Buying a property, whether it is your first home or an investment property, often requires a significant deposit. The deposit amount varies depending on the lender and the type of loan you choose. In this article, we will explore the minimum deposit required for buying a first home or an investment property, and how lenders mortgage insurance and the First Home Guarantee Scheme can help.

What is Minimum Deposit for a First Home?

For first home buyers, the minimum deposit required is usually 5% of the property’s value. However, a deposit of 20% or more is ideal as it will avoid the need for Lenders Mortgage Insurance (LMI). LMI is a type of insurance that lenders require when borrowers have a smaller deposit, typically less than 20% of the property’s value, and can add to the total upfront cost of buying a first home.

Lenders Mortgage Insurance is a form of insurance that protects the lender if the borrower defaults on their loan. LMI is usually required when the borrower has a deposit of less than 20% of the property’s value. The cost of LMI is typically added to the loan amount and can be several thousand dollars. It is important when considering the minimum deposit requirements, that you take into consideration the costs associated with low deposit loans such as LMI.

Many lenders will only go up to 95% of the total property value including LMI. So in many instances, if you only have a 5% deposit you may need an additional 2-4% to cover the cost of LMI as it may not be able to be added to the loan.

Will I have to pay Stamp Duty?

Stamp duty is a tax levied by state and territory governments in Australia on the transfer of ownership of a property. The amount payable is calculated as a percentage of the purchase price of the property and varies depending on the state or territory in which the property is located, as well as the value of the property. Stamp duty is generally paid by the buyer and is a significant cost that needs to be factored in when considering the total cost of purchasing a property. The amount of stamp duty payable can be reduced or waived for certain categories of buyers, such as first home buyers or pensioners, and it is important to check with your mortgage broker Stamp duty, as it relates to property purchases, is a tax levied by state and territory governments in Australia on the transfer of ownership of a property.

The amount payable is calculated as a percentage of the purchase price of the property and varies depending on the state or territory in which the property is located, as well as the value of the property. Stamp duty is generally paid by the buyer and is a significant cost that needs to be factored in when considering the total cost of purchasing a property. The amount of stamp duty payable can be reduced or waived for certain categories of buyers, such as first home buyers or pensioners, and it is important to check with your mortgage broker to see if any exemptions or concessions apply.

First Home Guarantee Scheme (FHGS)

The First Home Guarantee Scheme is designed to assist eligible first home buyers in purchasing a property with a deposit as low as 5% of the property’s value, without requiring Lenders Mortgage Insurance (LMI). The scheme works by the government guaranteeing up to 15% of the property’s value, which enables first home buyers to access mortgage products that are typically reserved for borrowers with larger deposits. This government guarantee effectively serves as a substitute for LMI and can result in significant savings for first home buyers.

Under the scheme, eligible first home buyers can apply for a home loan with a participating lender, which will assess their financial circumstances and determine whether they meet the lender’s criteria for a loan. If approved, the lender will provide a loan of up to 95% of the property’s value, with the government guaranteeing up to 15% of the loan amount.

The First Home Guarantee Scheme is limited to a maximum property value and is subject to eligibility criteria. To be eligible, applicants must be Australian citizens or permanent residents, at least 18 years of age, and have a taxable income of less than $125,000 per year for singles and less than $200,000 per year for couples. The scheme is also restricted to properties that are used as the applicant’s principal place of residence, and the property must be a newly built or off-the-plan dwelling.

Overall, the First Home Guarantee Scheme is a valuable initiative that can help first home buyers enter the property market with a smaller deposit, without having to pay Lenders Mortgage Insurance. It is important to note that the scheme is subject to eligibility criteria and is only available for a limited time, so it is advisable to speak to a mortgage broker or financial advisor to determine if the scheme is right for you.

What about investment properties?

The minimum deposit required for investment properties is usually higher than for a first home. Lenders generally require a deposit of at least 10% to 20% of the property’s value for investment properties. The deposit amount required will depend on the lender, the type of loan you choose, your financial circumstances and the property you want to buy.

If you have less than a 20% deposit for an investment property, you will likely need to pay Lenders Mortgage Insurance. The cost of LMI for investment properties is usually higher than for owner-occupied properties, so it is important to factor this into your budget when considering an investment property purchase.

It is important to also factor in stamp duty and other costs associated with buying a property as buying an investment property, even as a first time buyer, is usually ineligble for the benefits granted to those buying their first principal place of residence.

Why choose LiveInvest as a first time home buyer?

• Fast Approvals: When you’re a first time home buyer in an aggressive market, time is of the essence. It’s paramount to have a mortgage broker that values this position in the process and we know that it’s important to you to get results as soon as possible. With fast-track loan options and streamlined application processes, LiveInvest is committed to getting your first time home buyer loan approved faster!
• Convenience: First time home buyers are hardworking and active individuals. Their time is important and we at LiveInvest put our clients first so that you don’t have to spend time sitting in a waiting room or bank queue in order to lodge your loan application. Flexibility is one of our core values and that means that our brokers visit you at the time and location that’s most convenient for you. 
• Range: We offer commodities to suit the requirements for all first time home buyers. We understand that everyone’s circumstances are distinct and therefore, it’s important that we fit your solution to your particular set of criteria. Let us know if there are specific specifications we need to be cognizant of to fit your situation and we’ll find an affordable resolution for you!
• Relationship: Unlike most mortgage brokers, our first time home buyer service goes beyond the settlement of your new loan. We provide ongoing support, even after you are approved for your first time home buyer loan, to ensure that you continue to have access to the best finance solutions on the market!
• Network: We are partnered with some of the most reliable local professionals and businesses, so we can help you get the best advice and most trustworthy service on the market!

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