Looking Forward to Borrowing a Loan? Know More About the Deposit you Must Have

Preparing for your first home loan? Don’t worry, Your Finance Advisor is here to guide you through the way. If you are wondering how much money should you save for your deposit before you submit your application for the approval of your loan, then you are at the right doorstep. The lending specialists from Your Finance Advisor assist you in the process of loan borrowing right from the time when you submit your loan application to the time you buy the house of your dreams.

Ideally, lenders expect you to submit a 20% deposit. For instance, if you are looking for a property worth $5,00,000, you should have a deposit of $1,00,000 ready with you. The money that you have with you as your savings will not only fund your initial contribution to the purchase price of the property but will also be used to pay the stamp duty, as well as any other fees and charges that may be associated with your purchase of the home.

However, 20% amount of the deposit is not fixed. Many lenders take a significantly lower deposit in comparison with the others. A number of lenders would also lend up to 90% or 95% of the value of your desired property. However, this would be possible only if you manage to meet their specific lending criteria. On the other hand, if your deposit is less than 20% of the value of your home, you would have to pay Lender’s Mortgage Insurance or LMI. Unlike other insurances that protect you, Lender’s Mortgage Insurance safeguards the lender in case you fail to repay the loan amount. LMI is usually a one-off payment made at the time of loan settlement. The bigger your deposit amount, the lesser LMI you would pay.

However, if you have a parent or sibling who would not be concerned with using the equity in their home to guarantee your loan, you can avoid paying the LMI with their support. Such types of loans are commonly referred to as Guarantor Home Loans. Many lenders allow a family member of the borrower to help you buy your own home using additional security that belongs to them. The family member who provides such assistance is referred to as a ‘guarantor’. A guarantor is linked to the loan by a guarantee. This guarantee can be released and the guarantor’s responsibility could be stopped without the guarantor home loans being paid in full. However, in order to use a guarantor, you must be able to service the entire loan on your income. Irrespective of whether you have someone to be a guarantor to your loan or not, when it comes to buying a home, you must speak to your mortgage broker in the first place. A lending specialist will help you navigate the home buying process and work out on how much you may be able to borrow. A mortgage broker also helps you understand how much of a deposit you may need in order to buy the property of your dreams using tools like Home loan calculators. To gain independence on the required deposit amount, you may also access home loan calculators from Your Finance Advisor and check the minimum amount of deposit for yourself.