It’s possible to get a home loan approval with a deposit of as little as 5% of a property’s purchase price, or even with no deposit. But you’ll usually be a charged a higher interest rate and higher fees if you can’t raise a deposit of at least 20%. This is because your loan will be higher risk for the lender.
Why is a 20% deposit important?
You’ll be charged lenders’ mortgage insurance (LMI) if you can’t raise at least a 20% home loan deposit . LMI protects your lender if you don’t make your repayments. The cost of LMI varies depending on how much you borrow, but it can cost $10,000 or a typical home loan.
How can you get a 20% deposit?
There are a number of schemes in place to help you get your 20% deposit if you’re a first home buyer, including the:
- First Home Owner Grant if you’re buying a brand new home.
The FHOG is currently $10,000 in New South Wales.
- HomeBuilder Scheme if you’re building a home.
This is a $25,000 tax-free grant that is available between now and the end of the year. It was introduced by the federal government as a response to the economic impact of COVID-19.
The First Home Loan Deposit Scheme was introduced on 1 January this year to help up to 10,000 eligible first home buyers to avoid the cost of LMI each financial year. The government guarantees part of each eligible first home buyer’s deposit so that the lender doesn’t charge LMI.
This Scheme allows eligible first home buyers to make voluntary contributions to their superannuation fund to save for a deposit on their home. Contributions are tax-deductible and taxed in the fund at just 15%, which is lower than even the lowest marginal tax rate. Up to $30,000 worth of these voluntary contributions can then be withdrawn for a deposit on a home loan. Normally you can only withdraw super when you reach your preservation age (which is 60 for younger Australians) and you retire.
How we can help
Our experienced and licensed brokers at Wisebuy Investment Group in Newcastle can help you to get a home loan.
We also understand the lending criteria of different lenders. That means we can:
- recommend an appropriate lender for your specific situation.
- help you with your loan application so it will be approved.
Even a small difference in home loan rates can make a BIG difference to your repayments and to the amount of interest you’ll pay over the life of your loan.
The Australian lending market is highly competitive and that there is a huge range of lenders and products available. It’s time-consuming and difficult to research the market yourself. We can remove that hassle for you because we do it for a living.
Contact us today for an obligation-free chat! We’ll take the time to understand your individual financial circumstances before providing you with appropriate advice. Our focus will be on finding the right loan for your needs from over 45 lenders.