What is the minimum deposit I need to purchase a house?

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 imposed by state and territory governments in Australia on property transfers. The amount is calculated as a percentage of the purchase price and varies by state and property value. Buyers usually pay stamp duty, which can be a significant cost to consider.

Some buyers, such as first home buyers or pensioners, may be eligible for reduced rates or exemptions. Check with your mortgage broker to see if any concessions apply.

First Home Guarantee Scheme (FHGS)

The First Home Guarantee Scheme helps eligible first home buyers purchase a property with a deposit as low as 5%, without paying Lenders Mortgage Insurance (LMI). The government guarantees up to 15% of the property’s value, allowing buyers to access loans usually reserved for those with larger deposits. This guarantee acts as a substitute for LMI and can save first home buyers a significant amount.

Eligible buyers can apply through a participating lender, which assesses their finances and determines if they meet the lender’s criteria. If approved, the lender provides a loan of up to 95% of the property’s value, with the government covering up to 15%.

The scheme has a maximum property value and specific eligibility rules. Applicants must be Australian citizens or permanent residents, at least 18 years old, and have a taxable income under $125,000 for singles or $200,000 for couples. The property must be used as the applicant’s principal place of residence and must be newly built or off-the-plan.

Overall, the First Home Guarantee Scheme is a valuable tool for entering the property market with a smaller deposit and no LMI. Because it is subject to eligibility requirements and available for a limited time, it’s wise to speak to a mortgage broker or financial advisor to see if it’s right for you.

What about investment properties?

The minimum deposit for investment properties is usually higher than for a first home. Lenders typically require 10% to 20% of the property’s value. The exact amount depends on the lender, loan type, your finances, and the property you want to buy.

If your deposit is less than 20%, you will likely need to pay Lenders Mortgage Insurance (LMI). LMI for investment properties is generally higher than for owner-occupied homes, so include this in your budget.

Also, consider stamp duty and other purchase costs. Buying an investment property, even as a first-time buyer, usually does not qualify for the benefits available to those purchasing their first home as a principal place of residence.

Why choose LiveInvest as a first time home buyer?

Fast Approvals: As a first-time home buyer in a competitive market, time is critical. You need a mortgage broker who understands this. With fast-track loan options and streamlined applications, LiveInvest works to get your loan approved quickly.

Convenience: First-time home buyers are busy and hardworking. We value your time. That’s why our brokers meet you at a time and place that suits you. No more waiting rooms or long bank queues.

Range: We offer loan options for all first-time home buyers. Everyone’s situation is different, so we tailor solutions to your needs. Tell us your requirements, and we’ll find an affordable solution for you.

Relationship: Our support doesn’t stop at loan settlement. We continue helping you even after your loan is approved, ensuring you always have access to the best finance solutions.

Network: We partner with trusted local professionals and businesses. This helps you get the right advice and reliable service at every step.

Utilise our Loan Repayment Calculator to work out how much your repayments may be!