Buying property can be a sound financial investment. Or it could not be. There are many factors to consider and one of them is how much deposit you should put down. It’s not a good idea to buy a home as soon as you make enough money to cover the monthly repayments.
So how much deposit should you put down?
Can you get away without paying deposit?
Hundred per cent home loans aren’t readily available anymore. In other words, you would be hard-pressed to qualify for a home loan without a deposit at all. Most lenders require at least a five per cent deposit.
Is a five per cent deposit enough?
If most lenders need at least five per cent, does that answer our question? Not if you want the best deal you can get.
The more deposit you can put down, the less you have to borrow to fund your home, but most of all the lower your interest rates will be. Use a bond affordability calculator to play around with the settings and see what a difference the amount of deposit makes to what you will be paying for the next couple decades.
Another advantage is that a bigger deposit will give you more loans to choose from because you are a better candidate, making it easier to negotiate or get a good deal on the right loan.
So how much deposit do you need?
The best deals need a 30 per cent or even a 40 per cent down payment. If you can manage that – great! However, that is unrealistic for most buyers, especially first-time buyers. To still qualify for competitive deals you generally need a deposit of 25 per cent or more.
At the very least you should be in a position to put down a 20 per cent deposit. If you don’t have that much money, then it might be a good idea to wait until you have saved more. Don’t be in a rush. This is probably going to be the biggest financial commitment you make of your life so it is worth doing right. Saving for another year or two will pay off down the road.