Property - What deposit do I need for a home loan?

Your home loan deposit is viewed as ‘your contribution’ to the purchase price of the property you wish to buy. Your deposit is one of the biggest factors in determining the kind of loan you may be eligible for and the amount you can borrow to buy your home.

To apply for a home loan, you need to show evidence of regular savings over a period of at least three months. This can include a mixture of cash, shares, equity in an existing property, Term Deposits, an inheritance or gifts.

So is it possible to get a high LVR loan these days if you don’t have much of a deposit? The simple answer is, it depends.

The Big Four banks are generally willing to finance home purchases of up to 95%, provided you have a very strong employment history and savings history and evidence of genuine savings. The loan amount will also strongly influence the lender’s decision.

Non-bank lenders are also offering up to 95% of the property value and capping Lenders mortgage Insurance (LMI) this means the borrower can get a 95% loan and then add the cost of the LMI to the loan.

For instance, on a home purchase of $400,000, you could access a 95% loan of $380,000, meaning you’ll need to provide a cash deposit of $20,000. However, you can add the cost of LMI of to the loan amount (up to $8,000), which brings the total loan up to $388,000 or 97%. 

Ultimately, it doesn’t matter whether you’re looking to buy in WA or Western Sydney for investment purposes or for your own home: if you’re in the market for a low-deposit loan, there are certain things you can do to boost your chances of approval.

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