Applying for a home loan will often require a deposit – and this sum is what most banks will consider the borrower investment into their own mortgage. It can be as large as the potential borrower wants – but there is a minimum amount that most banks will expect to receive from their applicants in order to consider the loan.
How Much Deposit Do I Need for a Home Loan?
There are a variety of guidelines that can dictate how much an individual may need to provide upfront to act as their deposit. These guidelines also vary from bank to bank, so in order to understand the minimum amount it’s important to get to grips with the differences in terms that can play a role in how much is required up front.
For example, if the applicant is a doctor, veterinarian, or a particular type of professional – they may be able to take advantage of lower deposit amounts, often as small as just 5% of the total sum that they’d like to borrow. This is because of legislation that was passed within Australia that dictated that these types of careers should be able to take advantage of cheaper deals on loans.
Furthermore, many banks consider these types of borrowers to be low-risk and as a result, they will often extend cheaper options to them when applying for first time mortgages, repeat borrowings, or investments. This low percentage can sometimes be an option for those with a very good to excellent credit score, or those that have already borrowed from the bank and have demonstrated reliability.
Other deposit amounts
Most banks will undertake a full review of an applicant’s credit report in order to assess just how reliable a borrower they might be. The results can also play a role in the types of percentages that are made available to the borrower. In most cases, the deposit amount will vary from 5-20%. This can be modified depending on other factors (such as the amount that needs to be borrowed) and in extreme cases, some potential borrowers can expect to have to provide 25% upfront.
This is because they may possess a bad credit score, they may want to borrow a substantial amount – or on the other side of the coin, they may require just several tens of thousands of dollars instead of hundreds and the bank may wish to see commitment. In any event, 5-20% will be the average amount requested from a bank and in order to negotiate lower amounts that 25%, the help of a mortgage broker may be required to ensure that the bank is fair in their conditions and expectations.