Building Your Investment Property Deposit: Step 1 for Australian Buyers

Understanding the Deposit Requirements

Before you start saving, it's essential to know how much you need. Typically, Australian lenders require a deposit of at least 20% of the property's purchase price to avoid Lenders Mortgage Insurance (LMI). However, some lenders may accept as little as 5% with LMI. The average property price in Australia varies by location, so it's important to research your target market.

Practical Strategies to Build Your Deposit

1. Set a Clear Savings Goal: Calculate how much you need to save based on your target property price. Consider additional costs like stamp duty, legal fees, and inspection costs, which can add up to 5% of the property's price. 2. Create a Budget and Stick to It: Analyse your current financial situation. Identify areas where you can cut back, such as dining out or subscription services. Redirect these savings into a high-interest savings account or an offset account to maximise interest returns.

3. Leverage Existing Equity: If you already own property, consider using the equity to finance your deposit. This strategy can potentially eliminate the need for a cash deposit and expedite your investment journey.

4. Consider Government Schemes: The Australian government offers various schemes, such as the First Home Loan Deposit Scheme (FHLDS), which can assist in reducing the initial deposit amount needed for eligible buyers.

5. Earn Extra Income: Look for ways to supplement your income, such as freelancing or part-time work. Direct all additional earnings towards your deposit.

Common Mistakes to Avoid

• Underestimating Costs: Beyond the deposit, additional costs such as LMI, council rates, and property management fees can catch many investors off guard.

• Neglecting Financial Health: Lenders assess your overall financial health, including credit scores. Ensure you maintain a good credit rating by paying bills on time and managing debts effectively.

• Failing to Seek Professional Advice: Navigating the property market alone can be challenging. Seeking guidance from mortgage brokers like Esteb and Co can offer tailored advice and access to exclusive lender deals.

How Esteb and Co Can Help

At Esteb and Co, we specialise in guiding Australian investors through the complexities of building a deposit for an investment property. Our experienced brokers work closely with clients to develop personalised savings plans, explore financing options, and leverage our extensive network of lenders to secure competitive rates. Whether you need help creating a budget or understanding government schemes, we're here to support you every step of the way.