Home Loan Deposit Calculator

Working out your home loan deposit amount

The first thing you’ll need to do is think about the price range you are willing to spend on your home and determine your home loan borrowing power, which you can find by using our online calculator for a quick estimate. The next step is understanding the loan-to-value ratio (LVR).

In the situation that you purchase a $500,000 home and borrow $400,000, you have a LVR of 80% with your $100,000 deposit representing 20% of the property value. In addition to this $100,000 deposit, you’ll need to account for costs associated with the property’s purchase, which we’ll talk about shortly.

Throughout this process it's imperative that you maintain a sustainable financial situation and only borrow within your budget. This means considering a loan repayment that you are comfortable with each month.

How do you plan to save for a deposit?

There are many of ways to accumulate the funds required to purchase a home. The most common method is through your income and how well you can accrue savings.

Online calculators, such as our savings calculator, offer a quick and effective way of setting your savings target and seeing how to get there. Other methods include lump sum gifts, such as inheritance, and sharing the property purchase with a partner, friend or family member.

Is the deposit required too big? Are you comfortable with Lender's Mortgage Insurance?

Lender's Mortgage Insurance (LMI) is the lenders way of protecting themselves against the risk of not recovering the total value of the loan, in the event the borrower cannot meet their loan repayments.

Depending on the lender, if a certain LVR is not met, typically a LVR of 80%, they will charge a fee for LMI. If you are making a deposit of under 20% it's important that you are aware of this cost and are comfortable with the loan terms. A lenders mortgage insurance calculator can be used to gain a clearer picture of what this cost may look like.

Considering a guarantor for the property?

One thing you could do to make the home loan and subsequent deposit more affordable is to consider a guarantor for the property. This will impact the deposit needed for a house as the guarantor can take liability for some of the risks associated with a lower deposit.

What about genuine savings?

The term “genuine savings” refers to the savings a borrower has been able to save over time by themselves. It is important to note that the deposit is only one part of the equation. Once a loan is settled the monthly repayment and other property costs need to be met.

As part of this the lender may want to see evidence of genuine savings to determine if you have the capacity to make monthly repayments. The requirements for genuine savings will depend on your lender and loan amount.

What is the average house deposit required in Australia?

The average house deposit will vary from state to state and city to city. However, recent data shows that, with a deposit of 20%, the average house deposit in Australia for an owner-occupied residence is $119,114 with the average home loan size being $595,568.

When broken down to state level, maintaining the assumption of a 20% deposit, the averages are:

What is the minimum deposit required for a home loan?

Depending on the lender, you may be able to apply for a home loan with a deposit as low as 5% of the property value. However, this will more than likely mean your lender will charge LMI. In the situation that you have a guarantor to support your loan application, there is a possibility that the lender may not require a deposit at all.

If you’re hoping to avoid the costs that come with LMI, most lenders require a deposit of 20%. It's possible to avoid LMI with less than a 20% deposit in some situations, which depends on variables such as if your profession aligns with their lending policies.

Do I only need to save a deposit for the amount of money I want to borrow?

While the deposit will obviously be the largest upfront cost when buying a house, it's not the only cost associated with the purchase of a property. Other costs include things such as stamp duty and potentially LMI. It's important to be aware of these costs prior to entering the contract because fees such as stamp duty can be quite costly. Luckily, there are calculators such as our Stamp Duty Calculator and Property Buying Costs Calculator to see these costs for yourself.

Using these tools is a great way to start your research. It is also worth looking into your state/territory’s Government support systems for home buyers as there may be waivers and discounts that exist for fees depending on your location and situation.

Is a bigger deposit better?

There are many benefits to having a deposit of 20% or above. The primary one being that the larger your deposit, the less money you are borrowing, hence, reducing the amount of interest and principal to be repaid.

Other benefits include no LMI costs, an increased chance of approval on the loan and increased borrowing power. A big benefit, also, is that a bigger deposit shows a positive savings history pattern. This is a big thing that lenders use to assess the eligibility of the borrower.

How about deposits for investment properties?

When purchasing an investment property, it's likely you will need to provide a deposit of at least 10% to 20%. However, if you happen to own multiple properties, there are options that exist allowing you to use equity from these existing properties. Make sure to speak to your lender to determine your eligibility.