You might be closer to buying a house than you think


Nick Bendel

Nick Bendel

Apr 30, 2019( 4 min read )

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Housing affordability is one of the key issues of this election, yet it’s actually becoming easier to enter the property market in much of Australia.

Of course, ‘easier’ doesn’t mean ‘easy’. It’s still tough to save a deposit.

But as new statistics from Domain show, house prices fell in Sydney, Melbourne, Brisbane, Perth and Canberra during the year to March.

If you live in those cities, and you want to enter the market with just a 5 per cent deposit, home ownership might be closer than you think.

A lot of borrowers don’t realise it’s possible to buy a home with such a small deposit – yet there are actually more than 75 lenders that allow home buyers to borrow up to 95 per cent of the value of their property, according to a RateCity comparison search.

Who offers 95% mortgages?

Australia’s 10 biggest home loan lenders allow borrowers to take out mortgages with as little as a 5% deposit. They are Commonwealth Bank, Westpac, NAB, ANZ, ING, Suncorp Bank, Bendigo & Adelaide Bank, Macquarie Bank, Bank of Queensland and ME Bank.

How much of a deposit you need in each capital city

Here’s how much you’d need to save if you wanted to put down a 5 per cent deposit and buy a house valued at your capital city’s median price:

City Median house price Prices trending… 5% deposit
Sydney $1,027,962 Down $51,398
Melbourne $809,468 Down $40,473
Brisbane $563,666 Down $28,183
Perth $529,997 Down $26,500
Adelaide $542,474 Up $27,124
Hobart $478,247 Up $23,912
Canberra $722,440 Down $36,122
Darwin $514,546 Up $25,727

Which other banks offer 95% home loans?

A wide range of other banks offer 95% mortgages, including Auswide Bank, Bank Australia, Bank of Melbourne, BankSA, Bankwest, Gateway Bank, Greater Bank, Heritage Bank, IMB Bank, MyState Bank, P&N Bank, Qudos Bank, St George Bank, Regional Australia Bank and Teachers Mutual Bank.

Here’s how much you’d need to save if you wanted to put down a 5 per cent deposit and buy a unit valued at your capital city’s median price:

City Median unit price Prices trending… 5% deposit
Sydney $696,935 Down $34,847
Melbourne $466,892 Down $23,345
Brisbane $372,852 Down $18,643
Perth $347,596 Down $17,380
Adelaide $312,459 Down $15,623
Hobart $363,418 Up $18,171
Canberra $426,719 Down $21,336
Darwin $313,462 Down $15,673

Which credit unions allow 5% deposits?

Various credit unions allow 5% deposits, including BCU, Community First Credit Union, Credit Union SA, CUA, Family First Credit Union, Horizon Credit Union, Illawarra Credit Union, Macquarie Credit Union, Northern Inland Credit Union, People’s Choice Credit Union, Queenslander Country Credit Union, Queenslanders Credit Union, Southern Cross Credit Union, Summerland Credit Union and Transport Mutual Credit Union.

But wait, there’s more (costs)

If you think that buying a property with just a 5 per cent deposit seems too good to be true – well, it kind of is.

That’s because you’ll have to pay some other costs as well.

First, your lender will almost certainly make you pay lender’s mortgage insurance (LMI), which usually applies when your deposit is less than 20 per cent. LMI is an insurance policy designed to protect the lender (not the borrower) in case the borrower defaults on the mortgage. If you’re a first home buyer, and you put down a 5 per cent deposit on a $500,000 property, you’ll have to pay an estimated $15,960 in LMI, according to Genworth.

Second, you might have to pay stamp duty. This is a state tax, so it varies from state to state. For example, a first home buyer who purchases a $500,000 house would be exempt from stamp duty in New South Wales, Victoria and Queensland, but would have to pay $21,330 in South Australia.

Third, you’ll have to pay for conveyancing, which will set you back about $1,500.

Finally, you might choose to get a building and pest report, which would cost about $1,000.

Which non-bank lenders allow 95% LVR home loans?

You can also get mortgages with a loan-to-value ratio of 95 per cent through non-bank lenders such as AFM, Aussie, Australian Financial, Freedom Lend, iMortgage, Kogan Money, Liberty, Mortgage House, Pepper Money, RAMS, Resi, Resimac, State Custodians, Virgin Money and Yellow Brick Road.

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