Your home loan deposit is viewed as ‘your contribution’ to the purchase price of the property you wish to buy. Your deposit is one of the biggest factors in determining the kind of loan you may be eligible for and the amount you can borrow to buy your home.The amount of your deposit can also affect the interest rate on your loan, a bigger deposit means you’ll be able to negotiate a better rate and have a wider selection of lenders. Not forgetting, of course, the fact that the less you borrow, the less interest you’ll pay over the life of the loan.
Why size matter
• It gives the lender an idea of what you can afford to repay regularly
• It impacts the interest rate lenders may offer
• It affects how ‘risky’ you are as a customer, and whether you need to pay Lenders Mortgage Insurance (LMI)
• You pay less interest over the life of your loan
How much deposit do you need?
When you’re saving for your home loan deposit, it’s great to aim for at least 5%. Whilst it’s not always essential to have a 5% home loan deposit, the more money you have to put forward as contribution to the home value, the larger the choice of lenders and loans available to you. Our advice is have at least 20% .
The following types of savings are considered to be genuine savings, if they add up to be more than 5% of the purchase price.
• Savings held or accumulated over 3 months
• Term deposits held for 3 months
• Shares or managed funds held for 3 months
• Equity in real estate (varies depending on the lender)
• If you’ve been renting for the last 3 months then some exceptions may apply.
A bigger deposit, big advantages
• Save on monthly repayments and interest
• Better choice of lenders, lower rate
• Reduce Lenders Mortgage Insurance
Here some suggestions for you
• Establish a budget
• Set a savings target
• Reduce debts