Hot tips on house deposits
On the hunt for a home? G.J. Gardner share their inside expertise on house deposits, reaching your goal and getting into the property market.
THE SHORT STUFF
If you’re looking to get started in the property market, there’s one burning question you’ll need to answer: “how much do I need to save for a house deposit?”
The very short answer is somewhere between 5 –20% of the purchase price.
A DEEPER DIVE
Let’s delve in deeper, as there are lots of factors involved. To start with, most banks will finance home loans of up to 95% of the purchase price. This is dependent on your ability to prove your employment history and savings record. Every bank is different, so it’s worth shopping around or using a mortgage broker who can compare different loans for you.
If you’re in a field like freelancing it might make it hard to get a traditional loan so it’s worth knowing that there are always specialist mortgage brokers you can turn to.
IS BIGGER BETTER?
When it comes to house deposits, the answer is a resounding “YES”. The more you save, the stronger your position when it comes to interest rates and repayment amounts. And if you can make the magic 20% mark, you’ll usually avoid paying Lender’s Mortgage Insurance (LMI). According to Canstar, there’s a lot of confusion in the market about LMI. They explain LMI as:
“…an insurance policy that protects the lender from financial loss in the event that the borrower can’t afford to keep up their home loan repayments. The financial institution may make it a condition of borrowing that you pay for a lender’s mortgage insurance policy.”
How much this insurance costs depends on your individual circumstances –like your deposit amount, but usually it can be factored into your repayments so it’s not an up-front cost.
THE GOOD NEWS FOR FIRST HOME BUYERS
Even if you’re aiming for a deposit on the smaller side, there are some financial incentives to help those new to buying (or building) a home.
First home buyers’ grants and concessions vary by state or territory. But what’s great news is that they are largely geared towards new home buyers: whether you’re buying off the plan or building from scratch.
Although it’s not available yet, the Australian Government has proposed a new scheme that allows first home buyers to save a home deposit within their super fund. Saying that, this could boost savings by up to 30% towards a first home. You can check the Treasury website for further updates.
OTHER FACTORS TO KEEP IN MIND
You should also budget for some extra costs on top of your deposit. The biggest one is stamp duty, which you may be able to avoid if you’re a first home buyer. If you’re building a new home, you can avoid building and pest inspection costs; otherwise, you’ll need to factor these in. It’s wise to budget for a solicitor and removalist as well.
Want to know more?
Want a personal chat about getting into your dream home? Get in touch today! Give G.J. Gardner Homes a call or drop in for a chat.