Saving enough money for a home deposit is the holy grail for first-home buyers.<\/strong><\/p>\n Often the culmination of years of squirrelling away every spare dollar you earn, reaching that target amount is no small achievement, particularly with house prices soaring in most Australian cities.<\/p>\n But in today\u2019s market, how much do you really need? Do you need a full 20% deposit, or will lenders<\/a> let you in the door with considerably less?<\/p>\n Here\u2019s what you should know.<\/p>\n Contrary to what you may have heard, you don\u2019t always need to save a 20% deposit before the banks will talk to you.<\/p>\n Mortgage<\/a> broker and Port Finance Group director Anthony McDonald says banks are prepared to offer<\/a> loans<\/a> to buyers who have much less than a 20% deposit \u2013 some as little as 5%.<\/p>\n On a $500,000 loan that 5% deposit is only $25,000, but you\u2019ll also have to pay lenders mortgage insurance, which the banks use to mitigate their risk of lending money to someone with little savings.<\/p>\n McDonald says mortgage insurance generally applies to borrowers who have less than 20% of the purchase price, and the insurance costs can be significant.<\/p>\n \u201cMortgage insurance can go up to about 2% to 2.5% (of the loan amount) when you get up around that 90% (borrowing) mark. At that point it starts to become cost prohibitive\u00a0because you end up adding it to your mortgage and it becomes very costly over the journey,\u201d he says.<\/p>\n \u201cSay you borrow $500,000, it might be 2% mortgage insurance, plus the stamp duty. So it might be $10,000 to $12,000 that you\u2019re adding on to your mortgage.\u201d<\/p>\n Of course, in today\u2019s rapidly changing markets, waiting a few extra months to save additional money to avoid paying mortgage insurance might mean that the properties in your price range increase in value by much more than the cost of the insurance.<\/p>\n McDonald says you should factor those increases in when making your decision about when and how much to borrow.<\/p>\n \u201cSometimes it\u2019s better for the customer to go into a property and pay that insurance, knowing that by the time they try and save that money to avoid paying the mortgage insurance, the market\u2019s moved another 10% or 12% and they\u2019re actually behind even further,\u201d he says.<\/p>\n You will need to factor in other costs such as stamp duty which can vary from state to state. Picture: Getty<\/p>\n<\/div>\n Depending on which state you\u2019re buying in and the price of the home you\u2019re purchasing, first-home buyer concessions can shave off many of the extra costs normally associated with buying a home.<\/p>\n In Victoria, there\u2019s no stamp duty payable on any property purchased up to $600,000, and a sliding scale of concessions on properties valued between $600,000 and $750,000.<\/p>\n For homes worth $750,000 and above, you can expect to pay duties of around 5% of the purchase price \u2013 that\u2019s $40,000 on a $750,000 home. Of course, that extra cost can be capitalised (added onto your overall loan), but it will also slightly increase how much you need to borrow, and thus how much of a deposit you need.<\/p>\n McDonald says there are also other, smaller, fees, for things like conveyancing and title transfers.<\/p>\n \u201cThey might add up to around $2500 for a first-home buyer,\u201d he says.<\/p>\n Each bank has its own set of rules and standards.<\/p>\n McDonald says your personal financial situation will determine how flexible most lenders will be.<\/p>\n \u201cThe more you can give the bank, the better, because the less interest you\u2019ll pay. But it does just come down to individual circumstances. How good\u2019s your income, how long have you been in your job? You might have just got a good pay rise, so you can afford to make those repayments,\u201d he says.<\/p>\n \u201cThe rates and fees are what they are. It\u2019s just a matter of mining through the options to get to the loan that suits your needs.\u201d<\/p>\n
\n <\/p><\/div>\n Realestate au <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"How much deposit do you need before approaching a bank?<\/h2>\n
Is a first-home buyer better off saving for a bigger deposit?<\/h2>\n
What other costs are buyers charged?<\/h3>\n
![\"Couple](\"https:\/\/i0.wp.com\/www.realestate.com.au\/blog\/wp-content\/uploads\/2017\/07\/21112303\/couple_paperwork3_getty_a-1024x768.jpg?resize=1024%2C768&ssl=1\")
<\/p>\nDifferent banks have different lending requirements<\/h3>\n