How much deposit do I need as a first time buyer?
How much deposit will you need as a first time buyer? Throughout Australia it is usual that you will need an absolute minimum of 5% deposit + costs (usually about $3,000 for a first home buyer). Some states do have Government incentives to assist you in getting into your first home such as a stamp duty concession. For a full breakdown of additional fees required, please refer to the costs of buying a house in QLD - please note, most information there is relevent Australia-wide.
The main exceptions to using a 5% deposit as a first time buyer are displayed below. Please note: a 5% deposit refers (in almost all cases) to the purchase price; so when buying a house for $500,000, a 5% deposit would be $25,000.
| A 5% deposit home loan is generally available to a first time buyer that: |
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| Has a reliable income from employment. |
| Is a permanent resident in Australia. |
| Has the ability to cover the loan repayments any any current liabilities. |
| Situations where a 5% deposit may not be available to a first home buyer: |
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| If you've been self employed for less than 2 years. Refer to self employed home loan requirements for specific details. |
| If you have bad credit: generally more than 1 or 2 defaults will require 10% deposit or more. |
| When buying an usual property: common examples are high density apartments in Brisbane CBD, or properties over 5 acres. |
| If you don't meet Lenders Mortgage Insurance's criteria, you may require a 20% deposit. |
| If you are not a permanent resident of Australia. |
Can I put in less than a 5% deposit as a first time buyer?
The only option without using a 5% deposit is if you have a parent that will go guarantor on your loan application. For more information on how this is possible, see how a guarantor works.
Is there a benefit to putting in more than a 5% deposit?
Absolutely. If you have the option, a higher deposit will increase your chance of approval, and minimize Lenders Mortgage insurance. Having only a 5% deposit also limits your choice of lenders significantly; having an 8% or 10% deposit will open up your options and often allow you access to cheaper home loan products.
Can I use a gift as my 5% deposit.
Generally, yes. As a first time buyer, a gift as a home loan deposit is fine in most cases. If you're using a gift and have rented through a licenced Real Estate Agent for 12 months, you should be able to a competitive interest rate. If you are using a gift and have not been renting through a Real Estate Agent, there are still options, however they are generally much more expensive.
Need hel figuring out exactly how much deposit you'll need as a first time buyer?
If you found this useful, or need more information, we would love for you to give us a call. We can walk you through the entire process and don't charge any fees (as the banks pay us). 0466392717.
DISCLAIMER: You must not rely on the information in the report as an alternative to financial advice from an appropriately qualified professional. If you have any specific questions about any financial matter you should consult an appropriately qualified professional. We do not represent, warrant, undertake or guarantee that the use of guidance in the report will lead to any particular outcome or result. The content, calculations and opinions contained in this article are of the writer only, and are not necessarily those of Blue Fox Finance.