“How much deposit do I need to buy a home?” It is one of the most common questions out there when it comes to buying a home and to be honest, there is no “one size fits all” answer.  The size of your deposit will affect various aspects of your loan, in particular the interest rate you will expect to pay as well as the number of lenders who may wish to offer you a mortgage.

Here at Reach Financing, we call this your Total Contribution – a sum of the deposit and all fees and charges associated with purchasing which keeps it nice and simple for you, meaning that total is all you need to worry about so no hidden extras.

A general rule of thumb is that the minimum Total Contribution required will be at least 13% of the property’s purchase price.  This rule is based on mainstream lenders who can offer the best deals for loans requiring at least this level of deposit.

There are some lenders that will allow lower Total Contributions with the lowest being approximately 8%.  It is always important to remember though that the higher your contribution the less LMI (lenders mortgage insurance) you will pay.  Once you reach a Total Contribution of approximately 25% you will no longer need to pay LMI – this is the incentive to really save as hard as you can and purchase with the highest deposit possible.

So, in simple terms, if you wanted to purchase a home for $ 400,000, the minimum Total Contribution would be $ 32,000 (8% including the fees).

If you are unsure of your options, or would like to discuss what we can do for you, please don’t hesitate to get in touch.