How much do you need for a deposit?
Most home buyers aim for a deposit that covers 20% of the purchase price of their property, plus the upfront costs. Saving a deposit for your first home is no easy feat, but with patience and persistence you can be on your way to home ownership.

Tips to help you save your deposit sooner:

• Prepare a budget and stick to it: avoid extravagant spending on non-essential items and impulse purchases.
• Do not save what is left after spending, but spend what is left after saving: put money towards your home deposit first. Open a separate bank account and set-up an automatic transfer for every pay day, and make top-ups whenever possible.
• Move back into the family home: while it may not seem appealing, the cost of living today makes it harder than ever to save for a house deposit. Rent is likely to be one of your biggest expenses, so if you can cut this down you could increase your savings very quickly.
• Cut back on the extras: record and analyse your expenditure over a month for opportunities to save. Write down everything, even items such as coffees, presents, meals out etc. These everyday extras can add up over time. For instance, two takeaway coffees a day can cost up to $200 a month ($2,400 a year); money that could be put towards a deposit for your first home.

Struggling to save a 20% deposit? There are still options available, such as a Family Guarantee Loan or Lender's Mortgage Insurance.

Family Guarantee Loan
This option allows a parent or other family member to use some the equity in their own home (or other asset) to guarantee a portion of your home loan. This option through South West Credit, applies as a part-guarantee based on the portion of the deposit required. This reduces the risk to the guarantor as the guarantee is limited and can be released once the loan is reduced or the property increases in value.

Lender’s Mortgage Insurance (LMI)
If you are eligible, LMI insures the bank in case you default on your loan, letting you borrow a greater percentage of your property’s value and make a purchase with a smaller deposit.
LMI can be paid up front or rolled into your loan. It increases the total cost of your purchase, but it may help you to buy the house you want now.
LMI is calculated using your loan-to-value ratio (LVR) – the amount you borrow relative to the bank-assessed value of your property.

Buying a home is a big step and it's easy to be daunted by the large sums of money involved.

Talk to your South West Credit Home Loan Specialist to see how much you can afford to borrow and what deposit would be required. Our Home Loan Specialists will be able to help you come up with a plan and advise you what options are available to suit your needs.
 

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