Understand home loan deposits, lenders mortgage insurance, upfront costs and the checks first home buyers should make before applying.
Start with the total buying budget
When you’re researching first home buyer loans, the deposit is only one part of the equation. You also need to consider transfer duty where applicable, conveyancing, inspections, moving expenses and an emergency buffer after settlement. The right savings target depends on the price of the home, your state or territory and the loan available to you.
A bigger deposit can reduce the amount you borrow and may improve your choice of loans, but waiting to reach a particular percentage is not always the only pathway. Start with a comfortable monthly repayment, then work backwards to a realistic property price.
Understand the loan-to-value ratio
Lenders compare your loan amount with the property value using the loan-to-value ratio (LVR). For example, an 80% LVR means borrowing 80% of the accepted property value. The deposit you need may differ from 20% because some loans and government-backed schemes allow eligible buyers to borrow with a smaller deposit.
A smaller deposit often means a higher balance and may trigger lenders mortgage insurance (LMI), unless an exemption or guarantee applies. LMI generally protects the lender, not the borrower.
Check what you may qualify for
Available first-home support can change and eligibility rules depend on the scheme and location. Check current government guarantees, transfer duty concessions and grants rather than assuming a headline benefit applies to your purchase.
Lenders also review income, employment, existing debts, regular spending and credit history. A healthy deposit does not replace the need to demonstrate serviceability.
A practical deposit checklist
Before attending inspections, estimate your purchase costs, compare repayments at different interest rates, retain accessible savings for unexpected expenses and seek a borrowing assessment. A first home buyer mortgage broker can help compare lender policies and explain how deposit size affects loan options.
Importantly, a lender’s maximum borrowing figure and your personal comfort level can be different. Choose repayments that leave room for ordinary life and potential rate increases.
Useful resources
For general consumer guidance, see ASIC Moneysmart. For tailored home loan assistance, speak with Fulton Financial.
General information only. Loan suitability, features, fees and eligibility depend on your circumstances and lender requirements. Consider obtaining independent legal, tax or financial advice where appropriate.
