First-Time Homebuyers

Owning a home is a dream come true for many Australians. But it can be difficult, especially for first-time homeowners who don't know how the process goes. One common knowledge, however, is about the deposit you have to put down for your home. To learn more about this, keep on reading below.

What Is a Deposit When Buying a Home?

A deposit is a sum of money paid upfront to secure the purchase of a property. A deposit is usually paid when you make an offer on a property and is then held in a trust account until the settlement is completed. The size of your deposit will depend on several factors, including the price of the property, your financial situation, and the terms of your offer.

While a deposit is not required in all situations, it is typically expected when buying a home. A deposit shows the seller that you are serious about the purchase and can help to secure a lower purchase price. Sometimes, a deposit may also be used to cover the costs of closing the deal, such as the buyer’s agent commission.

How Much Deposit Do I Need When Buying a Home?

You’ll need to pay a minimum of 5% of the purchase price as a deposit. However, the safest recommended amount is at least 10% of the purchase price. So, if you’re buying a $400,000 home, you’ll need to pay at least $40,000 as a deposit, ideally.

However, it’s important to note that the higher the deposit you can pay, the better. This is because a higher deposit will result in a lower loan-to-value ratio (LVR), the percentage of the loan amount financed by the lender. Generally speaking, the lower your LVR, the better. This is because lenders view borrowers with a lower LVR as less of a risk, and as such, they may be able to offer a lower interest rate on the loan.

What Is Lenders Mortgage Insurance?

Lenders Mortgage Insurance (LMI) protects the lender if the borrower defaults on their home loan. It is generally required for loans where the borrower has a smaller deposit or loan amount is higher than 80% of the property value. LMI can be a costly addition to your home loan, so it’s important to understand how it works and whether it’s worth the expense.

How Does Lenders Mortgage Insurance Work?

When you take out a home loan, your lender will require you to take out mortgage insurance if you have less than a 20% deposit. Mortgage insurance protects the lender in case you default on your loan. Lenders mortgage insurance (LMI) protects your lender if you can’t repay your home loan. It’s a type of mortgage protection insurance.

LMI is arranged by lenders and is usually required when you borrow more than 80% of the property value. It’s designed to protect the lender, not the borrower. If you default on your loan, the insurer will pay out a lump sum to your lender. This gives the lender security, as they know they’ll get some of their money back.


A home deposit in Australia is typically between 5-20% of the property value. The higher the deposit, the lower the loan amount and the monthly repayments. The deposit is paid to the real estate agent or solicitor when the contract of sale is signed. The deposit is then held in trust until settlement, at which point it is transferred to the vendor.

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