How Much Deposit Do I Need?
When looking to finance property, one of the most important factors to consider is how much of a deposit will be required.
The deposit amount will vary depending on the type of loan being applied for, and each banks individual lending policy. In general terms this can be summarised as follows.
Owner occupied properties
Many lenders normally require a minimum deposit equalling 5% of the purchase price. Eg for a $400,000 property you would need a deposit of $20,000.
This deposit would need to be made up of what the banks call “genuine savings”, this is considered to be money that has been held or accumulated in a customer’s bank account for 3 months or more.
If a 5% deposit is not available then other options you may consider include a family guarantee loan (where a family member allows the bank to take a limited mortgage over their property, taking away the need for a deposit) or using an alternative lender such as Keystart, who require a minimum deposit of 2%.
Another thing to consider is the additional cost related to a purchase, such as stamp duty, settlement fees and other bank and state government charges. These fees will need to be accounted for over and above the banks minimum deposit requirements. Please note that if you are a first homebuyer stamp duty may be waived or discounted depending on your purchase price, and which state you are buying your property in.
Unlike owner occupied properties, investment loans now generally require a deposit of 10% of the purchase price of the home. Eg for a $400,000 property you would need a minimum deposit of $40,000
This deposit can come from physical cash held, or equity in another home. In addition you would need to have sufficient funds / equity to cover all associated costs such as Stamp duty, Bank fees and state government charges.
Financing an investment property normally requires a greater amount of research and planning prior to your purchase. It is recommended that you obtain advice from accountant accountant and finance provider before proceeding to purchase an investment home.
To learn more about how to qualify for a home loan, including banks minimum deposit requirements, feel free to talk to one of our friendly consultants today on 1300 308 225