Home Loan Deposit Calculator

How the home loan deposit calculator works

The calculator begins with a target property price and produces three deposit amounts, equal to 5%, 10% and 20% of that price. To each it adds the transfer duty payable in the selected state or territory for the selected buyer type, and an allowance of about $3,000 for conveyancing, inspections and similar costs. The total is the cash needed to complete the purchase at that deposit level. The headline result is the cash needed for a 20% deposit, the level at which lenders mortgage insurance is not ordinarily required.

Each total is then compared with savings to date. The shortfall is divided by the monthly savings entered and rounded up to whole months, which gives the time to save. Where savings already exceed the total, the target is shown as reached. For the 5% and 10% options the calculator also displays an indicative lenders mortgage insurance premium. The premium is shown beside the cash needed and is not added to it, because in practice the premium is commonly added to the loan and not paid from savings.

Choosing the inputs: price, savings, location and buyer type

The target price should reflect recent sale prices for the type of property and location under consideration, and not asking prices alone. A price that is consistent with likely borrowing capacity is most useful, and the borrowing power calculator may be used to test that. Savings to date should include only funds that will genuinely be available at settlement, excluding any reserve the household intends to retain for emergencies, moving costs and furnishings. Monthly savings should be an amount that has been achieved consistently and not an aspiration.

The state or territory determines the duty schedule, and the buyer type determines whether first home buyer relief is applied. The calculator offers three buyer types: first home buyer, owner-occupier and investor. First home buyer relief is generally conditional on matters such as citizenship or permanent residency, no prior ownership of residential property, and occupation of the home as a principal residence for a minimum period. Because relief commonly phases out as the price rises, a small change in the target price may alter the duty considerably.

How much deposit is needed to buy a house in Australia

A deposit of 20% of the purchase price is the conventional benchmark. At that level the loan to value ratio, or LVR, is 80%, lenders mortgage insurance is not ordinarily required, and the borrower generally has access to the widest range of lenders and the most competitive pricing. As an illustrative example, a 20% deposit on a hypothetical $600,000 purchase is $120,000, a 10% deposit is $60,000 and a 5% deposit is $30,000. The corresponding loans are $480,000, $540,000 and $570,000.

Many lenders accept a deposit of 10%, and some accept 5%, subject to lenders mortgage insurance and stricter assessment criteria. Low deposit loans may carry higher interest rates, and lenders may limit them for certain property types, locations or forms of employment. A larger deposit reduces the loan, the repayments and the total interest, and provides a margin of equity if property values decline after the purchase. Reserve Bank of Australia analysis has also observed that borrowers with very high LVRs tend to hold smaller cash buffers.

Genuine savings and how lenders assess the source of a deposit

Lenders consider where a deposit has come from as well as its size. For loans above 80% or 90% of the property value, many lenders and mortgage insurers require evidence of genuine savings, commonly equal to 5% of the purchase price and held or accumulated over a period of approximately three months. Regular deposits to a savings account, term deposits and shares held over time generally qualify. The requirement is intended to demonstrate that the applicant can set money aside consistently, which is relevant to the ability to meet repayments.

Other sources may be treated differently. Gifts from family members, inheritances, tax refunds, bonuses and proceeds from the sale of a vehicle may be accepted as part of the deposit without counting as genuine savings, and a lender may request a signed declaration that a gift is not repayable. Some lenders accept a consistent rental payment history in place of genuine savings. Policies vary considerably, so borrowers who rely on gifted funds may wish to confirm the position of the intended lender at an early stage.

The total cash needed: deposit, transfer duty and purchase costs

A deposit target alone understates the savings required. Transfer duty, commonly called stamp duty, is payable on most purchases and is ordinarily paid from cash, as are conveyancing fees, building and pest inspections, and lender and government registration fees. Funds applied to duty and costs are not available as a deposit, so a buyer who has saved exactly 10% of the price does not hold a 10% deposit once those costs have been met. The stamp duty calculator provides a more detailed estimate of duty for a specific price.

