Home News How Much Deposit do you Need to Buy a House?

How Much Deposit do you Need to Buy a House?

Font size :
Nila Sweeney
In the modern mortgage market, is it still possible for home buyers to get 95% LVR loans ­(or even higher) to purchase a house, or are those days long behind us?
 
About a decade ago, Australia's property investors and home buyers could access 100% loans with ease – and in some cases, loans as high as 105% were relatively available.
 
Nowadays, lending criteria from banks is stricter, and most banks and lenders have restricted the loan to value ration that they’re willing to extend to borrowers. 
 
So is it possible to get a high LVR loan to buy a house these days if you don’t have much of a deposit? The simple answer is, it depends.
 
The Big Four banks are generally willing to finance home purchases of up to 95%, provided you have a very strong employment history and savings history and evidence of genuine savings. The loan amount will also strongly influence the lender’s decision.
 
Non-bank lenders such as RAMS are also offering up to 95% of the property value. They may also add an extra 2% to help cover lenders mortgage insurance (LMI) capitalisation. This means the borrower can get a 95% loan and then add the cost of the LMI to the loan.
 

So how much deposit do you really need to purchase a house?

In order to purchase a home of $400,000, you could access a 95% loan of $380,000, meaning you’ll need to provide a cash deposit of $20,000. However, you can add the cost of LMI of to the loan amount (up to $8,000), which brings the total loan up to $388,000 or 97%. 
 
Ultimately, it doesn’t matter whether you’re looking to buy in WA or Western Sydney for investment purposes or for your own home: if you’re in the market for a low-deposit loan, there are certain things you can do to boost your chances of approval. Homeloanexperts.com.au offers the following advice:
 

Clear credit history

This means that your credit file has no blemishes whatsoever and that you have paid all of your bills such as rent, credit cards, personal loans and other debts on time every time for the last six months.
 

Stable employment

In most cases you must have been in your current job for 6 to 12 months.
 

Strong income

Lenders are more conservative when assessing your ability to repay a 95% loan, so your serviceability ratio must be outstanding.
 

Good asset position

Lenders want to see that you have a good asset position relative to your age and income.
 

Genuine savings

You will generally need to prove that you have saved 5% of the purchase price.
 

Minimal debts

Applicants with many credit cards and personal loans may struggle to be approved. As a rough guide, people who have more than 7% of the purchase price in unsecured debts such as personal loans and credit cards are often not approved.

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

Mortgage News and Articles

Borrowers should anticipate a possible rate hike Borrowers should anticipate a possible rate hike

Some experts advise borrowers to look for a fixed loan that allows extra repayments so that they can whittle down the balance sooner Read more

Why choosing the right mortgage is hard for first-home buyers Why choosing the right mortgage is hard for first-home buyers Many feel overwhelmed by the sheer range of products and interest rates on offer, a new survey reveals ... Read more

Mortgage applications drop in second quarter Mortgage applications drop in second quarter This marks the “beginning” of a downward trend, says Equifax executive ... Read more

To break monopoly, many smaller lenders could become banks To break monopoly, many smaller lenders could become banks The proposed change could break the Big Four’s monopoly over the mortgage market and help families get cheaper home loan rates ... Read more

More mortgage news and articles

Sponsored Links

Tuesday, Jul 25, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Whether you're a first homebuyer, looking to refinance, or investing, it's important to have the right loan for your needs. Just fill in a few details below and one of our trusted mortgage advisers will contact you.

A quick & easy way to find the right home loan
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords