Saving enough money for a home deposit is crucial to achieving the dream of buying a house in Australia. But do you know how much money you actually need? Have you ever wondered how much you should be saving per month to achieve it?
This is what we are here for! This article will help you figure out how much deposit you need to buy a house, be it a brand new home for your family or an investment property.
How much deposit do I need to buy a house in Australia?
The answer is: it depends. The amount of deposit varies on the price of the property you are purchasing. It may also be impacted by potential government grants you might be eligible for and how much money you will be able to receive from your lender.
Normally first-time home buyers work with a deposit of 5%; however, always keep in mind the other costs involved, such as stamp duty, registration of title, legal and conveyancing fees, building and pest inspections, insurance, etc.
If you wish to reduce your costs, be conservative and consider paying a 20% deposit. This way, you will not have to pay lenders mortgage insurance. However, also keep in mind existing cost with rent and how the property market is performing in the area you are looking to buy. It’s easy to get caught chasing that 20% for a long period of time.
Lenders mortgage insurance
It is important to have in mind that when paying a deposit lower than 20%, chances are your lender will require you to pay the LMI (lenders mortgage insurance) to minimize the risk of lending money to someone with little savings. The fee will also vary according to the property’s price and how much deposit you are putting down.
Talk to us and we can assist you in understanding all calculations and your ideal deposit amount.
How much should you save to buy a house?
Ok, so you understand the concept of calculating the deposit, but let’s make things even more clear:
Let’s use an example of a first-time buyer purchasing a house valued at $650,000 in NSW:
Estimated funds needed: $57,000 (considering deposit and costs with a lawyer but excluding inspections)
Home loan – $616,500
Repayment* – $547 per week.
Estimated funds needed:: $69,000 (considering deposit and costs with a lawyer but excluding inspections)
Home loan – $597,700
Repayment* – $530 per week
20% Deposit (in this scenario, LMI is not necessary)
Estimated funds needed: $132,400 (considering deposit and costs with a lawyer but excluding inspections)
Home loan – $520,000
Repayment* – $462 per week
Which option would be better?
This also depends on your budget, there is no right or wrong. If you want to check exactly how much deposit you need to buy a house in Australia or discuss your possibilities further, please contact us! Our team will sit with you, understand your property goals and financial needs to guide you every step of the way, making sure you’re always on track.
*Repayments are being calculated based on an interest rate of 2.3% per annum. However, you should always check with your broker or lender if rates apply to your particular scenario.