I would like to buy my first property in the next few years. Should I aim for a 10 or 20% deposit?
Hi Marc, you should aim for as much as you can possibly save with 10% plus costs ideally the minimum. Any mortgages by and largecwith under a 20% deposit plus cost incur extra expenses such as lenders mortgage insurance.
Hi Marc. The amount you save is the perfect indicator as to the amount you can repay on a mortgage.
Let's say you average $2000 per month in savings over the next 24 months.
At the same time you are paying your rent which is $2000 per month.
This would suggest you could afford a mortgage with repayments of $4000 per month.
Now we need to reduce that a little to allow for home ownership costs like rates, insurance and maintenance, so we would comfortably look at loan repayments of about $3500 per month.
This method is the truest way of determining the size of a home loan.
So for now focus on saving what you can rather than worrying about percentages and you will achieve your home ownership goal.
Best of luck.
Well said everyone and great question.
My question would be is this property an investment or a place to live in?
Everyone has different thoughts but generally if people are buying a primary residence then they would prefer to definitely avoid the lenders mortgsge insurance (LMI) and therefore save 20% + costs. In terms of investment purchases if possible avoid but it is not a must as this can be included in your loan if needs be.
The situations are always unique so you have to do what suits you.
Done forget there are things like First Home Owners Grants and New home schemes by the Government that can help your savings but there are requirements to be eligible.
Hope that all helps. Happy to have a complimentary discussion.
Hi Marc. You will need at least 12% minimum. 5% to cover deposit and another 7% or so to cover stamp duty and compulsory Lenders Mortgage Insurance (LMI). If your parents are willing you could avoid costly LMI by taking a Family Pledge loan with a limited guarantee against their home.
These are quite common now. Let me know if you have any questions about this.
Are you planning to buy a 2nd investment property?
If so, how long has it taken you save this deposit so far? Wouldn't it be wiser to place 10% on this one so that you can get your next investment property with another 10% deposit? Getting into the market quicker.
If your not aiming for a 2nd investment property. You are probably better off saving for a 20% deposit and avoiding LMI.
hope that helps