19 Mar 2021

Deposit: How Much is Enough for a New Home Purchase?

Deposit: How Much is Enough for a New Home Purchase?


A home purchase like a vehicle purchase requires a deposit if you receive financing. The amounts required vary and different circumstances offer exceptions. A deposit minimises the lender’s risk. They are willing to finance your purchase but want assurance you are going to see the repayments through. In general, a lender asks an applicant for a 20% deposit. Here are some things to consider.

How Much Do I Need Up Front?

Lenders ask for a 20% down payment on a home purchase, which is one fifth of the total cost. By asking for 20%, the lender ensures you have skin in the game. For example, 20% of $500,000 is $100,000, which is not a small amount. In some cases, $100,000 is an applicant’s net annual income. For others, it takes more than one year to earn that much. The deposit attaches the homeowner to the house. Essentially, you are less likely to bail on the mortgage. Individuals are no longer living in their home for 15 or 30 years. However, they are living in it at least ten. Moving from one home to another in the middle of a mortgage is different from abandoning a home loan.

Low- to No-Deposit 

The Australian government is well aware that the young have the most difficulty purchasing a first home. So, deposit exceptions exist. Keep in mind that most individuals who give under 20% incur the Lender’s Mortgage Insurance charge. Once you pay off enough of the home loan, the charge goes away making repayments more manageable.

It is possible to borrow 100% of the property’s value with a Family Pledge or a 100% House and Land package. Under the Family Pledge, a family member offers their house as security. For more information, contact our team. 

Deposit Conclusion

A deposit is an important home purchase requirement. Lenders request 20% of the property’s value up front to minimise risk. Ideally, you would give more up front. Those who cannot provide at least 20% have options. Our Mortgage House team walks you through them. Plus, our best rate mortgage calculator is available to you for free online. It allows you to explore several home loan interest rates.


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