Everything You Need to Know About Home Loan Deposits

How Much Deposit Do You Actually Need for a Home Loan?

Most lenders require at least a 5% deposit for an owner occupied home loan, though you'll also need to cover Lenders Mortgage Insurance and settlement costs if you're borrowing more than 80% of the property value. The total upfront cash requirement depends on your loan to value ratio and whether you're buying as an owner occupier or investor.

Lenders assess deposits differently depending on whether the funds have been saved over time or received as a gift. At least 5% of the purchase price typically needs to come from genuine savings, which means money held in your account for at least three months. A one-off deposit from selling shares or receiving an inheritance doesn't always count as genuine savings, even though it's real money you can use.

Consider a buyer in Joondalup purchasing with a 10% deposit. They'd need that deposit amount plus around $8,000 to $12,000 for settlement costs like conveyancing, building inspections, and loan establishment fees. If borrowing above 80%, add Lenders Mortgage Insurance, which varies by lender and loan amount but typically ranges from a few thousand to over $10,000 depending on how much you're borrowing.

What Counts as Genuine Savings?

Genuine savings are funds you've accumulated over at least three months in a standard savings account, offset account, or term deposit. Lenders verify this by reviewing your bank statements to confirm the money wasn't just deposited recently to inflate your position.

First home buyers using the First Home Owner Grant can sometimes count that toward genuine savings requirements, though policies vary between lenders. Equity in another property, even if you're not selling it, can also be used instead of cash savings when you're purchasing an investment property or upgrading your home.

Rent paid consistently over 12 months can demonstrate savings discipline to some lenders, particularly if you've been paying more than what your proposed mortgage repayment would be. You'll need tenancy agreements and evidence of timely payments through bank statements. This approach works when you haven't saved a traditional deposit but have been paying substantial rent in a market like Joondalup, where rental costs have climbed steadily.

Loan to Value Ratio and How It Affects Your Deposit

Your loan to value ratio is the amount you borrow divided by the property's value, expressed as a percentage. An 80% LVR means you're borrowing 80% and providing a 20% deposit. Staying at or below 80% LVR avoids Lenders Mortgage Insurance, which is why many buyers aim for that threshold.

Once you exceed 80% LVR, lenders charge LMI to protect themselves against the higher risk of default. The premium increases as your LVR rises, so a 95% loan costs significantly more in LMI than a 90% loan. Some lenders cap their maximum LVR at 90% or 95% depending on your employment type, property location, and whether you're a first home buyer.

In our experience, buyers around Joondalup often weigh up whether to wait and save a larger deposit or pay LMI to enter the market sooner. Property values in suburbs like Edgewater, Currambine, and Joondalup itself have moved quickly enough in recent cycles that paying LMI to buy sooner sometimes proves cheaper than waiting another year while prices increase. Your borrowing capacity also plays a role since higher LVR loans require you to service a larger loan amount.

Using Equity Instead of Cash

If you already own property, you can use equity as your deposit rather than needing cash savings. Equity is the difference between what your property is worth and what you owe on it. Lenders let you borrow against that equity, typically up to 80% of the property's value without needing to pay LMI.

As an example, someone owning a unit in Joondalup worth $450,000 with a $250,000 mortgage has $200,000 in equity. They could potentially access up to $110,000 of that equity as a deposit on an investment property or a new home, leaving them at 80% LVR on the original property. The new purchase would then be structured with its own loan, often at a different variable rate or fixed rate depending on the strategy.

This approach avoids the need to sell your existing property and works particularly well for buyers transitioning from apartments to houses within the northern suburbs corridor. The risk is managing two mortgages simultaneously, so lenders assess your income carefully to confirm you can service both loans. A split loan structure sometimes helps here, allowing you to fix part of the new loan while keeping variable rates on the rest.

What If You Don't Have Enough Deposit?

Family guarantees let you borrow with little to no deposit by using a parent or relative's property as additional security. The guarantor doesn't hand over cash but allows the lender to use their property equity to cover the shortfall in your deposit, reducing or eliminating LMI.

The guarantee typically only covers the amount needed to reach 80% LVR on your purchase, not the entire loan. Once you've paid down enough of your mortgage or the property increases in value, the guarantee can be removed. It's a common option for buyers in Joondalup who have stable income and can afford the repayments but haven't had time to save a full deposit.

Some lenders offer low-deposit loans for specific professions like doctors, accountants, or lawyers, allowing them to borrow up to 90% without LMI or at reduced LMI rates. These aren't widely advertised, so it's worth asking whether you qualify based on your occupation.

Another option is the First Home Guarantee, a government scheme that lets eligible first home buyers purchase with a 5% deposit without paying LMI. Places are limited and eligibility depends on your income and the property price, but it's particularly relevant for buyers in Joondalup where median prices sit within the scheme's caps for established homes.

How Settlement Costs Add to Your Upfront Requirement

Settlement costs include conveyancing, building and pest inspections, loan application fees, and government charges like stamp duty. These sit on top of your deposit and typically range from $10,000 to $20,000 depending on the property price and whether you're eligible for stamp duty concessions.

First home buyers purchasing in Joondalup may qualify for stamp duty relief or exemptions under Western Australia's First Home Owner Grant scheme, which reduces the upfront cost significantly. If you're buying a property under the relevant threshold, you might pay no stamp duty at all, freeing up more of your savings for the deposit itself.

Building and pest inspections usually cost between $400 and $800 combined, while conveyancing fees range from $1,200 to $2,500 depending on the complexity of the sale. These aren't optional expenses you can skip. Lenders want to see you've budgeted for the full cost of purchasing, not just the deposit. When you apply for home loan pre-approval, the lender checks that your savings cover both the deposit and these additional costs.

Offset Accounts and Building Equity Faster

An offset account linked to your home loan reduces the interest charged by offsetting your savings balance against the loan amount. If you have $20,000 in your offset and owe $400,000 on your mortgage, you're only charged interest on $380,000.

This feature matters if you've used most of your savings for the deposit and settlement costs but expect to rebuild your cash buffer quickly. Instead of sitting in a standard savings account earning minimal interest, your money in a linked offset reduces your home loan interest, which is typically much higher than any savings rate you'd earn elsewhere.

Not all loan products include an offset account, and some lenders charge higher interest rates for loans with this feature. It's worth comparing whether the interest saving from an offset outweighs any rate difference. If you're disciplined about keeping funds in the offset, it helps you build equity faster and can shave years off your loan term without increasing your actual repayment amount.

Call one of our team or book an appointment at a time that works for you to talk through your deposit options and find a loan structure that fits your situation in Joondalup.

Frequently Asked Questions