How Much Do I Need for a Home Loan Deposit?
If you’re feeling overwhelmed at the thought of needing to save 10-20% for a home loan deposit, you’re not alone. If you have had a stable employment history, a good rental and savings record you may only need as little as a 5% deposit, and here’s how…
Taking out Lenders Mortgage Insurance on your loan reduces the lenders risk and allows you to purchase your dream home or investment property sooner. This can open up many possibilities for you as a new home buyer – better location, larger home, ability to do renovations -simply put, LMI brings you that much closer to achieving your home ownership dreams. Unlike traditional insurance products, there is a “one off” premium payable on settlement of your loan. In some cases you can capitalise the LMI premium to the loan amount.
If you are a first home buyer, here’s a case study that’ll help you.
Case Study: Young Professional
Stephanie graduated from university five years ago and has been working for a law firm in the city. She currently lives at home with three younger siblings and would like to move out and start looking for a place of her own. While living at home she has been able to save for a deposit and would like to buy rather than rent.
A friend of Stephanie’s recommended she call MortgageDirect who are home loan lending specialists. She shared with them her ideal home and property aspirations. They advised Stephanie that using Lenders Mortgage Insurance (LMI) would help her get into her home by allowing her to purchase her new home with a 5% deposit and funds for the LMI premium. After speaking with MortgageDirect, Stephanie is confident she can afford to service a loan of $520,500 – while factoring in a buffer against interest rate rises and uncertainties. This means that with her $42,000 savings, she will be able to buy her first home, a one bedroom apartment for $550,000.
Crunching the numbers
My income is presently $95,000 p.a.
I’ve saved a deposit of $42,000*
I received FHOG of $10,000 and exemption for stamp duty
I used LMI to get a loan for $520,500**
To buy a dream home for $550,000
For a monthly repayment of $2,582 ($595pw)**
Including an LMI cost of $98pm***
· Allowed Stephanie to start building her financial security and wealth
To find out how much you could borrow or what your income after tax is, use our calculators, it’s so quick and easy!
*includes 5% deposit and funds for LMI premium
**30-year term, assumed a rate of 4.29% p.a.
***monthly when capitalised to the loan