How to achieve your home deposit savings goal
Understand the key aspects of a home loan deposit in Australia, including how to calculate it, the associated costs, and the benefits of saving a larger amount.
How much deposit do you need for a home loan?
The sometimes intimidating first step to buying a home is the deposit. Here, we look at everything you need to know about this part of the homeowner journey so you can calculate how much deposit you need for your home loan.
Understanding the upfront costs when purchasing a property is essential. Previously, we've discussed strategies to help you reach your home deposit savings goal. Now, let's look at the deposit and how to secure the ideal home loan.
Quick facts about home loan deposits
A home loan deposit is the amount a homebuyer has in cash for a property purchase.
Deposits in Australia start at a minimum of 5% to 20% of the property purchase price.
An approved home loan covers the difference between the deposit and the sale price.
For smaller deposits, the lender might request Lenders Mortgage Insurance (LMI) and additional proof that you can afford the loan.
Understand the property price you can afford
First things first – find the property price range that's financially comfortable for you. Assessing what you can afford will give you an idea of the deposit you'll need. Things to consider:
Household income
Expenses
Existing debts
Looking at the above outgoings will help you assess how much of your salary can be put toward home loan repayments.
Helpful tools
Borrowing power calculator – Get a realistic idea of how much you can borrow based on your financial situation.
Repayment calculator – Find out what you could be paying once you start making mortgage repayments on your new loan.
Remember: As a guide, it's best if your repayments don't exceed 30% of your after-tax salary.
Calculating the deposit
Once you have calculated the price of the property you can afford, you can start calculating the deposit needed. Home loan deposits in Australia usually range from 5% to 20% of the property purchase price. Lenders will typically require a good credit score, stable income, consistent employment history, and LMI to use the minimum deposit of 5%.
Working out how much you need for a deposit
Start with the property purchase price
Add the various upfront costs
Minus the amount you can afford to borrow
Leaves you with the required deposit amount
Example
Take the property purchase price ($1,000,000)
Add Government fees ($40,000), conveyancing ($1,000), and other costs ($500)
Minus the amount you can afford to borrow ($937,350)
Leaves you with the required deposit amount ($104,250)
Other factors to consider
Loan type: Different loans may have specific deposit conditions
Lenders: Some lenders may accept a smaller deposit, especially for first-time homebuyers
Government schemes: Check government websites for the current programs to help home buyers.
At Qantas Money Home Loans, we offer competitive loan products and deposit options. Our team can help you understand how much deposit you'll need based on your unique financial situation.
Upfront costs that can affect your deposit
The deposit isn't the only upfront cost that comes with a new home. Here are some additional expenses that can significantly increase the amount you need to save.
Stamp Duty
Stamp Duty (or transfer duty) is a state government tax levied on home buyers. The amount varies depending on the state or territory you're buying in. Find out more about ‘What is stamp duty’.
Lenders Mortgage Insurance (LMI)
If your deposit is less than 20%, you may need to pay LMI, which protects the lender if you default on the loan. This can be a substantial cost, sometimes adding thousands to your expenses. Some lenders can add the LMI premium to your loan amount, so you don't pay for the insurance upfront.
Legal and conveyancing fees
A solicitor or conveyancer is essential for managing the legal aspects of purchasing a property.
Additional Fees
Other costs can include loan application fees, registration of title, mortgage registration fees, building and pest inspections, strata reports, valuation fees, and moving expenses.
Can you get a home loan without a deposit?
Obtaining a home loan without a deposit might sound appealing, especially when saving is proving challenging. While loans typically require a deposit, there are scenarios where a no-deposit loan might be possible.
Guarantor: Some lenders offer loans where a guarantor (usually a close family member) provides security by using their property as collateral. The guarantor is responsible for paying back the loan if the borrower cannot do so.
Government schemes: Depending on your eligibility, government schemes like the First Home Loan Deposit Scheme and Family Home Guarantee may allow you to purchase a property with a minimal deposit. Check government websites for the current programs to help home buyers.
Remember: These options come with additional risks and responsibilities. It's crucial to seek professional advice and fully understand the implications.
Benefits of having a higher deposit
Simply put, the bigger your deposit, the less interest you pay.
Saving for a deposit can be challenging. Saving for a bigger deposit can be even harder. However, the more you save and put towards a deposit now, the less you need to borrow for your home loan. The smaller your home loan, the less you'll pay in interest over the loan term.
If you save a deposit of 20% or more, there can be other cost savings, like more competitive home loan interest rates. Also, you won't need Lenders' Mortgage Insurance, an expense associated with smaller deposits.
Deposits for Qantas Money Home Loans
At Qantas Money Home Loans, we understand the challenges of saving a 20% home deposit and navigating the home-buying process.
We're here to help you achieve your homeownership goals. That's why we offer competitive home loan options. In most cases, our minimum deposit is 10%. Loans above $2M require a minimum 25% deposit. It’s important to keep in mind that if you do have less than a 20% deposit of the property's value, you'll also need to pay Lenders' Mortgage Insurance (LMI).
Why come on board with a Qantas Money Home Loan?
100,000 Qantas Points every year^: Enjoy this perk every year for the life of your home loan.
Competitive rates: Our streamlined process means streamlined costs.
Easy application process: Apply online to get an answer in minutes.
Help when you need it: Our home loan experts are here to help with your application seven days a week.
You have to be a Qantas Frequent Flyer member to apply for a Qantas Money Home Loan. This website contains general advice only. This information has been prepared without considering your objectives, financial situation or needs. You should consider your circumstances before acting on this information.
^Qantas Frequent Flyer members will earn 100,000 Qantas Points upon settlement of their Qantas Money Home Loan. Members will earn the annual bonus of 100,000 Qantas Points three months after the settlement anniversary of their Qantas Money Home Loan for up to 30 years. Both upfront and ongoing points will be credited to the member’s Qantas Frequent Flyer account within 8 weeks of the Qantas Points being earned, provided the loan is in compliance with the Qantas Money Home Loans Points Eligibility Policy, not in arrears or default and the loan is not the subject of hardship relief or assistance. In the instance of joint applicants, the Qantas Points by default will be awarded to the primary applicant annually unless you opt to either split the points between the secondary and primary applicant or award the points in full to the secondary applicant.
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