5 things to consider if you don’t have a 20% deposit

There are a few options if your savings balance isn’t quite there yet when it comes to saving for a deposit for a new home.

When it comes to buying a home, saving for a deposit is one of the biggest hurdles. Lenders will typically require 20% deposit as a minimum, but there are a few options if your savings balance isn’t quite there yet.  

This content has been created for educational purposes only. Unloan may not provide all features discussed. Visit our product page here to learn more about our home loan features.

Lenders Mortgage Insurance

If you’re borrowing more than 80% of the property value, one option includes taking out Lenders Mortgage Insurance, also known as LMI.  

  • A one-off, non-refundable, non-transferrable premium that’s added to your home loan.
  • It is collected by your lender and passed on to their insurance provider.  
  • It’s calculated based on the size of your deposit and how much you’re looking to borrow.
  • Protects your lender against any loss they may incur if you’re unable to make loan repayments.  

Low Deposit Premium

Low Deposit Premium, also known as LDP, is another option if you’re looking to purchase a home but don’t have a 20% deposit.  

  • A one-off, non-refundable, non-transferrable fee that’s added to your home loan.
  • It is paid directly to your lender, not an insurance provider.  
  • Similar to LMI, it is calculated based on the size of your deposit and how much you’re looking to borrow.
  • Protects your lender against any loss they may incur if you’re unable to make repayments on your loan.

The circumstances of your home loan will determine whether a Low Deposit Premium or Lenders Mortgage Insurance is suitable.

Boost your deposit with help from family

Saving for a deposit for your first home can be a daunting task, especially if you’re trying to do it on your own. According to Finder, more than 60% of first home buyers in Australia are turning to their parents for financial assistance to buy their first home. Also known as ‘Bank of Mum and Dad’, parents can choose to loan or gift their children a contribution to their deposit.

While this can help close the gap for a 20% deposit, lenders may require a letter from your parents stating the amount is a gift and they don’t require you to pay it back to qualify for the loan.  

Family guarantor

If you’re exploring help from family, another option if you don’t have 20% deposit is a family guarantor. A guarantor is someone, for eg: a family member, who agrees to be responsible for your home loan repayments in any situation where you’re unable to make repayments. They help you secure a home loan by agreeing to offer their own property as additional security.  

Government grants

Saving a deposit for your first home is challenging and the Australian Government has grants in place to support Aussies on their journey. Under the Home Guarantee Scheme, there are a number of schemes you can explore including:

  • First Home Guarantee
  • Family Home Guarantee
  • Regional First Home Buyer Guarantee

To check if you’re eligible, visit the NHFIC website here.

It’s important to consider the benefits and risks when exploring options to help you buy a home. To learn more about buying a home and factors to consider, click here.

This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval; satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000.

^ Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. This discount is applied to each loan that you have with Unloan. If you have multiple loans (e.g. one investor and one live-in loan), they will each have a discount calculated based on when you settled each loan. Unloan may withdraw this discount at any time.

There are no fees from Unloan. However, there are some mandatory Government costs depending on your state when switching your home loan. For convenience, Unloan adds this amount to the loan balance on settlement.

* Other third-party fees may apply. Government charges may apply. Your other lender may charge an exit fee when refinancing.

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Calculations are not a loan approval. Applications are subject to credit approval, satisfactory security and minimum deposit requirements. Full terms and conditions will be set out in our loan offer, if an offer is made.

^Rates shown are inclusive of a 0.01% p.a. discount off our reference rate. On each anniversary of your loan’s settlement date, you will receive an additional discount of 0.01% per annum, up to a maximum discount of 0.30% per annum. For purchase loans with a Loan to Value Ratio (LVR) between 80.01% - 90% LVR, a lenders mortgage insurance (LMI) premium and higher interest rate apply. In some cases depending on the property’s location or type, LMI may also be required for LVR between 70.01% and 80%.

*Comparison rate is calculated on a $150,000 secured loan over a 25 year term. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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