First Home Buyers - How much deposit do I need?
Buying your first home is an exciting milestone, but understanding how much deposit you need can sometimes feel overwhelming. The amount of deposit required for first-time home buyers varies depending on the lender, the value of the property, and whether you're eligible for any state/federal government grants or incentives. Let’s break down how much deposit you’ll typically need and what factors can affect this amount.
Standard Deposit Requirements
In general, most Australian lenders require a deposit of at least 20% of the property's purchase price (plus costs) to avoid additional costs like Lenders Mortgage Insurance (LMI). For example, if you're buying a property for $600,000, a 20% deposit would amount to $120,000. This standard deposit helps secure your loan and reduces the risk to the lender, meaning you won’t need to pay LMI, which can be quite expensive.
What if You Don’t Have a 20% Deposit?
If saving 20% seems out of reach, don't worry – it's not a strict rule. Many lenders offer home loans with deposits as low as 5-10% of the property’s value. However, with a smaller deposit, you may need to pay LMI. LMI is a one-off insurance premium that protects the lender if you're unable to repay the loan, but it can add thousands to your costs. The amount of LMI depends on your deposit size and the loan amount, so it’s worth exploring your options with different lenders.
For instance, if you were looking to purchase a $500,000 property with a 10% deposit, you would need $50,000 upfront, plus any additional LMI charges.
First Home Buyer Grants and Schemes
As a first home buyer in Australia, you may be eligible for several government grants and schemes designed to make homeownership more affordable.
First Home Owner Grant (FHOG): Depending on the state or territory, you may qualify for a grant ranging from $10,000 to $20,000, particularly for newly built homes.
First Home Loan Deposit Scheme (FHLDS): This federal government initiative allows eligible first home buyers to purchase a property with a deposit as low as 5% without paying LMI. The government guarantees part of the loan, allowing you to avoid LMI.
First Home Super Saver Scheme (FHSSS): This scheme allows you to save money for a home deposit within your superannuation account, offering tax benefits that can help you grow your deposit faster.
Stamp Duty Concessions: Many states and territories offer stamp duty concessions or exemptions for first home buyers, potentially saving you thousands.
Additional Costs to Consider
Beyond the deposit, there are other upfront costs to consider when purchasing a home. These include:
Stamp Duty: A state-based tax that varies depending on your property’s price and location. As a first home buyer, you may be eligible for concessions or exemptions, depending on your state’s policies.
Legal and Conveyancing Fees: These cover the cost of a solicitor or conveyancer to manage the legal aspects of the property purchase.
Building and Pest Inspections: Ensuring the property is structurally sound and free from pests is crucial before making a purchase.
Loan Application Fees: Some lenders may charge fees to process your home loan application.
How to Boost Your Deposit Savings
If you’re aiming to build a larger deposit, here are some tips to accelerate your savings:
Set a Budget: Track your income and expenses to find areas where you can cut back and save more for your deposit.
Open a High-Interest Savings Account: Store your deposit savings in a dedicated account that offers a higher interest rate to grow your funds faster.
Take Advantage of the FHSSS: Contributing extra funds to your superannuation can reduce your taxable income and help you save for a deposit at the same time.
Consider Government Schemes: If you're eligible for the FHLDS or FHOG, these schemes can significantly reduce the amount you need to save upfront.
Conclusion
As a first home buyer in Australia, the deposit you need will vary depending on factors like the lender, property price, and your eligibility for government support. While a 20% deposit is ideal to avoid Lenders Mortgage Insurance, many buyers successfully purchase homes with deposits as low as 5-10%. Make sure to explore the available grants and schemes to maximize your opportunities and minimize upfront costs. At Rosh Partners, we can help guide you through the process and find the best loan options for your situation, making your path to homeownership smoother and more accessible.
