The low down on low deposits

Entering the property market is not easy. Whether you’re a first home buyer or a seasoned investor, pulling together a full deposit on a new home can be a testing experience.

There are options

Low-deposit home loans makes it possible to borrow up to 95% of the property value, reducing deposit requirements.

In addition, some lenders understand that you have to be creative when it comes to sourcing your deposit funds. For example, rather than just relying on savings, you might use gifted funds from a family member or even borrow the deposit to get you on the property ladder sooner.

How big does my deposit need to be?

The size of the deposit will vary depending on how quickly you want to buy. If you are looking to buy quickly, the minimum deposit you need is 5%, however this will incur the added cost of lender's mortgage insurance (LMI).

Typically, any deposit less than 20% of the purchase price will require LMI. This is a one-off premium paid by the borrower that protects the lender.

The good news is you don’t have to have the cash saved to cover this cost. Some lenders, like Liberty, give you the option to add this cost onto your loan amount, so you can pay this over the life of the loan.

Extra costs to consider

Other costs to consider when purchasing a property include:

• Administrative costs, such as legal fees and stamp duty

• Protective costs such as home insurance and income protection insurance

• Essential costs such as pest and building inspection, utilities set-up and connection fees, and moving costs.

• Ongoing maintenance costs, such as council and water rates, strata fees, and any essential house repairs or renovations

Contact your Liberty Adviser today to find out whether a low deposit home loan could be the right option for you.