5 things to consider if you don’t have a 20% deposit
Not sure if you can buy a home without a 20% deposit? Discover 5 key things you need to know when applying for a home loan with a smaller deposit.
When it comes to buying a home, saving for a deposit is one of the biggest hurdles. Lenders will typically require 20% deposit as a minimum, but there are a few options if your savings balance isn’t quite there yet.
Lenders Mortgage Insurance
If you’re borrowing more than 80% of the property value, one option includes taking out Lenders Mortgage Insurance, also known as LMI.
- A one-off, non-refundable, non-transferrable premium that’s added to your home loan
- It is collected by your lender and passed on to their insurance provider.
- It’s calculated based on the size of your deposit and how much you’re looking to borrow.
- Protects your lender against any loss they may incur if you’re unable to make loan repayments.
Low Deposit Premium
Low Deposit Premium, also known as LDP, is another option if you’re looking to purchase a home but don’t have a 20% deposit.
- A one-off, non-refundable, non-transferrable fee that’s added to your home loan.
- It is paid directly to your lender, not an insurance provider.
- Similar to LMI, it is calculated based on the size of your deposit and how much you’re looking to borrow.
- Protects your lender against any loss they may incur if you’re unable to make repayments on your loan.
The circumstances of your home loan will determine whether a Low Deposit Premium or Lenders Mortgage Insurance is suitable.
Boost your deposit with help from family
Saving for a deposit for your first home can be a daunting task, especially if you’re trying to do it on your own. According to Finder, more than 60% of first home buyers in Australia are turning to their parents for financial assistance to buy their first home. Also known as ‘Bank of Mum and Dad’, parents can choose to loan or gift their children a contribution to their deposit.
While this can help close the gap for a 20% deposit, lenders may require a letter from your parents stating the amount is a gift and they don’t require you to pay it back to qualify for the loan.
Family guarantor
If you’re exploring help from family, another option if you don’t have 20% deposit is a family guarantor. A guarantor is someone, for eg: a family member, who agrees to be responsible for your home loan repayments in any situation where you’re unable to make repayments. They help you secure a home loan by agreeing to offer their own property as additional security.
Government grants
Saving a deposit for your first home is challenging and the Australian Government has grants in place to support Aussies on their journey.
Under the Home Guarantee Scheme (HGS), there are a number of schemes you can explore including:
- First Home Guarantee
- Family Home Guarantee
- Regional First Home Buyer Guarantee
To check if you’re eligible, visit the NHFIC website.
It’s important to consider the benefits and risks when exploring options to help you buy a home. Learn more about buying a home and factors to consider.
Unloan is a division of Commonwealth Bank of Australia.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Tax law is complex and subject to change. For the latest information, check the ATO website or with your accountant or financial advisor.
Unloan is a division of Commonwealth Bank of Australia is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.
Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).
Unloan offers a 0.01% per annum loyalty discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.
*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.
Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions are found on our Unloan Terms and Conditions. Modified Terms and Conditions will be set out in our Notice of Variation Agreement, if you are approved. This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.
