The minimum deposit required for first-time home buyers in Australia can vary based on factors such as location, government assistance, and individual financial circumstances. Typically, a deposit equal to or greater than 20% of the property’s purchase price is recommended. However, there are options available for those who cannot meet this threshold.
General Guidelines
- Standard Deposit: The recommended deposit is usually 20% of the property’s purchase price. A larger deposit can lead to better loan terms and lower interest rates, saving you significant money over the life of the loan.
- Low Deposit Options: Some lenders may accept deposits as low as 5%, though this often comes with additional costs such as Lender’s Mortgage Insurance (LMI). LMI is typically required if your deposit is less than 20% and it protects the lender in case you default on the loan.
State-Specific Requirements
- New South Wales (NSW): The average property prices in NSW, particularly in Sydney, are quite high, often requiring a substantial deposit. The standard deposit is 20%, but the NSW government offers grants and stamp duty concessions to help first-time buyers.
- Victoria: Similar to NSW, property prices in Victoria, especially Melbourne, are high. A 20% deposit is standard, but first-time buyers may be eligible for deposit assistance through various state programs.
- Queensland: In Queensland, a 20% deposit is also the norm. However, first-time buyers may benefit from transfer duty concessions and exemptions.
Government Assistance Programs
- First Home Deposit Scheme: This government scheme allows eligible first-time buyers to purchase a property with a deposit as low as 5% without paying LMI.
- First Home Super Saver Scheme (FHSSS): This program lets first-time buyers save for a deposit within their superannuation fund, allowing them to withdraw up to $15,000 in voluntary contributions per financial year.
- First Home Owner Grant: A one-off payment for first-time buyers that varies by state and territory. It can be applied towards the deposit, reducing the amount needed upfront.
Additional Considerations
- Loan-to-Value Ratio (LVR): LVR is a key factor for lenders, representing the amount borrowed as a percentage of the property’s value. A lower LVR typically results in better loan terms.
- Source of Deposit: Lenders generally prefer deposits that come from personal savings as it demonstrates responsible financial management. However, deposits from inheritance, government grants, or donations may also be accepted, depending on the lender’s criteria.
- Property Type and Location: The required deposit can vary based on the type of property and its location, with urban properties often requiring a higher deposit compared to rural ones.
Conclusion
While the standard recommendation is to aim for a 20% deposit, there are various options available for those who may not be able to meet this requirement. First-time buyers should explore government programs, state-specific grants, and consider the impact of LMI when deciding on their deposit amount. For personalized advice, it’s recommended to consult a mortgage broker or financial advisor.
Get in touch with a Sydney-based mortgage broker at sunil@philipsgroup.com.au for additional details.
