How a low deposit loan can end up more expensive
Here's a simple example of 2 home loans with identical interest rates based on a $800,000 property and a 30-year loan term. The only difference is the deposit size. You can see how this changes both the loan amount (and therefore the repayments) and the LMI premium.
| Details | Low deposit | Full deposit |
|---|---|---|
| Property value | $800,000 | $800,000 |
| Deposit size | $40,000 (5%) | $160,000 (20%) |
| Loan amount | $760,000 | $640,000 |
| LMI costs | $34,982.80 | $0 |
| Interest rate (30-year loan) | 6.00% | 6.00% |
| Monthly repayments | $4,557 | $3,838 |
| Difference in monthly repayments | $719 more | $719 less |
In this hypothetical example, the low deposit borrower pays $34,982.80 in LMI premiums upfront, and an extra $719 a month in repayments. This is because they have to borrow more money.
Over the life of the loan this adds up to $139,006 in extra interest. Adding the LMI in, the low deposit home loan works out to be $173,988.80 more expensive.
But that doesn't mean the low deposit option is a bad idea
Choosing a low deposit home loan can still be worth it. You just need to have a clear idea of the costs involved. Plus, you can always minimise the interest charges over time by repaying more of the loan, or saving money in an offset account.
You also need to consider how long it would take you to save a 20% deposit. It could take you years.
Tighten up your spending
Hi my husband & I have purchased a block about 7 months ago and we want to build a house on it but we are not entitled to the first home owners grant and have very little as a deposit what is the best way to go about it thanks
Hi Donna,
Thanks for getting in touch with Finder. I hope all is well with you. :)
It is worth noting that most home construction loan lenders will want at least 20% of the total cost put down as a deposit. This is because your lot is not of great value yet without a building on it.
As this might be the case, it would still be worth checking out our list of home construction loans. But it is not just the cost you need to consider before choosing to build. On that page, you will see a table that allows you to conveniently compare your options. The table includes interest rates, ongoing fees, and monthly payments, to name a few. Once you find the right one for you, click on the “Enquire now” green button to learn more.
The page that I just shared with you also includes guides and tips on finding the right construction loan for you. So, it is really worth reviewing.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
Hello
I have $14000 saved. Would this some how be enough to get a mortgage on an existing home
If so what sort of amount of loan value could be attained with annual income of 150k. Just roughly
Thanks
G
Hi Gavin,
Thank you for getting in touch with Finder.
Lenders use different important criteria such as your income, outstanding debt level, and credit history to determine your eligibility for a home loan. I suggest that you answer all the information asked from our home loan eligibility calculator to see the estimated amount you can borrow. It is also a good idea to seek professional help from mortgage brokers regarding your home loan enquiry.
I hope this helps. Please feel free to reach out to us if you have any other inquiries.
Thank you and have a wonderful day!
Cheers,
Jeni
Is Defence bank offering a good deal on their home loans?
Hi Chris,
Thank you for getting in touch with Finder.
Defence Bank offers several different home loan options for its customers that include competitive interest rates and flexible payment options. Several loans are available just for Australian Defence Force members, which allows them to use the Defence Home Ownership Assistance Scheme (DHOAS) subsidies.
Some of the home loans offered by Defence Bank are:
You can use our home loans comparison tool to compare your option. To help you, please enter the amount you’d like to borrow, and your preferred term then press “Calculate”. You may then compare each lender based on their interest rate p.a., comp rate p.a, fees, maximum LVR, and your projected monthly repayment. If you like to see the side-by-side comparison between brands, just click the “compare box” below the brand’s logo.
When you are ready, head to Defence Bank’s official website to proceed with your application.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. You can also contact the provider if you have specific questions.
I hope this helps.
Have a great day!
Cheers,
Jeni
I would like to know which of the lenders listed loan to someone looking at buying a home to reside in the postcode 6714 and the percentage deposit
that is required.
Thank you
Hi Louise!
Thanks for your message and for visiting finder – the leading comparison website & general information service built to give you advice on your buying decision needs. How are you doing today?
All lenders listed on the page you’re in will be able to help you find to a loan that suits you best. It would be best to contact the lender to ask about the percentage deposit and you may also mention to him/her that you’re purchasing a property in the postcode 6714.
Also, please be reminded that the standard deposit size for most lenders is 20% of the property’s value. In other words, borrowers need a loan-to-value ratio (LVR) of 80%. Low deposit loans come with an LVR of 90 or 95%. This means you can potentially get a mortgage with just a 5% deposit.
If you’re buying an $800,000 property, a 20% deposit is $160,000. A 5% deposit is just $40,000. That’s a huge difference.
You may review the lenders on the table above. Just filter your options and once you’ve decided on the lender, click ENQUIRE NOW.
Hope this helps!
Feel free to message us again should you have further questions.
Cheers,
Nikki
Hi Nikki,
At this stage most lenders I have contacted won’t lend past 70% due to the risk of lending to people in the 6714 postcode due to properties dropping $300,000 – $700,000 in price and the rate of mortgagee repossessed homes. CBA is the only one I can find that lends 90% with LMI.
Hi Louise,
Thanks for getting back.
I would suggest that you contact a mortgage broker instead. They can take your circumstance into account and can offer you a range of lending options based on your situation.
You can click the link above to find the right broker for you. Please ensure to press the “Load More” button to expand the link. Once done, sort the table based on upfront consultation fee, variable rates from, comparison rates from as well as the number of lenders on their panel. You can also click the name of the broker or the “More info” link to be redirected to our review page and learn more about them. When you are ready, you may then click on the “Enquire Now” button to send in your details.
Once they’ve found a lender who is willing to help, you may proceed with the regular application process. Before applying, please ensure that you meet the eligibility criteria and requirements of the loan option or lender and make sure to read the details, as well as the relevant Product Disclosure Statements / Terms & Conditions of the loan option before making a decision and consider whether the product or option is right for you.
Cheers,
May
HI, I’m researching for a first home loan,have a small deposit saved a steady well paying job but numerous credit enquiries on my file from a few years ago.
I also have no credit cards or personal loans but am worried about further enquiries damaging my chances of securing a loan.
should I talk to my bank or a mortgage broker first?
Hi Justin,
Thanks for your question and for reaching out to us. I hope you are doing fine today.
When you apply for a home loan, banks and lenders check your credit file before you can get approved. Your credit file acts as a representation of your credit history and can include: unpaid bills, getting declined from a loan, late payments, if you have applied too often or if you have declared bankruptcy.
The lender will check your credit file and if you do have any negative marks, your options will be limited. All your past dealings with borrowed money are collected and are used as an indication of your future ability to make repayments. This is why your credit history is so important when applying for loans. You may read our guide on how your credit affects your ability to access home loans and tips on improving your chances of being approved for a home loan as well as details on how likely you are to be approved for a home loan
One of the tips in buying your first home is to speak to a mortgage broker.
Please take time to review the relevant details as well as the Product Disclosure Statements / Terms & Conditions when you are comparing options so you would be able to choose the one that suits your needs.
I hope this helps.
Cheers,
Judith