How much do I need for a first home deposit?

Geoff Wood, director of My First Property Finance, says bigger deposits generally lead to lower interests rates with some banks, however licensed finance or mortgage brokers are often able to negotiate the same rate even if the deposit is only five per cent of the total loan amount.

“In general terms, banks will lend up to 95 per cent of the total $450,000 value of that property, which means you can borrow $427,000, and of course the deposit you need will be reduced if you are eligible for the first home buyer’s grant,” Woods says.

“It’s vital to remember that there are always extra costs and charges involved in buying a property that will increase the size of the deposit required. Conveyancing, bank fees and mortgage insurance can add up to well over $10,000.

“Loan interest rates generally go down as the size of the deposit increases. Usually the lowest interest rates are available with a 20 per cent deposit, but that’s $90,000 on a $450,000 property, and let’s face it, not too many young couples or single first home buyers have that much available.

“However, there are some banks that charge the same rate whether they’re lending 80 per cent or 95 per cent of a property’s value, and that’s just one reason why it’s so important to have a licensed credit adviser working to get the best deal for you.

“A typical loan term is 30 years, but the real outlook is three to five years because lifestyle needs change and people can consider new choices because their property’s value will probably have increased. Again, a licensed credit adviser can help with that.”