How much do you need?
What is the right amount to have as the deposit to buy a home?
It's not easy to provide a straight simple answer to this question.
It is a matter of several things that make up your individual situation (and it is 100% best to get your situation checked so that answers can be given that are relevant to you - fill in our full inquiry form here:)
Things that matter:
- Price of the property.
When you apply for your mortgage there are options of amounts that you could to borrow and this all depends on the Value of the property. The Value of the property and the price of the property can differ. The Bank will always use the value of the property when calculating how much can be borrowed against it as security - this is determined by their chosen independent property valuer. The options of amounts are as a percentage of the value of the property. Also know as LVR [Loan to Value Ratio].
For example a 98% LVR means 98% of the value of the property has been borrowed in order to complete the purchase. So on a property valued at $500,000, a 98% loan = $490,000 meaning there is $10,000 that you need to come up with yourself.
Same for a 95% LVR on $500,000 is $475,000 meaning you will need to come up with $25,000. You will likely have a better interest rate (meaning lower repayments).
Be also wary that there are other costs involved in purchasing that you will need to come up with other than the difference between the mortgage amount and the value of the home. This includes Conveyancing fees and stamp duty (currently there are concessions for first home buyers with Stamp Duty).
- Your financial situation. Your financial situation is made up of a whole host of major and minor details - some of which you might be completely unaware (including some financial history as well as your current financial status).
- The lender will only lend you the money based on the value of the property, the percentage that you are borrowing, and your ability to be able to make the repayments on the mortgage.
- The higher the LVR (i.e. 98% is a higher LVR than 90%) can mean a higher interest rate on the money that you borrow. HOWEVER, in considering being able to buy your own home, being in your own home SOONER rather than busting yourselves in order to try and save more to get a lower LVR and slightly better interest rate can be pulling you backwards - if you are paying rent while trying to save, and the property market makes house prices higher then you could end up worse by waiting.
There is a lot to consider and it can be confusing, just think about the best situation for you and your family to be in (we believe it's always best for you and your family to be in your own home).