Buying a dream house is an exciting and life-changing decision. However, various challenges come with the house purchase. Among them, one is saving for a house deposit. Now, the question arises: how much money do you need for a house deposit? Let’s understand house deposit requirements.
How much deposit do you need to buy a house?
If you don’t have enough savings, you may need to take out a home loan. To get a home loan, you must have a small amount of cash deposit. The deposit will cover a required percentage of the property price that you want to buy, and the home loan will cover the rest of the amount. In most scenarios, the home loan lenders can lend up to 80% of the property price, which means you must have a 20% house deposit. However, some government grants allow eligible first-home buyers to buy a house with less than a 20% deposit.
Home Guarantee Schemes for Eligible First Home Buyers with Less Deposit
The Home Guarantee Scheme (HGS) is a government initiative that allows eligible first-time home buyers to buy a house with a deposit of as little as 2-5%. These government schemes guarantee up to 15% of the property price and up to 18% for single parents or guardians to avoid paying lender’s mortgage insurance (LMI). The following are government schemes available for eligible first-home buyers:
- First Home Buyers Grant
The First Home Buyer Grant in Melbourne is for eligible first-home buyers to purchase a home with a deposit of as little as 5% without paying LMI. The grant may vary from one state or territory to another state or territory.
- Regional First Home Buyer Guarantee
Regional First Home Buyer Guarantee is for eligible first-time home buyers to purchase a home in a regional area with a deposit of as little as 5% without LMI.
- Family Home Guarantee
Family Home Guarantee allows single parents or guardians with at least one dependent to purchase a home with a deposit of as little as 2% with no LMI.
Can I Buy a House with $10,000 Deposit?
It is based on the value of the house you want to buy. If the property value is $100,000, then $10,000 would be enough as a deposit. However, for more information on the amount you need as a deposit, you can ask Star Homeloans.
Things You Must Know When Taking Out a Home Loan
- Loan to Value Ratio (LVR)
You may have heard the term LVR when taking out a home loan. LVR means how much you can borrow, demonstrated as a percentage of the lender-assessed value of the property. For instance, if you have a 25% deposit of the lender-assessed property value, then you may have to get the rest 75%. This means your Loan-to-Value Ratio would be 75%.
- Lenders Mortgage Insurance (LMI)
In case, your LVR is above 80%, then you may have to pay LMI. Generally, it protects the home loan lender if you default on your home loan.
- LMI Waiver for Eligible Professionals
If you work in a medical, legal, or accounting profession, you qualify for an LMI waiver. For more information on how you can save more on a house deposit, you can ask Star Home Loans in Australia.
How much you can borrow to buy a home?
When you think about buying a property, one thing that will you want to know is the amount you can borrow to buy a home. The amount you can afford to borrow depends on numerous factors, such as:
- Income and expenses
Your income and expenses are key factors to consider the amount you can afford to borrow. As you need to repay the borrowed amount, so must consider your income and expenses.
- Deposit savings
If you have a bigger deposit, you’ll need to have a smaller home loan amount and the less interest you will pay. Home Star Home Loans in Australia can help you buy a house with a minimum deposit.
- Credit score
Saving for a deposit is a great way to show that you can repay the borrowed amount on time. The lender will also check your credit score, which depends on your borrowing and repayment history.
Conclusion
When thinking of buying a house for the first time, you may have various questions in mind, including a house deposit. Moreover, if you want to secure a perfect home loan with the right interest rates, you can speak to mortgage brokers at Star Homeloans in Australia.
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