How much deposit do I need?
One of the biggest questions a first time buyer will ask themselves is how much deposit do I need?
The answer is not always a simple one.
Your borrowing capacity for a home loan will depend on many factors, which can affect the amount your lender will require for a deposit.
These factors include, but are not limited to, your income, credit history, income history and employment history. If you are applying as a couple, these details will be required for both partners.
You will need to have an idea about what kind of property you want to buy, which will give you an indication of how much you will need to spend. This is the best place to start when deciding on a deposit amount.
Generally, once you have saved a five per cent deposit, you can begin looking at your options.
Loan to Value Ratio (LVR)
The Loan to Value Ratio is a way of showing how much equity you have in a property by comparing the amount of your deposit to the amount your lender is offering toward the mortgage.
As an example, if you purchase a property for $300,000 with a $60,000 deposit, then you will have a $240,000 mortgage. This gives you a ratio of 80 per cent, as $240,000 is 80 per cent of the total home value.