How much do I need upfront?

The largest hurdle is generally getting your deposit together, although there are a number of other costs you need to be aware of.

How much do I need for a deposit?

If you have started saving you can start to look at buying once you have around 5% of the purchase price.

If you have between 5% and 20% of the purchase price, you may need to pay what’s called Lenders Mortgage Insurance, which enables your lender to lend you a larger percentage of the purchase price. This can be included either in your upfront costs or in your loan repayments so that it’s spread out over the term of the loan.

The estimates below do not take into account the money you need for upfront costs.

Example of deposit amounts

Home purchase price                                    Minimum deposit

———————————————–With mortgage insurance | Without mortgage insurance——
$200,000                                                             $10,000                              $40,000
$300,000                                                             $15,000                              $60,000
$400,000                                                             $20,000                              $80,000
$500,000                                                             $25,000                              $100,000
% of purchase price                                                5%                                        20%

If you have a deposit of over 20%, you can avoid the extra costs of Lenders Mortgage Insurance.

These figures may differ if you are self-employed and applying for a low doc loan. For more information, read up on low doc loans for the self employed.

What if I don’t have a deposit?

If you don’t have a deposit, there are a number of options that can help you get your home sooner.

You may be able to use a guarantee from your parents (supported by a mortgage over their property, or a term deposit) as equity to assist you with your home purchase. These are generally referred to as family guarantees.

Another option is a Deposit Protect Bond, which lets you go ahead with a purchase before you have an actual cash deposit ready. It’s useful if your cash is tied up in other investments or if you’re eligible for the First Home Buyers Grant and using that to help fund your deposit. You can use a Deposit Protect Bond at multiple auctions or by private treaty.

What other costs are there?

There are other up front costs you should consider when you are doing your sums, including:

Conveyancing and legal costs
Government fees including stamp duty, although this can be included in the loan
Title search and registration fees
Pest and building inspections
Home building Insurance prior to settlement, and possibly contents insurance when you move in.

Geraldton Property Inspectors are not financial advisers or mortgage lenders and if you seek investment advice we advise you to talk to your lender or people who are qualified to do so.