How Much Do You Need for a House Deposit?

A deposit bond is a financial agreement that acts in place of a deposit and guarantees the borrower will pay the set amount by a certain date. These are useful for those who don’t have the cash up front to pay for a property, but it’s worth noting that not all lenders or vendors will accept them.

That will depend on the value of the property you want to buy, whether this is your first home and what your overall financial situation is.

If you’re a first home buyer, you may qualify for a grant of up to $15,000 from your state government, which would increase your overall deposit to $25,000.  As a 20% deposit, this would give you borrowing power of $125,000.   If you were to take out LMI and only submit a 5% deposit, this could potentially give you $500,000 borrowing power. If you’re not a first-time buyer, though, the most valuable property you’re likely to be approved for is $200,000 with a 5% deposit.

If you buy an existing home through a private sale, the first step will be for you to sign and exchange contracts.  This contract will specify how large a deposit is required and the date it has to be paid by to make it legally binding. 

Once the sales contract is signed, you’ll pay your deposit to the seller’s real estate agent.  Quite often, the entire deposit doesn’t need to be handed over at the time of contract exchange: a portion of it is likely to be included in the settlement agreement with your conveyancer.

Generally, you’ll pay your house deposit through electronic funds transfer with a cheque or deposit bonds. It’s best to arrange the payment method earlier to avoid any confusion or time-wasting on the day you exchange contracts or on the final settlement day.

Absolutely – budgeting is a great way to work out your financial capabilities ahead of time. You should track your earnings and expenses to find out where you can reduce spending and determine how much you can save to grow your deposit.

Firstly, you’ll need to gain an understanding of your disposable income – that is, how much you can afford to pay once all your other financial commitments have been honoured.  A household budget spreadsheet will help you calculate your income and expenses and see how much you may be able to afford to pay on your home loan.

Once you have an idea about what repayments you can afford, you can use Savvy’s home loan repayment calculator to work out how much you may be able to borrow based on the term of the loan, its interest rate and the repayments you can afford.

No, you won’t need a larger deposit if you want to buy land and build your own home.  Many lenders offer specialist construction loans with low deposit requirements and very low interest rates.  These loans can mean you pay interest-only on the principal that you use to pay your builder in stages as construction progresses.  Once the dwelling is complete, the loan reverts to a traditional principal and interest loan.  In addition, many builders now offer house and land packages for first-time home buyers which only require you to pay a small deposit.