownership market, and this means there are now more alternatives available.

The best way to find out your options is to get advice from a Home Lending Specialist, as the exact loan products that are available can vary from state to state.

For example, with a Graduate Loan in South Australia, you can get a mortgage with:

  • Certificate III/IV, diploma or degree from a Registered Training Organisation
  • Evidence of 3 months continuous employment with one employer
  • Have savings of $3 000 held for at least three months, or 12 months rental history.

With these loans, you can start with a deposit of as little as 3%, as well as the home buying costs. Plus with these home loans, you won't pay LMI.

So you can see that even if you think buying a home is out of reach right now, a Home Lending Specialist might be able to offer you options you weren't aware about.

It's never too soon to speak to a Home Lending Specialist to start planning your future.

An obligation free consultation with a Home Lending Specialist will leave you with a clear idea of the best path for you to take to purchasing your first home. .

To find out more, fill out a pre-approval form, and one of our Home Lending Specialists will be in touch soon, or call us on 1300 366 287.

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