What to do When You Don’t Have Enough Deposit – First Home Buyers

  • Posted 20 Aug

What to do When You Don’t Have Enough Deposit – First Home Buyers

Buying a home is part of the Australian dream. To have your own place where you can put roots down, decorate how you want and have a place to really call your own. If you’re at this point, then you know that there are a few things to think about, particularly when it comes to finances.

What if you don’t have enough deposit to get into your first home, what do you do?

Here at Australian Credit and Finance we are here to help all first home buyers just like you.

How much do I need?

Saving for a home deposit, even if you’ve been contemplating buying a new house for a while, can be complicated and challenging due to higher living costs and endless personal expenses that you still have to manage.

However, with a set goal in mind it’s important that you start saving for this deposit. Most lenders might let first home buyers borrow up to 95% of the price of the property, but in the long run this will cost you more than actually helping you.

The ideal deposit when taking a home loan should be no less than 20% of the purchase price of the house you’re buying. For example, if you were buying a home for $500,000, then a 20% deposit would be $100,000. This is because the more you can pay with your deposit, the less you will need to rely on lenders to help you buy your new home. It allows you to make independent decisions.

If saving up 20% of the purchase price proves to be unlikely for you, don’t worry. Most lenders want to see around 5%-10% of the purchase price in savings. But this is still a lot of money for most people to save.

Savings will be considered only when they have been gathered over a period of at least three months.

Alternative Deposit Options

In case you haven’t been able to save your target deposit amount, here’s a quick list of alternatives that you might feel comfortable considering:

  • Ask your parents or relatives to donate a financial gift to you for the purpose of buying a house. There has to be a statutory declaration and witnesses to the signing over for it to be considered legal. The gift they’re making in your name has to be worth at least 5% or 10% of the purchase price.
  • If your family has a home of their own, they can help you by using the equity in the home. This way you could be cleared to get 100% of the purchase price in a home loan (provided your relative or parents have a limited guarantee of 20% of the purchase price against their home).
  • Jointly buying a property with a friend can also be a great solution for when you cannot afford it alone. Put your savings together and produce the 5%-10% deposit for the home loan.

Buying your first home is always the hardest, because of the need to come up with a deposit. If you’re able to, you should consider the first home buyers grant, accessible in each State with differing requirements. You can find out more details here.

Need more help and advice? Talk to us today for more information on home loans and let us help you buy the house of your dreams.

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