How much deposit for a home loan do I need?
A Loan Market broker can talk you through your options even if you have little or no deposit. You could be in your home sooner than you think.
Your deposit is one of the most important parts of your home loan application and how much you put down can impact your repayments, fees and how much interest you pay over the term of your loan.
Banks and lenders all have different criteria for assessing and allowing you to use certain money for your deposit. The larger the deposit you have saved, the better chance a mortgage broker can negotiate you a lower interest rate or get fees waived. Generally, most banks require a 5% 'Genuine Savings' for your deposit.
What are Genuine Savings?
Genuine savings are regular savings that you have had in your bank account for at least three months. Banks and lenders use genuine savings as a tool to see if you can demonstrate a pattern of saving, among other criteria.
The exact requirements for Genuine Savings differ from bank to bank so speak to your Loan Market mortgage broker to clarify what your savings are.
Advantages of a bigger deposit
The larger your deposit, the closer you will be to paying off your home loan quickly. A larger deposit means that you will have a lower Loan-to-Value (LVR) ratio and you may be able to secure a discounted interest rate from a lender. Additionally, you won't likely have to pay for Lenders Mortgage Insurance (LMI).
What is Lenders Mortgage Insurance?
If you want to borrow a high percentage of a property's value (generally over 80%), and your income is not consistent or you're self-employed, you might need Lenders Mortgage Insurance.
LMI protects the lender if you're unable to repay your loan and the sale of the property doesn't cover the outstanding loan balance.
LMI is a one-off fee that can be subtracted from your loan or paid up-front. Your Loan Market mortgage broker will advise if you need LMI and do all the paperwork for you.