Do You Need A Deposit For A Mortgage?

How much deposit do I need for a house?

Discovering the deposit amount needed for a mortgage can be as simple as clicking on any of Mortgage House’s fixed rate or variable rate home loans. As a general rule, banks and lenders will require a 20% deposit, meaning the amount will vary depending on the property value and loan amount. A deposit of that kind gives them the confidence to manage any risk, a risk that comes if a borrower defaults on their loan. That means you may be able to borrow up to 80% of the value of the property you are looking to buy, whatever the interest rate. However, Mortgage House also understands that some home buyers may not be able to afford the 20% deposit often required, especially as house prices continue to climb. That is where Lenders Mortgage Insurance, or LMI, can be an advantage.

LMI is an insurance that protects banks and lenders against default risks. However, it can also help home buyers by reducing the deposit amount needed for a mortgage. Taking out LMI means your cash deposit could be as little as 5%. LMI is common, with the Reserve Bank predicting that up to a quarter of Australian home buyers use it to get a lower deposit, or interest rate, deal. LMI can be incorporated into the upfront costs of your home loan. By adding it to your mortgage you pay it off over the life of the loan.

Are there any other upfront costs?

The deposit amount needed for a mortgage isn’t the only upfront cost you need to consider when looking for a home loan. Other upfront costs can include:

  • Legal fees. Home buyers will need a solicitor or a conveyancer when they look to buy a property, to help them with all the legal requirements and paperwork, including the contract of sale. They can also help answer any questions you have. Ask them up front what they will charge you.
  • Inspections. Before you buy a home, it is important to get a qualified person in to take a closer look. Home buyers can use builders or property inspectors to check the home for things such as structural integrity, pests, electrical safety and even any urgent repair or maintenance costs. These inspections can save you money in the long term and may even help you negotiate a lower price.
  • Removalists. It is always worthwhile to get a quote from a removalist before you budget for the deposit amount needed for a mortgage. Removalists can be expensive, especially if you are moving interstate.
  • Cleaners. If you are selling your existing home, or moving out of a rental, budgeting for professional cleaners can always be a clever investment.
  • Stamp Duty. Stamp Duty is a tax on the financial transaction of buying a home. Depending on where you live, whether it is your first home, and whether you are building a new home, the amount you pay will vary. Use Mortgage House’s Stamp Duty Calculator to find out more.
  • Exit fees. If you are refinancing your home loan or paying out your current home loan early, make sure you’re aware of any exit fees your current mortgage may have.

If I have a deposit, how much can I borrow?

Finding the deposit amount need for a mortgage is only one part of the home loan equation. The other is working out how much you may be able to borrow. If you have a cash deposit already saved, use a simple calculator to work out what that means for your loan amount. If you have a deposit of $120,000 saved, you may be able to borrow up to $480,000, allowing you to buy a home valued at $600,000. If you choose Lenders Mortgage Insurance, and you want to purchase a home valued at $600,000, you may only need a deposit of $30,000. Whatever your cash deposit, use our Borrowing Calculator to understand your possible borrowing power. Fill in the details as accurately as you can, and we’ll give you a figure of how much we may be able to lend you, remembering it is simply an indication. Your borrowing power can help give you an indication of the type of purchase price you can look for.

Borrowing Calculator

Loan Details

The interest rate for the loan.
% p.a.
What is the length of time to repay the loan?
years
Will the loan be for yourself or joint with another applicant?

Yes

No

Any person who depends on you for financial support e.g. your children?

Annual Net Income

Your net income per year i.e. after tax
$
Your partner's net income per year i.e. after tax
$
Any other income you may receive each year e.g. rent from a property, interest on savings or dividends from shares
$

Monthly Expenses

Personal monthly expenses e.g. rent, bills, shopping, fuel etc.
$
Any repayments you have to make each month to cover your credit cards or other loans
$
Any other monthly expenses
$

Your Monthly Repayment

per month

You Can Borrow Up To

Important Disclaimer: This is intended as a guide only. Details of terms and conditions, interest rates, fees and charges are available upon application. Mortgage House's prevailing credit criteria apply. We recommend you seek independent legal and financial advice before proceeding with any loan. The Comparison Rate for each of the home loan products contained in this page is based on a loan of $150,000 over a 25 year term. Fees and charges may be payable.

WARNING: The comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. * This mortgage calculator shows indicative repayments based on 12/26/52 equal repayments for monthly/fortnightly/weekly options.

Can I use a First Home Owners Grant as a deposit?

The amount of the First Home Owners Grant can vary depending on which state you live in, and sometimes also by what kind of house you are buying, and where you are buying it. Helping you borrow less isn’t the only benefit of a First Home Owners Grant. Getting off the rental treadmill and into the freedom of your first home can have many long-term benefits, and a First Home Owners Grant can make that a reality by being part of, or all of, the deposit amount needed for a mortgage.

If you aren’t a first home buyer, or the First Home Owners Grant isn’t enough for the deposit you’re after, there can be other ways to reach the deposit amount needed for a mortgage. Some banks and lenders will allow a gift to be used as part of a cash deposit, but they generally prefer to see you have a history of saving money. Another option in the same vain is a Family Pledge Loan. These mortgages allow for immediate family members to be able to use any equity in their home to guarantee your loan. You may also want to speak with our lending specialists about the suite of low deposit home loans available.