How much deposit do I need to buy my first home?

It’s one of the biggest challenges facing a first-time home buyer – when to buy.

How much deposit do I need before I can get finance to purchase a property?

Do I need to wait until I have 20% of the purchase price saved?

Should I buy with the bare minimum and wear the extra cost of lenders mortgage insurance (LMI)?

With property prices in Sydney growing at such a pace, many prospective first home buyers are feeling frustrated. They finally save their deposit but prices have risen again and their target homes are out of reach.

How much deposit does a first-home buyer need?

A minimum 5% deposit plus costs is typically required. The costs associated with purchasing a residential property – including stamp duty and legal fees – are usually about 5% of the purchase price. For example, if a property is $500,000 to buy, budget on needing at least $50,000 in your piggy bank ($25,000 deposit savings + $25,000 for purchase costs)

There are ways to move around this, for example guarantor loans (read our info on this here).

Are you better off waiting longer to buy so that you can save a bigger deposit?

So whilst many lenders will lend you 95% of your homes value, this isn’t always the best option. While each situation is different, the bigger the deposit the better. If you are borrowing more than 80% of the value of your home you will need to pay lenders mortgage insurance (LMI). LMI is a once off premium you pay based on the amount you are borrowing, so even if you don’t get to 20% every $ extra you have will reduce your premium.

That being said, if it takes you another 12months to save the 20% and prices continue to increase you may be in the same situation in 12 months time.

As we said, every situation is different. So the best way to navigate this particularly tricky one is to get in touch and let us help you.