The Truth About Deposit Size

Many homebuyers believe that a 20% deposit is necessary to secure a home loan, but this isn’t always the case. While a larger deposit has its benefits, such as lower monthly repayments and avoiding Lenders Mortgage Insurance (LMI), it’s not a strict requirement.

Smaller Deposits: A Viable Option

Lenders now offer home loans with deposits as low as 5-10%, making homeownership more accessible. However, smaller deposits often require paying LMI, which protects the lender if you default. Though an added cost, LMI can be a strategic choice if property prices are rising faster than you can save.

Benefits of a Larger Deposit

• Lower Interest Rates: Better rates for borrowers with larger deposits.
• Reduced Monthly Repayments: Borrow less, pay less monthly.
• Avoiding LMI: No LMI cost with a 20% deposit.

Strategies for Saving a Deposit

• Set a Budget: Track expenses and save where possible.
• Cut Unnecessary Spending: Allocate savings towards your deposit.
• Government Schemes: Utilise first-home buyer grants and schemes.

Alternative Pathways to Homeownership

• Guarantor Loans: A family member’s property can secure your loan.
• Shared Ownership: Buy part of a property and pay rent on the rest.

The 20% deposit myth can be discouraging, but smaller deposits are a viable option. With careful planning, you can find a solution that works for you. Don’t let the myth hold you back from owning a home—explore your options and move forward with confidence.