How much do you really need for a house deposit?

There’s no simple answer to this question. It depends on a range of factors – from how much a lender is willing to lend to you, to whether you’re willing to pay a little more on the loan.

There are few concepts to get your head around before you can get a good estimate of how much you’ll need for your house deposit. In this article we run through the basics, but we also recommend reading some of our other articles that unpack things in a bit more detail.

Let’s get cracking.

Three reasons why a bigger deposit may be better

1. Generally, a big deposit shows the lender what a great saver you are – and this could increase the likelihood of your home loan application being approved.
   
   
2. A bigger deposit may mean not having to borrow as much money, which may mean paying less interest over the life of your home loan. It could also mean paying off your loan sooner.
   
   
3. If your deposit is less than 20% of the lender-assessed property value, there may be added costs involved in getting a home loan. This is partly because you may need to pay for Lenders Mortgage Insurance. More on this later.

Some important concepts to get your head around

Loan to Value Ratio (LVR)

You hear this term a lot in the world of home loans. LVR is basically how much you need to borrow, expressed as a percentage of the lender-assessed property value.

For example, if you have a deposit of 25% of the lender-assessed property value, you may need a home loan for the remaining 75%. That means your LVR would be 75%.

It’s worth getting your head around LVR properly, so make sure you read our article on LVR – it explains things in a bit more detail.

In a nutshell, LVR is important because it affects whether you may need to pay for Lenders Mortgage Insurance.

What’s Lenders Mortgage Insurance? Glad you asked.

Lenders Mortgage Insurance (LMI)

Generally, LMI is a type of insurance you may need to pay for if your LVR is over 80%. Basically, it provides protection to your home loan lender in the event you default on your home loan. If the proceeds from the sale of your house aren’t enough to pay back the amount owing on your mortgage, LMI may cover the lender for that loss.

There’s a bit more to LMI than that. Make sure you fully understand how it works and when you might need it. Find out more by reading our article on LMI and how it works.

LMI waiver for eligible professionals

Do you work in a legal, medical or accounting profession? You may be eligible for an LMI waiver with your ANZ home loan.

See eligible professions

Don’t forget about fees and costs

When you’re trying to figure out how much you need to save for your deposit, don’t forget to factor in fees and other costs you may have to pay. We’ve put together some handy tools and info to help you understand what these costs may be.

Read our article explaining some of the unexpected costs involved in buying a home.

Our home loan deposit calculator helps you estimate how much you may have to pay in upfront fees and other costs. That way you can figure out how much you may have left for your deposit.

To sum up 

• Make sure you understand Loan to Value Ratio and Lenders Mortgage Insurance.
• Don’t forget to consider upfront transaction costs and fees you may have to pay.