We all know saving for a deposit on a first home can be challenging, especially if you are also paying rent. Even if the deposit you’ve saved is small, there are other ways to fund or grow the deposit and get a place you can call your own home.

Most lenders prefer to see a deposit of at least 20% of the cost of your property. It is also possible that you might be able to get your first home for considerably less! It’s viable to enter the market with a deposit of 5% to 10% as some lenders offer loans that are 90% to 95% of the property value.

The “loan to value ratio” (LVR) refers to the amount you borrow in relation to the value of your home. The high LVR indicates that you owe more money than you contributed as a deposit which indicates a higher risk to the lender. When the LVR exceeds 80%, Lenders Mortgage Insurance (LMI) is required to be taken out to safeguard the lender, not the person borrowing the loan.

It’s possible you can also save costs on LMI if you have a deposit of 20% or more. A low deposit and paying LMI can be beneficial for some people. However, this can add to your expenses. It is best to think about it before deciding.

A small deposit between 5% to 10% may lead lenders and LMI insurers to check your credit record. In this situation, seek financial advice from an accredited finance specialist.

A first-home buyer may be eligible for the First Home Owner Grant or stamp duty savings. These two initiatives can be a big help with your first home-buying budget. It is pretty obvious that buying a first home may cost a lot more than the initial deposit. Upfront and ongoing costs may include stamp duty, conveyancing fees, removalists, and council rates. 

Micah Finance Solutions can work closely with you in your first home purchase, a 5% deposit and stamp duty savings. Schedule an obligation-free consultation with us today and let’s make your first home happen.