Home Loan Deposit

Working out the deposit required can be a bit tricky and varies from lender to lender. Some lenders may offer loans up to 97% of the property value but all will want to see a minimum of 5% genuine savings.

Now don’t be fooled, when you are borrowing 97% of the property value, this includes the capitalisation of Lenders Mortgage Insurance (LMI), which means that in most cases you will require some additional deposit above your 5% as the capitalisation of mortgage insurance will take the loan amount above 97% of the property value. When this happens, the lender will required the additional deposit to reduce the loan amount to 97%, therefore the true deposit required is usually around 5.5% but this is also driven by the loan amount.

Genuine Savings

When you are borrowing above 90% of the property value, lenders will want you to have 5% genuine savings over a period of minimum 3 months.

It is therefore advisable to open a separate savings account when starting you savings plan for your first house.

What Qualifies as Genuine Savings?

  • Regular weekly, fortnightly or monthly contributions into a savings account over a 3 months period.
  • Lump sum funds ie Tax return – this must be held in the savings account for a minimum of 3 months
  • Shares held for over 3 months
  • Term deposit held for over 3 months
  • A gift held in the savings account for over 3 months
  • Equity in existing property
  • Sale of property held in borrowers name
  • Sale of Assets (e.g. Vehicle) held in borrowers name
  • Tax refunds held in bank account for over 3 months
  • Inheritance held in bank account for over 3 months

There are other proof’s of genuine savings that some lenders will accept such as:

  • Rent paid for a single property through a licensed property manager for a minimum of 12 months

Keystart is the only lender that requires less than 5% genuine savings but has very strict lending requirements, to see if you qualify please contact us.

Non-Genuine Savings

As a first home buyer, you also have the option of going down the non-genuine savings path which usually has a maximum loan to value ration of 80%. Anything over this will require you to have a minimum of 5% genuine savings.

What Qualifies for Non-Genuine Savings?

  • Gifted funds held in savings account for less than 3 months
  • Parental guarantee
  • Proceeds from sale of assets
  • Government grants (e.g. FHOG)
  • Loans to borrow equity
  • Windfall gains (compensation, lotto etc)
  • Sale discounts on a property for prompt settlement
  • Unconfirmed deposit sources
  • Bulk savings deposits inconsistent with income

There are many other factors which need to be considered when purchasing a property and obtaining expert assistance will make the process easier.

How much deposit will you need?