Many homebuyers believe that a 20% deposit is necessary to secure a home loan, but this isn’t always the case. While a larger deposit has its benefits, such as lower monthly repayments and avoiding Lenders Mortgage Insurance (LMI), it’s not a strict requirement.
Smaller Deposits: A Viable Option
Lenders now offer home loans with deposits as low as 5-10%, making homeownership more accessible. However, smaller deposits often require paying LMI, which protects the lender if you default. Though an added cost, LMI can be a strategic choice if property prices are rising faster than you can save.
Benefits of a Larger Deposit
Lower Interest Rates: Better rates for borrowers with larger deposits.
Reduced Monthly Repayments: Borrow less, pay less monthly.
Avoiding LMI: No LMI cost with a 20% deposit.
Strategies for Saving a Deposit
Set a Budget: Track expenses and save where possible.
Cut Unnecessary Spending: Allocate savings towards your deposit.
Government Schemes: Utilise first-home buyer grants and schemes.
Alternative Pathways to Homeownership
Guarantor Loans: A family member’s property can secure your loan.
Shared Ownership: Buy part of a property and pay rent on the rest.
The 20% deposit myth can be discouraging, but smaller deposits are a viable option. With careful planning, you can find a solution that works for you. Don’t let the myth hold you back from owning a home—explore your options and move forward with confidence.
Published at April 9, 2025