How big of a deposit I need?
While a 20% deposit is often considered ideal by most banks, there are lenders who offer low deposit home loans with less than 20% down payment. Here's a breakdown of the deposit requirements you mentioned:
3% deposit: Some lenders may consider providing a home loan with a 3% deposit. However, it's important to note that a smaller deposit may result in higher interest rates and the need for Lender's Mortgage Insurance (LMI).
5% deposit: Many lenders offer home loans with a 5% deposit. With a 5% deposit, you have a better chance of accessing a wider range of loan options and potentially avoiding LMI depending on the lender.
10% deposit: A 10% deposit is a common requirement for low deposit home loans. With a 10% deposit, you have even more lender options and may have the opportunity to secure a more competitive interest rate.
15% deposit: A 15% deposit provides an even stronger position when applying for a home loan. With this deposit amount, you're likely to have more lender options available to you and potentially qualify for more favorable loan terms.
It's important to remember that each lender may have different criteria and requirements for low deposit home loans. Additionally, the specific terms and conditions of the loan, such as interest rates and LMI, will vary based on individual circumstances and the lender's policies.
To determine the exact deposit requirement and explore available options tailored to your specific situation, it's recommended to speak with a mortgage broker or contact lenders directly. They can assess your financial circumstances and provide personalized guidance on the most suitable low deposit home loan options for you.
How Do I Qualify?
- Good income: Lenders assess your income to determine your ability to make mortgage repayments. Having a stable and sufficient income is crucial.
- Loan purpose: Most lenders offer low deposit home loans for purchasing, refinancing, or building owner-occupied or investment properties. Other purposes, such as debt consolidation, may be considered based on the strength of your application.
- Property type: Some restrictions may apply to certain property types and locations, such as mining towns, high-rise units, or display homes. It's important to check the lender's requirements in this regard.
- Clean credit file: A good credit history is important, with no late payments on personal loans, credit cards, or rent. However, some lenders may be less strict if you have a deposit of at least 10% or more.
- Genuine savings: Most banks require applicants to demonstrate genuine savings of at least 5% of the purchase price, accumulated over a period of 3 months. However, certain lenders may have alternative criteria that don't require genuine savings.
- Reasonable asset position: Showing a relative level of assets, such as owning a car, having savings, or other valuable possessions, can strengthen your application.
- Stable employment: Lenders prefer borrowers who have stable, long-term employment. Typically, they look for full-time employment with a minimum employment history of 5 months in the current role or 2 years in the same line of work.
- Low level of debt: While a good credit file is important, having minimal unsecured debts (personal loans, credit cards) is crucial when borrowing at a high Loan-to-Value Ratio (LVR). Ideally, the total unsecured debt shouldn't exceed 5% of the property purchase price
It's important to note that not all lenders offer low deposit home loans, especially major banks. Non-bank lenders are often more flexible in their requirements and may have competitive interest rates. Working with a mortgage broker can help you navigate the options and find a lender that suits your needs.