Saving a Deposit Isn’t the Most Stressful Part in First Home Buying
How Much Deposit Do I Need?
In years gone by, banks used to offer 100% loans, but nowadays, these options are very rarely found. Many people come to find that if they have savings of around $15,000 to $25,000, they can usually proceed with talking to a mortgage broker or lender. This does require them to make up any difference which can be sustained by partnering up with a family member, or getting money as a gift from parents and having a family member to be a guarantor, if necessary.
- Lower your Credit Card/Personal Loan Debt (including any store card debt)
- Cut Down on Takeaway
- Go out Less
- Spend Less on Luxury Items
- Cut Down Expenditure
- Have a Budget and Stick to It (Income minus expenses)
The rule of thumb for the amount of deposit required was 20%, but now some finance organizations may, in fact, lend you 95% of the value of your home. That means you only need a 5% deposit for some areas. So, if you currently have a 5% deposit, this could be enough to sway lenders to finance the purchase of your home. Location and zoning will be factors here. Residential and country denote different requirements.
Example: If you had to find a deposit for a $300,000 property, you would only need to find $15,000. If you saved $1000 per month, then, in 15 months you would have your deposit! That seems possible if you have a real plan set in place.
If you have a sum which is larger than this 5%, it is more beneficial to you as it will reduce the risks to lenders – which means they will look more favorably on you. This is due to your LMI payment being substantially reduced. This LMI “Lenders Mortgage Insurance” is a one-time insurance payment that is required for any home buyers who have less than a 20% deposit to put down.
First Home Australia offers many house and land packages. Our professionals can also advise you on using the First Home Buyers grant as part of your deposit.
A few people have followed this route and have been able to purchase their first home with no deposit at all, although this does require a little forethought.
Around 60% of first home buyers have some form of assistance from their parents when purchasing their first home, this frequently comes in the shape of a guarantor loan and with this, you can usually ensure:
- 110% of the property value can be borrowed.
- LMI will be avoided.
- Extra costs of stamp duty, mortgage set up costs and any legal fees will be covered.
- Interest rates can be lower.
It is also possible to receive the deposit amount as a gift from your parents, although lenders can restrict some of the options available to you if this route is followed.
The professionals at First Home Australia can help you find the best solution to overcome the deposit dilemma, and you may just find that a simple solution requires much less than you thought. You can check with a broker or contact us and we can steer you in the right direction, too. If you are eligible for government grants then you won’t need to save as much for your deposit. Take the worry out, and call us!