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Saving for a deposit

The first step in buying a house is establishing how much deposit you need. Lenders typically require 5% and, once you factor in upfront costs, this comes to about 8% of the purchase price.

When you apply for a home loan, your lender will want to see that you can save money and pay your existing commitments. Having a strong savings and repayment history will increase your chances of getting your mortgage application approved. Lenders use your savings history to help them determine if you have the discipline to save on a regular basis to meet your regular mortgage repayments. It certainly works in your favour to show that you can save money while also meeting your current commitments with no overdue payments.

Lenders Mortgage Insurance

While it is possible to buy a house with a low deposit, if you have less than 20% of the purchase price, you will need to pay Lender’s Mortgage Insurance (LMI). This fee covers the lender against the borrower defaulting on the loan.

Lender’s Mortgage Insurance (LMI) is a one-off premium that is charged if your deposit is less than 80% of your property’s value. This upfront fee protects the lender in the event you default on your repayments and the property has to be sold to recover the outstanding debt. LMI is not transferable, so if you decide to refinance your home loan later on, and your loan is greater than 80% of the property value, you will need to pay LMI again.

Use our home loan calculator to get an estimate of your borrowing capacity.

If you’d like a more accurate idea of how much you can borrow with emoney, complete our obligation free pre-qualification form or contact one of our lending specialists on 13 SAVE.


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