The amount of money needed to form a deposit for a house can vary. Many people also wonder if the amount of money they have saved up is enough for a deposit.
There are different variables affecting how much deposit is needed, and this article cannot cover off all those aspects, therefore it forms a non-binding general guide to some of the possible deposit levels.
20% is Ideal
If you’re going to live in the home, It is generally ideal that a person has a 20% deposit. Whilst this isn’t always possible, there are a few reasons why this is ideal. Having a 20% deposit can mean that you have an easier time getting your home loan application assessed and approved. This level of deposit is usually representing a lower level of risk than someone who has less than a 20% deposit. Banks can also more easily entertain these requests without having limited funding.
10% for new constructions and new developments
It is possible that someone can get a newly built house or townhouse on a 10% deposit. The good news is that this also can be for investment/rental properties sometimes. This means that for a small sum of money, people could already have a house deposit. Banks can more easily grant 10% deposits for new properties as they have easier access to this type of funding, and may therefore be less restrictive.
10% for existing properties
If you’re looking to buy an existing property to live in, then you may be able to buy with a 10% deposit, though this is a bit more difficult. Banks can be restrictive about who they lend money to in this category. In addition, because you have such a small deposit, you would typically have higher interest rates and also typically needing to pay a “Low Equity Margin”- whether buying new or existing.
30% for existing rental properties
For older properties that have already been built and are going to be rented out, you may need a 30% deposit or 30% equity in the rental property.
Other deposit levels
Sometimes other deposit levels can be achieved by working with a certain lender or financial adviser. They may be able to form solutions or use alternative lenders that can use different levels of deposit. For example, it may be possible buy an investment property with one lender with a 20% deposit, rather than 30%. However the trade-off may mean paying a higher interest rate.
Certain property types might also call for a higher deposit. For example if you’re buying an apartment you might need a greater deposit than if you were buying a freestanding house.
Also bare in mind that you may need a larger deposit depending on your circumstance and other variables. For instance, if you have a lower income, then you might need a very large deposit. Or if you have a lot of debts, you may need a larger deposit. These types of mathematical equations may need to be worked out by a lending expert or a financial adviser or mortgage broker.
Where to get more information
If you’re looking for a clearer answer on how much of a deposit you might need, consider speaking to a financial adviser.