How to Secure a Home Loan with a 15 Percent Deposit in Australia
Navigating the Australian home loan landscape can be daunting, especially when you're trying to secure a mortgage with a 15 percent deposit. While many believe a 20 percent deposit is the golden rule, a 15 percent deposit is increasingly viable for many Australians. In this post, we'll explore how you can secure a home loan with a 15 percent deposit, offering practical advice and insights to help you make informed decisions.
In This Article
Understanding the 15 Percent Deposit Home Loan
In Australia, saving for a home deposit can be one of the most significant hurdles for first-time buyers and those looking to upgrade. While a 20 percent deposit is often recommended to avoid Lenders Mortgage Insurance (LMI), a 15 percent deposit is a feasible alternative that can get you into your dream home sooner. LMI is typically required when your deposit is less than 20 percent, but with a strategic approach, you can manage its costs and implications.
Benefits of a 15 Percent Deposit
- Faster Home Ownership: Saving an additional 5 percent can take years. A 15 percent deposit allows you to enter the market sooner, potentially benefiting from property appreciation.
- Increased Buying Power: With property prices continuously rising, a 15 percent deposit can make it easier to secure a home before prices climb further.
- Flexibility in Financial Planning: A smaller deposit may leave you with more funds for other expenses, such as moving costs or home improvements.
Practical Tips for Securing a Loan with a 15 Percent Deposit
1. Boost Your Credit Score
Lenders assess your credit score to determine your borrowing risk. A higher score can improve your loan terms, potentially offsetting the costs of LMI.2. Consider LMI Premiums
While LMI is an added cost, it can be capitalised into your loan, spreading the cost over the loan term. Comparing LMI premiums across lenders can save you money.3. Use Government Schemes
Explore schemes like the First Home Owner Grant or the First Home Loan Deposit Scheme, which can support buyers with less than a 20 percent deposit.4. Shop Around for Lenders
Different lenders have varying policies for borrowers with smaller deposits. Use a mortgage broker to identify lenders offering competitive rates and terms for a 15 percent deposit.5. Strengthen Your Application
Present a strong financial profile by reducing debts, ensuring stable employment, and demonstrating consistent savings habits.Common Mistakes to Avoid
- Ignoring LMI Costs: Underestimating LMI can lead to financial strain. Always factor it into your budget.
- Not Comparing Lenders: Failing to shop around can result in unfavourable loan terms. Use a broker to access a wider range of options.
- Overestimating Affordability: Ensure that your monthly repayments fit comfortably within your budget, considering possible interest rate rises.
How Esteb and Co Can Help
At Esteb and Co, we specialise in helping Australians navigate the home loan process. Our experienced brokers can guide you through securing a loan with a 15 percent deposit, ensuring you understand all options and obligations. We work with a wide range of lenders, allowing us to find the best possible terms to suit your financial situation. Whether you're a first-time buyer or looking to upgrade, our personalised service and expert advice can make your home buying journey smoother and more efficient.
Frequently Asked Questions
Q: Can I avoid LMI with a 15 percent deposit?
A: Typically, LMI is required for deposits under 20 percent. However, some lenders may offer loans without LMI under specific conditions, such as guarantor support.
Q: How does a 15 percent deposit affect my interest rate?
A: Generally, a larger deposit can secure a better interest rate. However, with a strong financial profile, competitive rates are still possible with a 15 percent deposit.
Q: What is the First Home Loan Deposit Scheme?
A: It is a government initiative that allows eligible first-time buyers to purchase a home with a deposit as low as 5 percent without paying LMI.
Q: How can a mortgage broker help with a 15 percent deposit?
A: A broker can identify lenders who offer favourable terms for smaller deposits, assist with application preparation, and negotiate on your behalf.
Q: Is it better to wait and save for a 20 percent deposit?
A: It depends on your circumstances. Entering the market sooner with a 15 percent deposit can be beneficial if property prices are rising faster than you can save.
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With direct experience helping Australians secure home loans, car finance, and business funding, Ricky founded Esteb and Co to bring transparency and technology to mortgage broking.