How much deposit do I need for a home loan?
Traditionally you need at least a 20 per cent deposit to get a home loan. However, the amount you need to save is dependent on the loan to value ratio (LVR). LVR is the loan amount divided by the value of the property. For example, if you’re looking at a property with a purchase price of $200,000. If you have a deposit of $40,000, your LVR is 80% (160k/200k).
Can you secure a loan without a deposit?
If you don’t have a 20 per cent deposit, you will generally be required to pay for lenders mortgage insurance (LMI). Lenders mortgage insurance provides protection to the lending institution in the event that you default on your home loan. it is a one-off charge that gets included in your loan amount or is required to be paid upfront.
A guarantor can also volunteer their home equity as security for your loan. In the event that you default on your loan, your guarantor would wear the responsibility of paying off the loan.
What is stamp duty?
Stamp duty is a charge which is applied by state governments in Australia on transactions relating to the transfer of land or property. It is paid upfront and needs to be budgeted for in addition to your loan deposit. The amount of stamp duty you are required to pay differs in each state.
What’s a simple way to increase my borrowing capacity?
The key to increasing your borrowing capacity is to reduce your debt. One of the easiest ways to achieve this is to lower your credit card balance, reducing the perceived risk to lenders.
