What is a deposit?

A home loan deposit is your initial financial contribution toward purchasing a property. The size of your deposit plays a key role in reducing the lender’s risk when approving your loan.

Typically, most lenders require a deposit of around 20% of the property’s purchase price (excluding additional transaction and government registration costs).

However, there are alternative options available for lower deposit amounts if you do not have 20%, though these options may come with higher costs or more specific eligibility requirements.

What are the upfront costs I need to consider when buying a property?

When purchasing a property, there are a few costs you need to factor in that you will need to nominate towards the purchase.

It’s best to calculate the total costs you will need to complete the purchase which can include

• Purchase Price of the Property
• Stamp duty for the Property*
• Legal Costs**
• Building Inspection Costs**
• Building Insurance**
• Outstanding Rates/Misc Costs**
• Processing and Application Costs.**

The total of the above should generally be what is required to complete your purchase.

*Stamp duty can be calculated:https://stampduty.calculatorsaustralia.com.au/

**The above costs can vary or may not be applicable depending on your provider and the complexity of the purchase.

You will then need to figure out how much the bank is willing to lend to you (With the help of your mortgage broker), the difference between the loan amount the banks are able to lend and the total cost above is generally the funds you’ll require to complete your purchase.

Example using a $800,000 Purchase Price in NSW

*The above Stamp duty/transfer fees are based on an $800k purchase price in NSW with no concessions. This may vary between states and your eligibility for concessions.

**Legal and other miscellaneous costs can vary greatly, we are using a general buffer.

How much deposit do I need as a First Home Buyer?

There are several options available for First Home Buyers, such as the standard 20% deposit, low deposit options with Lender’s Mortgage Insurance (7.5% - 19.5%), using a family guarantor, or accessing the First Home Guarantee scheme.

Each option has different eligibility criteria, so it’s important to consult with your mortgage broker to determine what works best for your situation.

*The above table is a representation of the deposit requirements for an $800,00 purchase in NSW for a First home buyer.

**The above is based on you meeting bank and government eligibility requirements.

OwnHome Option

OwnHome offers a new solution for first-time buyers with deposits under 20% who may not qualify for traditional schemes or lack access to a guarantor.

They provide an alternative to lender’s mortgage insurance, which we can review with you to determine if it’s a suitable option.

OwnHome supports both first home buyers and investors. For more details, visit their website at OwnHome. Be sure to consult with your mortgage broker to assess whether this product fits your specific needs.

How much do I need as an investor?

There are several options for investors, but the general minimum deposit requirements are:

• A deposit at 12% of the purchase price
• A deposit at 20% of the purchase price
• A deposit >20% of the purchase price

Each option comes with its own advantages and disadvantages. It's recommended to consult with your mortgage broker to better understand the structures, costs, and interest rates involved.

Eligible Professionals

Certain professionals are eligible to apply for loans without the need for Lender’s Mortgage Insurance (LMI), allowing them to potentially secure a loan with as little as:

• A 5% deposit for the purchase of an owner-occupied property
• A 10% deposit for the purchase of an investment property

Eligible professionals typically include those in the medical sector (including nurses), accountants, legal professionals, senior executives from partnered banks, bankers (from qualifying banking groups), and eligible entertainers.

What is a Deposit Bond?

• A deposit bond is a substitute for a cash deposit required when purchasing a property. The deposit bond can be used to assist with up to 10% of the purchase (Including at auction)
• A deposit bond is not a loan. It is a substitute for a cash deposit, you must pay the full purchase price, including the amount of the deposit of the property at settlement.
• It’s best to check with the seller’s agent/real-estate agent if they are happy to accept a deposit bond at the exchange of a contract.

Further Questions about your deposit requirements?

If you have any other questions about what options are available to you and what the deposit requirements are to get into the property market or purchase your next property, reach out and get the expert guidance you need.