From inner-city apartments to stunning mansions, Queensland offers everyone an exciting investment opportunity. Since purchasing a property is a huge decision you’ll ever make, navigating the real estate market stands as the core step. However, that’s not the sole concern in your homeownership journey. Financial readiness is essential, and the down payment is the primary consideration.
So, if you’re about to buy a property in Queensland, prioritise deciding how much down payment to put down before choosing fancy furniture.
What’s a Down Payment, and Why Does It Matter?
If you are a cash buyer, there’s no need to worry about a down payment. However, an individual borrowing from a lender must pay the upfront amount when purchasing a home. This amount is called a down payment that represents the key investment in the property.
In Australia, most lenders require at least 5% to 20% of the property’s value. The more you put down, the less you need to borrow, leading to lower repayments and interest.
How Much Do You Really Need?
5% Deposit
As a first-time home buyer, you still can get into the homeownership journey with just a 5% down payment. Since an individual is depositing only 5% it signifies a higher risk to the lender.
Consequently, this often requires LMI (Lender’s Mortgage Insurance) which protects the lender from potential financial risk that is outstanding loan balance.
20% Deposit
A 20% down payment is ideal for any property investor or buyer. This means there is no need for LMI, one can enjoy lower interest rates and better loan options. Let’s assume you’re looking for a $600,000 property in Brisbane; if you can pay 20% upfront ($120,000), the bank considers you a lower-risk borrower.
Government Help
Hopefully, the government also offer grants and schemes. These grants help first-time buyers accomplish their ownership journey with smaller deposits while avoiding LMI.
Specifically, the First Home Owner Grant (FHOG) provides a lump sum to help with a deposit, and the First Home Loan Deposit Scheme (FHLDS) allows first-time buyers to purchase a home with a deposit as low as 5%.
So, What’s the Right Amount for You?
If you are good at saving up to 20% down payment, it’s good for you. But don’t stress out, as there are other alternatives to homeownership. Even with a small deposit you can achieve your dream home sooner with or without LMI.
Hence, the key is to balance what you can afford and how to maximize your future investment.
Start saving and exploring your options with our team of experts. Your dream home might be closer than you think!
