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If you’re saving hard for your home deposit, you may be wondering why you need one and what exactly you’re meant to do with it.
A home loan deposit is your initial contribution to the purchase price of a property. It means that you own a small portion of the home. A bigger home deposit may mean not having to borrow as much money, which may mean paying less interest over the life of your home loan. It could also mean paying off your loan sooner.
When you own more of the property with a larger deposit, it reduces the risk to the lender giving you the home loan. That’s why generally, the lender will require that you have a home deposit.
Many lenders now require a home deposit of 20% of the purchase price (excluding transaction costs). Some will accept lower deposits but you may have to pay Lenders Mortgage Insurance (LMI).
You’ll also need additional savings to meet property transaction costs such as solicitor/conveyancer fees, stamp duty and other charges.
If you’re not eligible for exemptions or concessions, stamp duty costs can be substantial. Use our home loan deposit calculator to estimate how much you’ll have left for a deposit after stamp duty and other costs.
Do you work in a legal, medical or accounting profession? You may be eligible for an LMI waiver with your ANZ home loan.
While low deposit home loans can help you buy a home sooner, they could come with stricter lending criteria and most lenders will require that you pay the cost of LMI.
Here are some ways you could buy a home with a low deposit.
Asking a family member to be your guarantor could help you buy your home with a low deposit. Just be aware that being a guarantor is a big commitment that your guarantor should think about carefully. If for some reason you default on your loan, your lender could seek to recover money from your guarantor. We recommend your guarantor obtains independent financial and/or legal advice, so that they fully understand the risks of entering into a guarantee.
The FHLDS allows a limited number of eligible first home buyers with a 5% deposit to get a home loan without paying LMI.
Equity is the difference between the value of your property and how much you owe on it.
If you already own your home, your lender might let you use the equity in your home to borrow additional funds, using your home as security. You should seek advice from your financial adviser and registered tax agent before making a decision whether to do so. Alternatively, you could use the equity in your home to apply for a supplementary loan.
In a private sale, you pay the deposit once you and the vendor have exchanged signed contracts. If you buy at auction, you must sign the contract and pay the deposit on the day. Generally, the vendor or real estate agent will require 10% of the purchase price and this serves as a part payment before settlement takes place. At settlement, you will officially own the property and pay the remainder of the purchase price.
Here are the most common ways to pay a deposit:
It’s a good idea to ask the real estate agent how they prefer to receive the deposit. This is especially important if you’re intending to buy at auction, as it gives you time to move money between accounts or organise cheques.
Find more about paying a deposit.
If your deposit is tied up in other assets or investments, you may be able to use a deposit bond instead. A deposit bond is a guarantee to the vendor that you will pay the deposit at settlement.
Not all vendors and real estate agents accept deposit bonds. You’ll need to check before you bid or buy.
ANZ does not offer deposit bonds. Please contact your legal or financial adviser who may be able to provide you with more information about deposit bonds.
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Eligibility criteria applies to the Special Offer discount for ANZ Simplicity PLUS, including $50,000 or more in new or additional ANZ lending. Offers can be withdrawn or changed anytime.
ReturnOther home loan fees including Late Payment Fee, Lock Rate Fee, Early Repayment Cost (Fixed Rate Loans) and ANZ Equity Manager facility fee still apply. Loan security fees including Lodgement Fee, Production Fee, Settlement Fee and Search Fee still apply however will not be charged on establishment of a loan. Government fees and charges (including government search fees and stamp duty) may still apply.
ReturnA property price range estimate is an estimate only. It is based on certain available information and is not a valuation of a property or guarantee of its market value or future sale price. Price ranges may change daily and the actual sale price (if the property is sold) may be different.
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