Saving for a house is not an easy task. You might not even know when to stop saving. In fact, you might think to yourself that will you ever have enough money to buy a house. A home loan can be a huge commitment. Typically, people take around 25 to 30 years to completely pay it off. There is no need to rush into it. Based on logic, you would be compelled to save as much as possible. However, we only live for a certain number of years. You cannot just sit around trying to stockpile money. Therefore, you should know when to stop and spend the money on a deposit.
Now, everyone has a different home loan situation. But, there are some considerations that will help you get an idea about when you can head to the lending institution or bank for obtaining a loan. Some financial institutions can provide you with the best mortgage broker melbourne even if you can pay up to 95 percent of the overall property value. Therefore, you should be able to borrow about $285,000 against a property worth $300,000. Although it might be possible to access such loans, there are various factors that influence the amount of money you can borrow.
For instance, it would be necessary to have a solid employment history, consistent savings plan, and an exceptional credit history. Besides this, you also have to get LMI (Lenders Mortgage Insurance) for less than 20 percent deposit.
What Is Lenders Mortgage Insurance?
In the simplest of words, lenders mortgage insurance is an insurance policy that aims to protect lenders in case the borrowers end up defaulting. Let’s look an example to help you better understand it. If the bank lends you about $260,000 and you manage to repay $20,000, but fail to make further payments due to financial woes, the bank would be $240,000 out of pocket.
In the worst case situation, the bank would have no option but to seize the property. However, they might only be able to get $200,000 from selling the property. The bank would still be $40,000 out of pocket. Then, there is also the interest on that home loan broker in melbourne. Thus, mortgage broker Melbourne comes to the rescue. It can either be included in the loan or paid upfront by the borrower. Therefore, the borrower would either pay $5,000 upfront or borrow $265,000. It is important to keep in mind that interest rates tend to vary. However, you might not need to get mortgage insurance if you can get someone to be your guarantor. If someone agrees to be your guarantor, they would need to agree to put up their property as security.
So, How Much Money Is Required For A House Deposit?
If you are lucky, you might be able to borrow up to 95 percent of the property price. However, there are complications, risks, and expenses that also need to be accounted for. Generally, you will need a minimum of 20 percent of the property purchase price for the deposit. Hence, if want to purchase a property costing $300,000, you will need to have $60,000.