• How much deposit will I need to buy a home?


    Author: Bankwest (sponsored content)


    If, like most of us, you’re not lucky enough to have a huge stash of cash in the bank, you'll probably need a home loan. And to get a home loan you’ll need a cash deposit. The deposit covers a percentage of the price of the property you want to buy, while the home loan covers the rest of the property price.

    How much do I need to secure a home loan?

    In most cases, home loan lenders will lend up to 80 per cent of the property value, meaning you’ll need to come up with the other 20 per cent (your deposit). For a property of $400,000, for example, you’ll need a cash deposit of $80,000 (20 per cent).

    Calculate how much you could borrow.   

    The pros and cons of smaller deposits

    A 20 per cent deposit is a lot of money. When you have rent, bills and groceries to pay for, it’s not easy to save that much. Some lenders let you borrow more than 80 per cent of the property’s value to help you get into your own home faster. Some will lend you up to 95 per cent. This means your deposit will be five per cent, plus the associated purchase costs. So, if the property you want is $400,000, five per cent of that would be $20,000 deposit - a bit more doable.

    Of course, a smaller deposit comes with greater risk. If interest rates rise or unexpected expenses pop up and you’re borrowing at maximum capacity, you could get caught short. Because there’s a greater risk, you’ll need to pay Lenders Mortgage Insurance (LMI) if your deposit is under 20 per cent. LMI is paid to the bank’s insurer to cover the bank in the event you default on your home loan, as borrowings above a loan to value ratio of 80/20 are considered ‘higher risk’. You can pay your LMI as an upfront cost or, depending on how much LMI you have to pay, you can add it to your home loan amount.

    Other costs

    It’s important to factor in all the costs of buying a home. As well as the deposit, there are some other upfront fees you’ll need to cover. These include (but aren't limited to):

    • Mortgage registration fee
    • Transfer fee (or commonly referred to as 'Transfer of title fee')
    • Title search fee
    • Stamp duty
    • Pest and building inspections
    • Home building insurance
    • Moving costs
    • Ongoing costs such as council rates, strata fees, utility bills and property maintenance.

    To find out a bit more about these costs, see our guide to upfront home buying costs.

    If you’d like to speak to someone about your deposit savings plan get in touch with a Bankwest Home Finance Manager today.

    The information contained in this publication is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this publication without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia (Bankwest) ABN 48 123 123 124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this publication.