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To receive a house loan or mortgage, first-time buyers Sydney will almost always need to put down a deposit. There are, however, a variety of loan packages available, many of which have varied initial deposit requirements. With this in mind, how much of a down payment do you need to get a mortgage on your first home?

Purchasing a First Home with a 20% Down payment:

Securing a house loan for first-time home purchasers might be tough since they do not own a home. A house buyer would often sell their present home to fund the purchase of their new home, or they may use their current home as collateral on their new owner-occupier mortgage. Both choices are unfortunately unavailable to first-time customers. This is why first-time buyers will often require a larger down payment, lowering the proportion of the total purchase price they must borrow. A payment of up to 20% of the total purchase price lowers the loan-to-value ratio (LVR), making the buyer a more appealing prospect to lenders.

Purchasing a First Home with a 5% Down Payment:

A 20% down payment is not required for all borrowers. First-time home buyers may be able to borrow the cash they require with a much smaller down payment — as little as 5% in some cases. While this may help you to purchase a home sooner, it may also have drawbacks.

If you put down a smaller deposit, you’ll have fewer loan options and the loan term will be longer, potentially exposing you to higher interest rates. You also pose a higher risk to the lender, and as a result, you’ll likely have to pay extra over the life of the loan (we’ll go through Lenders’ Mortgage Insurance in more depth below). Furthermore, loan products requiring a 5% deposit will be subject to tougher lending criteria, and you will be required to demonstrate that you have a good credit history with low levels of ongoing loan and credit card debt.

Purchasing a First Home with a 2% Deposit: 

The Australian federal government can help single parents acquire a family home with a 2% deposit. The Family House Guarantee is available to both first-time homebuyers and individuals who have previously acquired a home. The government has committed to offering 10,000 Family Home Guarantees to customers who match the loan conditions between 2021 and 2025 as part of the initiative. This implies that in some situations, house buyers may be able to obtain a mortgage with as little as a 2% down payment. Those who take advantage of the program may be eligible for additional types of help, such as homeowner grants, when they purchase a home. 

The Benefits of a Larger Down Payment:

Finding the minimum permissible deposit requirement isn’t always in your best interests. You are effectively obtaining a share in your house by paying a deposit. The greater the deposit, the less you’ll have to pay back on the property loan, which means you’ll save money by reducing the loan term.

A larger deposit minimises the lender’s risk, which means Lenders’ Mortgage Insurance (LMI) may not be applied to your mortgage repayment schedule. If you don’t have to pay LMI, you could discover that the home acquisition is significantly less expensive over the life of the loan.

Even if you seem unable to pay a 20% deposit right immediately, there are advantages to making as much of a deposit as feasible. For example, if you’ve reached the appropriate level of home equity, you might be eligible to eliminate LMI payments from your loan schedule. If you start with a greater deposit, you’ll be much closer to accomplishing this objective and lowering your loan payments sooner.

Get the Best First-Time Home Buyer Loan:

As a top mortgage broker in Sydney, we assist customers in obtaining the house loans they want, whether they are acquiring their first home or planning to construct a new home on a parcel of land. Our staff of mortgage brokers has extensive expertise in assisting customers in achieving their property goals in Australia’s state capital cities and other parts of the country. We are the team you need because we have an Australian Credit Licence and a strong dedication to customer care. To get started, contact us right now..

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