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Rosa S.
Rosa S.

I am a first time buyer. What is the % deposit I should be aiming for to get a decent rate on a mortgage?

8 years ago

Minimum genuine savings is 5% + costs or approx 10% for any non- first home buyers. Good interest rates are still available to owner occupied 95% loans but you pay LMI - bank risk insurance on any loan above 80% lending.


Aim for 20%. If your parents have equity in their house or cash to gift to you and are willing to help they can contribute to the deposit.

Rosa, hi. There are essentially three basic types of loans.
1) variable rate professional package. These loans are priced for the risk being taken on. Therefore you should aim for a 20% deposit to achieve the best rate.
2) basic variable rate loans. These loans are often not priced for risk and you can be eligible for very good rates up to 95% of the home value
3) fixed rate loans. Again there are lenders that will do fixed rate lending without significant pricing for risk. Therefore these remain a good option if you do not have the full 20% deposit.
Please call me if you would like a full assessment for your personal situation
1300 ASK KEN

Ideal 20% deposit + 5% costs - 25% ie $125,000 for $500,000

Option 2 12% deposit + 5% costs = 17% ie $85,000 on $85,000

Anything less than that and mortgage insurance starts becoming very expensive

In this environment of relatively 'cheap' money you can achieve very sharp rates at 90% LVR (10% deposit) or even 95% LVR (5% deposit). I have found that some mortgage managers and originators I deal with have more control in offering a sharper rate compared to the banks. I can access rates as low as 3.58% but remember the best rate is NOT always the best loan. Take into consideration the total interest cost and other associated costs, restrictions and limitations. Many of my clients are choosing some smart fixed options which includes a full 100% offset account - very innovative and effective for an astute buyer!

John Maxwell

Hi Rosa - depending on the finance provider the interest rate may remain the same regardless of the deposit size. If you borrow more than 80% of the assessed home value then you may be subject to pay LMI (lenders mortgage insurance). Please also consider the area you buy in and whether high density as different lenders will have restrictions on these types of properties in particular postcodes e.g. High density in Mascot may only lend 70% LVR but high density in Hillsdale may lend up to 90% LVR. Considering you are a first home buyer I would suggest you meet with different mortgage lenders in person for advice based on your personal situation. If you would like more detail please do not hesitate to email me on emily.faith.robertson@hsbc.com.au

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