So you’ve decided you want to buy a new home? Congratulations! Making this huge decision is just the first step in your upcoming home loan journey. But it’s an exciting one. The next step is to save for a house deposit. But how much do you actually need for a house deposit? How long should you save for and when will you have enough to satisfy the bank to accept you for a loan? Let’s explore because everyone’s house deposit figure will be different.
Why Do I Need a Deposit to Buy a House?
Generally, banks and mortgage lenders recommend you to have a deposit to buy a house. Having a good deposit reduces the lender’s risk of recovering loan from borrowers. That’s why normally, deposit required when buying a house.
How Much Do You Need for a House Deposit?
Some lenders will let you borrow up to 95% of the property value. But a better question to ask is – ‘How much savings do I need to buy a house?’ Generally, you’ll need between 5 to 20 percent deposit to buy a house. So to talk numbers, you could theoretically borrow $380,000 against a property worth $400,000, meaning you’d need a $20,000 house deposit.
However, when borrowing up to 95% of the property value you may also have to pay Lenders Mortgage Insurance. This is added on to your borrowing amount, so while you have a $20,000 deposit your final loan amount might be higher than $380,000 come settlement time.
Lenders Mortgage Insurance is paid when you have less than 20 per cent deposit. For a detailed explanation about Lenders Mortgage Insurance and how to avoid paying it see here. For this same $400,000 property mentioned above, having 20 per cent deposit will mean you’ll need to have saved $80,000. But you won’t have to pay any Lenders Mortgage Insurance.
Now this may take a lot longer to save for. But don’t lose hope. There are a few lifelines available at the moment, especially if you’re a first home buyer.
First Home Loan Deposit Scheme
If you’re a first home buyer with less than 20 percent house deposit you may be able to access the Federal Government’s First Home Loan Deposit Scheme. Under the FHLDS scheme 15 percent of your house deposit is waived because the National Housing Finance and Investment Corporation (NHFIC) provides the guarantee for it. Talk to your mortgage broker to see if your eligible as places are limited.
First Home Owner Grant Queensland
The First Home Owner Grant scheme is a one-off grant payable to the first home owners that satisfy all the eligibility criteria. In Queensland, you can get $15,000 towards buying or building a new house, unit or townhouse, valued less than $750,000.
Speak to our mortgage experts!
Well, you could simply start saving to buy a house. But for a more strategic approach contact the home loan brokers team at Coronis Finance to see how much deposit you should be aiming for based on your situation and intended property purchase price in Queensland.
Or you can start by taking our online home loan experience quiz.