Eligible first home buyers may receive a full exemption or a partial concession from duty below certain price thresholds, which may reduce the savings target substantially. First home owner grants may also be available in some jurisdictions, most commonly for new homes. The calculator does not include grants. Amounts, thresholds and eligibility rules differ between states and territories and change from time to time, so the relevant state revenue office should be consulted, and the government grants guide on this site provides a general overview.

5% deposit home loans, LMI and the Home Guarantee Scheme

Purchasing with a deposit of less than 20% allows earlier entry to the market at additional cost. The lender ordinarily requires lenders mortgage insurance, which protects the lender and not the borrower if the loan defaults and the sale of the property does not clear the debt. The premium rises as the deposit falls and as the loan increases, and is commonly added to the loan, where it accrues interest. The LMI calculator provides an indicative premium, and actual premiums vary between lenders and insurers.

Under the Home Guarantee Scheme, now marketed as the Australian Government 5% Deposit Scheme and administered by Housing Australia, eligible first home buyers may purchase with a deposit of 5% without paying lenders mortgage insurance, and eligible single parents and legal guardians with a smaller deposit. The Government guarantees part of the loan to a participating lender. The guarantee is not a cash payment, and the lender still assesses the application in the usual manner. Property price caps apply by location, the home must be owner-occupied, and duty and other costs remain payable by the buyer.

A family guarantee is a further alternative, under which a relative offers equity in their own property as additional security for part of the loan. The arrangement may remove the need for lenders mortgage insurance, although the guarantor assumes legal risk if the borrower defaults. Guarantees are commonly limited to a fixed portion of the loan and may be released once the borrower has built sufficient equity. Independent legal and financial advice is advisable for both parties before such a guarantee is given.

An illustrative example of cash needed and time to save

The following figures are hypothetical. A buyer targets a price of $600,000, has saved $35,000 and saves $2,000 per month. If transfer duty were a hypothetical $20,000 and other costs $3,000, the cash needed would be $53,000 for a 5% deposit, $83,000 for a 10% deposit and $143,000 for a 20% deposit. The shortfalls of $18,000, $48,000 and $108,000 would take 9 months, 24 months and 54 months respectively. The indicative premiums displayed by the calculator would be approximately $15,960 at 5% and $7,560 at 10%.

If the same buyer qualified for a full first home buyer duty exemption, the cash needed would fall to $33,000, $63,000 and $123,000. The 5% target would already be reached, the 10% target would take 14 months and the 20% target 44 months. The comparison shows that the choice is a trade-off between time and cost. In this illustrative case, waiting for a 20% deposit takes almost four years longer than purchasing at 5%, while purchasing at 5% involves a loan that is $90,000 larger, together with an insurance premium unless a guarantee applies.

Common mistakes when saving for a house deposit

The most common error is to plan for the deposit alone and to overlook duty and costs, which may amount to tens of thousands of dollars. Others include assuming eligibility for a first home buyer concession without checking the conditions, committing every available dollar and retaining no reserve for moving costs and early repairs, and relying on gifted funds without confirming how the lender treats them. Large unexplained deposits shortly before an application may also prompt further questions from a lender.

The time estimate should also be read with care. It assumes that the price stays constant and that savings earn no interest. In practice, property prices may rise or fall during the saving period, which moves the target, and interest earned in a savings account shortens the period slightly. Rent paid while saving is a further cost of waiting. The estimate is therefore best treated as a planning aid to be revisited every few months, and not as a forecast of the date on which a purchase will be possible.

How to act on the result and related decisions

Buyers may use the result to set a savings target that includes duty and costs, to decide which deposit level to aim for, and to test how a lower target price or a higher monthly saving changes the timeline. Those who are weighing a 5% or 10% deposit against a longer wait may compare the indicative premium and the larger loan with the rent payable during the additional saving period. First home buyers may also examine whether the First Home Super Saver Scheme, which permits voluntary superannuation contributions to be released for a first home, is suitable for their circumstances.

A deposit is only one part of an application. A lender will also assess whether the repayments are affordable at a buffered interest rate, so the borrowing power calculator and the property affordability calculator are useful companions to this tool. The mortgage repayment calculator shows the repayments on the loan that each deposit level implies. The first home buyers guide on this site explains the purchase process in more detail. This information is general in nature, and a lender or mortgage broker can confirm the requirements that apply to a particular application.