How Much Do You Need For A Home Loan Deposit?

What counts towards a deposit?
Can I use the FHOG as a deposit?
First Home Loan Deposit Scheme (FHLDS)
How much of a deposit do you need for a home loan?

Congratulations! You’ve decided to move into the world of home ownership! Before you start picking out bathroom tiles and kitchen sinks, there’s one very important step you need to take; the home loan. There is so much information out there these days and so many different options that it can seem really overwhelming. So we’re going to share some tips and information with you to help it seem a lot less scary! The first question everyone asks is, how much do I need for a home loan deposit? Well, as Dad would say, how long’s a piece of string? *cue eye roll*. The truth is, there is no set amount. In fact these days you can
get $0 deposit home loans, but be warned, they do come with consequences such as Lenders’ Mortgage Insurance or a Low Deposit Premium. You can read more about Lenders’ Mortgage Insurance (LMI) in our blog. The general rule for home loan deposits is 10%, but preferably 20% of your borrowing amount. So if you’re borrowing $300,000 then you’re looking at a $60,000 deposit. If you’re borrowing more than 80% of the home value (so you have less than a 20% deposit) you could be looking at having to pay LMI. $60,000 seems like a lot of money, right? But the harder you work to build a deposit, the less you’re going
to be paying for it in the long run, literally! In fact, you could save yourself thousands over the lifetime of your loan simply by having a higher deposit.

Here are 5 ways you can reach your deposit goal:
1. FHOG
If you’re a first time home buyer, you can use the First Home Owners Grant towards your deposit. In Queensland that grant currently sits at $15,000, so that’s 25% of your deposit right there! You can read more about the FHOG in our blog.
2. First Home Loan Deposit Scheme
Again, this one is only for those first home buyers who haven’t had a home loan before. This is a relatively new scheme only introduced at the beginning of 2020 in which the Australian Government will guarantee 10,000 low-deposit loans per year for low and middle income earners who have saved up a deposit of as little as 5%. Under this scheme you will also not be required to pay LMI.
3. Term Deposit
Term deposits are savings accounts that help you earn a fixed rate of interest for a fixed length of time. So the more you deposit into these accounts, the quicker your money will grow with a higher interest rate. You usually need a minimum amount to open one of these accounts, so you might need to save your coffee money for a few months before changing over to one of these. There is also a penalty should you need to access your money early, so make sure you’re prepared for the
long term commitment!
4. Guarantor
This isn’t for everyone and requires a fair bit of trust from everyone involved, however many people use a guarantor to help secure a loan. A guarantor is someone that is willing to take on the responsibility of paying off a loan should you ever be unable to meet the repayments. Most of the time a guarantor is an applicants parents. A guarantor means you won’t have to pay LMI and it means you can borrow 100% of the property price, so no deposit required! Don’t forget that there
are long term effects of a $0 deposit loan so make sure you weigh up the pros and cons of this option.
5. Budgeting
This might seem like the most simple and obvious way to save a home loan deposit, but it’s often one of the hardest because it means changing our habits! And we know how hard habits can be to break. We recommend doing a budget planner so you can see exactly where your money is going. The Queensland Government offers a simple and easy one here. You then need to commit to the changes! Do you need that daily café coffee? Or could you make one at home for less? We suggest
making a savings account that isn’t linked to any of your other account. Making it less accessible will help stop you dipping into it.

For sound financial advice based on your personal circumstances, we suggest talking to a financial professional, whether it be your local bank, a home loan lender or mortgage broker.