You can put down as little as 5% deposit for a new home in Queensland: $20,000 down for a $400,000 property.
Given the average loan in Queensland is $383k – one of the most affordable states in Australia – that makes homeowning much more achievable.
It’s not quite as cut-and-dried as that though, so it’s a good idea to know what your deposit amount will get you, and how you can stretch your deposit dollars.
Technically, you can even pay zero down for a home, if you’ve got the right ducks in a row. Or, use government grants like the First Home Owners Grant for part or even all of your deposit.
Here, we’ve put together a snapshot of what you can expect from different deposit amounts, from zero to 20%.
What different deposit amounts look like in Queensland:
It’s possible to get a loan for up to 105% of the value of your home using a guarantor, or equity in another property. For example, your parents could be guarantors by using their own property as security for your loan.
This comes with the risk of them losing their home if the loan is defaulted on, but can be a good option if you’re financially secure enough to stay on track with repayments.
If you own another property, you can borrow against the equity by refinancing. Some lenders will even offer a cash rebate for refinancing with them, which can be a helpful boost.
As an alternative, you can also use a personal loan for a deposit, if your income is high enough to satisfy your lender.
5% is one of the lowest deposits you can make without equity, although a selected few lenders will go as far as loaning up to 98% of the value of the property.
Low-deposit loans can be a great way to get into property and avoid years of saving (all while the market keeps on increasing in value, which can feel a bit like chasing your tail).
Some lenders have strict criteria around 5% (and less) deposits, which means you may not get the most competitive interest rate. However, you have to weigh that up with your current costs of renting and the rate at which you can save, and calculate if a slightly higher rate still works to your advantage.
Anything less than 20% deposit will activate Lenders Mortgage Insurance, which is a security fee added to your loan to protect the lender in case you default on your repayments.
LMI differs between lenders, but as an example, a 5% deposit on a $400,000 home would incur LMI of around $12,500. LMI is either added to your loan or can be paid as a lump sum.
Even though you’ll have to pay interest on the LMI portion of your loan, it’s still often a small price to pay – literally – to get into a home sooner. A mortgage broker will be able to go through the numbers with you, so you can decide what’s financially within reach.
You’ll have your choice of many more lenders and competitive interest rates with a 90% loan. You’ll also have an easier time being approved, and accrue a lower LMI rate.
A $400,000 home with 10% deposit ($40,000) will trigger a $6,336 premium for LMI.
Anything less than 20% deposit will also need more proof of ‘genuine savings’ for lenders to approve your application. That means showing you have the ability to save well (or, in their world, pay your future repayments reliably).
You’ll have your choice of many more lenders and competitive interest rates with a 90% loan. This is good news if you’re using a cash gift, for example, a contribution from your parents, as part of your deposit amount.
You’ll also have an easier time being approved, and accrue a lower LMI rate.
At less than 20% deposit, some lenders may need more proof of ‘genuine savings’ to approve your application. That means showing you have the ability to save well (or, in their world, pay your future repayments reliably).
That’s not always the case though, as there are some lenders who will happily use other forms of proof as genuine savings, like your rental history, if you’ve collected a deposit via government grants.
A 15% deposit will give you more lender and rate options, and you may need less historical savings proof.
The variation in lender criteria shows why it’s so important to work closely with an independent mortgage broker, who can run your specific circumstances through a range of lenders to find one that works for you.
If it’s possible, a 20% deposit is the best-case scenario. You’ll avoid LMI, be able to lock in great rates, and have the lowest possible repayments. In general, the criteria for getting a loan is much more flexible with a higher deposit.
Grants that make a deposit easier
All those facts and figures above don’t yet take into account the great incentives on offer from Queensland’s state and federal governments.
First home buyers in particular can access a range of grants, some of which can be used to boost your deposit.
|Grant||Grant What you’ll get|
|First Home Owners Grant A cash boost for buyers of brand new homes who have never owned property before. Can be used as a deposit.||$15,000 cash|
|First Home Loan Deposit Scheme For buyers of brand new homes, where you pay 5% deposit and the government guarantees the remaining 15%, saving you LMI. 10,000 places available in the scheme.||No LMI payable|
|First Home Super Saver Scheme If you make voluntary before or after tax contributions to your super, you can release those funds to bolster your deposit.||Use superfund contributions to buy your home|
|Stamp Duty Concession In Queensland, buyers will either receive a discount, or pay zero stamp duty fees||Up to $7,175 (up to $15,925 for first home buyers)|
In addition, we offer our clients a $15,000 Builders Contribution grant, to help buyers who missed out on the government’s HomeBuilder Grant. Altogether, it’s possible to take up to $40,000 off the cost of your first home with government and Insignia Homes grants.
How to make your deposit stretch further
You’d be amazed at the creative potential of your deposit and the grants you can access. Use a mortgage broker and financial planner, who can give you a range of lender choices and show you how to maximise your deposit amount.
House and land packages are a good option for any deposit range, but work particularly well for deposits less than 20%. The cost of a new home is set in stone, which lenders like, and you know exactly what you’re going to pay, which is good for the pocket and calculating repayments.
There are no hidden surprises or expenses with new builds, whether you’re building from scratch or securing a brand new constructed home.
Small deposits are common and feasible
The good news is that a very small deposit can still get you into a home, if you’re smart about your deposit and your home purchase.
Use a professional to find a property that fits your budget and your needs, and see financial experts to help you secure a good lender and interest rate.