How Much Deposit Do You Need to Buy Your First Home?

Buying a home involves several costs, and the amount you need to save for a deposit can vary based on multiple factors. Every scenario is different, and a mortgage broker can help you navigate these complexities. Here’s a detailed guide to understanding how much deposit you need to buy your first home.

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Key Factors Affecting Your Deposit:

Bank Lending Policies: Different banks have different lending policies. Many are willing to lend up to 95% of the property’s value, while some may allow you to add the cost of Lenders Mortgage Insurance (LMI) to the loan, increasing your Loan-to-Value Ratio (LVR) up to 98%.
Government Assistance Programs: Each state has its own set of rules for stamp duty, fees, and charges. For first-time home buyers, many states offer special programs, including stamp duty exemptions, concessions, or lump sum grants. To see if you qualify and what savings are available in your state, visit the first home website
Conveyancing (Legal) Costs: Legal fees for conveyancing typically range from $1,500 to $2,500.
Stamp Duty Costs: These vary by state and can be a significant expense unless covered by a government assistance program.
Lenders Mortgage Insurance (LMI): Usually required if borrowing over 80% of the property's value. LMI is insurance that protects the lender if you default on your loan. The cost is typically passed on to you, the borrower. However, if you qualify for the Government Home Guarantee Scheme, this expense can be waived, providing a significant saving. Some lenders also waive LMI for selected professions and industries, so it's worth discussing this with your mortgage broker.

Example Calculation:

‍Here is a simple example for someone that qualifies for the Victorian (no stamp duty) and Federal Government (No LMI) programs.

Buyer (Victorian Single)

Income: Single earning $120K per year.
Purchase Price: $400,000

Costs:

Stamp Duty: Waived
LMI: Waived
Government Fees: $1,175
Own Legal Fees: $1,500

Total : $402,675

Maximum Loan (95%): $380,000
Your Needed Deposit: $22,675

Online Calculators: A mortgage broker can provide tailored advice for your situation, but if you want to start building your own knowledge, these calculators are a great starting point:

Action Plan:

Calculate Your Stamp Duty: Use an online calculator to estimate the stamp duty based on your property’s value.
Calculate Your LMI: Determine if you need to pay LMI and how much it will cost.
Ask a Parent: If possible, ask a parent to act as a limited guarantor to help secure your loan.
Research Government Programs: Check your eligibility for the Government Home Guarantee Scheme and other grants and rebates in your area.

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Summary

‍Understanding the various costs involved and knowing how much deposit you need can help you better prepare for buying your first home. With the right planning and assistance from a mortgage broker, you can navigate these financial hurdles and move closer to home ownership.

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