Deposit

A deposit is the first brick in your home loan application, so here are some tips to help you prepare for when it comes to realising your home ownership dream.

How much deposit?

This is a common concern for potential home buyers wanting to secure a loan as soon as possible, while patient ones will tolerate the wait to save more for a bigger down payment. Generally, borrowers will need to have saved at least 5 to 10 percent of the purchase price as deposit. For example, if you are purchasing a $600,000 home, a minimum 5 percent deposit of $30,000 may be required.

How do I get it?

Besides the tried-and-true method of saving dollar by dollar, government incentives such as the First Home Owner Grant and the First Home Saver Account can go a long way in helping you collect the funds you need.

Alternatives

Before the global financial crisis a few financial institutions offered zero-deposit home loans, allowing people to obtain a mortgage without putting down a deposit. Today banks are more risk averse and less inclined to accept a borrower with less than 5 percent down payment – and even then you'll likely be up for lender's mortgage insurance.

 Remember the other fees

A deposit is not the only thing that you will need to pay for when you get a home loan. Fees for loan application and settlement, valuation of the property, Lenders Mortgage Insurance (LMI), and stamp duty can in excess of 5 percent on to the property price.

Tips for savings

It's not rocket science – the more you save upfront, the less you will have to borrow to buy and therefore the less interest you'll have to fork out in the long run.  To work out the savings, visit RateCity's home loans calculator today.

If you’re already considering buying a property, you can compare home loans online to get the lowest interest rates for home loans and the highest rates for savings accounts. It’s possible to have the best of both worlds when it comes to saving up for your home loan deposit.