There’s no one size fits all when it comes to home loan deposits.
Banks traditionally required borrowers to contribute a 20% deposit to the loan amount. However, lending criteria today are changing for the better. You can enter into the property market much sooner than the time required to save a 20% deposit. Or you can retain some savings that can be put towards items such as renovations, investing, etc.
We explore the different deposit options that may be worth considering or exploring further below.
Low deposit home loan
A low deposit home loan allows you to purchase a property with a 5-10% deposit and borrow the rest.
Although they impose some extra requirements, low deposit home loans have some key advantages which include the following:
- You can enter the property market sooner
- Additional funds left over for personal use
No deposit, guarantor and other deposit options
A Guarantor Loan allows you to borrow up to 105% of the purchase price to include costs such as stamp duty, legal fees and bank fees.
These types of loans require a parent or close family member to offer some of the equity in their property to guarantee your deposit.
The guarantor does not physically hand over the deposit to you; the lender will register a mortgage against the guarantor property for the deposit they are guaranteeing for you, which can be up to 25% of the purchase price of your property.
If your close family member does not have an existing property or sufficient equity, however, they have some savings, they can provide you with a non-refundable gift that can go towards your deposit.