What Are Home Loan Deposit Requirements in Hawthorn?

For Hawthorn residents looking to achieve home ownership or invest in property, understanding deposit requirements is an essential first step. The amount you need to save can significantly impact your home loan application, interest rate, and overall borrowing capacity. Whether you're pursuing your first home loan or expanding your property portfolio, knowing the deposit landscape will help you secure your financial future.

Standard Deposit Requirements for Home Loans

Most lenders across Australia require a minimum deposit of 20% of the property's purchase price for an owner occupied home loan. This percentage represents the loan to value ratio (LVR) of 80%, which is the standard threshold many banks and lenders prefer.

For example, if you're purchasing a property in Hawthorn valued at $1,000,000, a 20% deposit would be $200,000. This amount helps you:

• Avoid paying Lenders Mortgage Insurance (LMI)
• Access more favourable home loan rates
• Improve borrowing capacity for future investments
• Build equity from the start of your home loan

When you apply for a home loan with a 20% deposit, you'll typically have access to home loan options from banks and lenders across Australia, with competitive interest rate discounts and more flexible home loan features.

Low Deposit Home Loans

Not everyone can save a full 20% deposit, particularly first home buyers in premium suburbs like Hawthorn. Fortunately, low deposit loans are available for borrowers who can contribute between 5% and 19% of the property value.

With a deposit of less than 20%, you'll need to factor in Lenders Mortgage Insurance (LMI). This insurance protects the lender if you default on your loan. The cost of LMI varies based on:

1. Your loan amount
2. Your deposit size
3. Your employment status and income
4. The property type and location

Some borrowers qualify for low LMI loans or even no LMI loans depending on their profession or circumstances. Medical professionals and legal practitioners often have access to specialised home loan products with reduced or waived LMI requirements.

Genuine Savings vs Non-Genuine Savings

Lenders assess not only the size of your deposit but also where it comes from. Genuine savings are funds you've accumulated over time through regular income, typically demonstrated over three to six months. These include:

• Savings in bank accounts
• Term deposits
• Shares or managed funds
• Balances in an offset account or linked offset account

Non-genuine savings include windfalls such as gifts, inheritances, or bonuses. While these can contribute to your deposit, lenders prefer to see genuine savings as evidence of your ability to manage repayments and build financial stability.

Government Schemes and Concessions

First home buyers may access government schemes that reduce deposit requirements. These programmes can help eligible applicants enter the property market sooner, sometimes with deposits as low as 5% without paying LMI.

When considering a first home loan, it's important to understand the eligibility criteria, property price caps, and income limits that apply. Your mortgage broker can help you determine which schemes you qualify for and how they integrate with various home loan packages available.

How Deposit Size Affects Your Home Loan

The size of your deposit influences several aspects of your home loan:

Interest Rates: Larger deposits often qualify for lower variable interest rate or fixed interest rate offerings. Lenders view borrowers with substantial deposits as lower risk, which translates to rate discount opportunities and reduced home loan interest rate costs over the life of the loan.

Loan Features: With a larger deposit, you'll have access to home loan products with enhanced home loan features such as:

• Offset account facilities
• Redraw capabilities
• Portable loan options
• Flexibility to split between variable rate, fixed rate, and split rate structures

Repayment Options: Higher deposits may provide flexibility in choosing between principal and interest or interest only repayment structures, depending on your financial goals and whether the property is for owner occupation or investment.

Calculating Your Deposit and Repayments

Before you apply for a home loan, it's valuable to understand how much you need to save and what your repayments might look like. Calculating home loan repayments helps you budget effectively and determine if you need lower repayments or can afford to pay more to build equity faster.

Consider using online calculators to:

• Estimate your borrowing capacity
• Compare rates across different home loan products
• Assess the impact of extra repayments on your loan term
• Evaluate fixed interest rate home loan versus variable home loan rates

Additional Costs Beyond the Deposit

When saving for your home loan, remember that the deposit is just one component. You'll also need to budget for:

• Stamp duty (which varies by state and property value)
• Legal and conveyancing fees
• Building and pest inspections
• Valuation fees
• Home loan application fees
• Moving costs

Typically, these additional costs amount to 3-5% of the property purchase price. Factor these into your savings plan to ensure you're financially prepared for the entire purchase process.

Strategies to Build Your Deposit Faster

If you're working towards your deposit goal, consider these approaches:

1. Maximise your savings rate: Redirect any pay increases, bonuses, or tax refunds directly to your deposit savings
2. Reduce expenses: Review your spending habits and eliminate unnecessary costs
3. Consider a guarantor: Family members may help you enter the market sooner by using their property as security
4. Explore joint applications: Combining incomes with a partner or family member can improve borrowing capacity

For Hawthorn residents, working with a local mortgage broker who understands the local property market can provide valuable insights into realistic savings goals and timelines based on current home loan rates and property values in the area.

Getting Pre-Approval

Once you've saved your deposit, obtaining Home Loan pre-approval is a valuable next step. Pre-approval provides:

• Clarity on your budget when property shopping
• Confidence when making offers
• Faster settlement times
• Evidence to vendors that you're a serious buyer

Pre-approval involves a thorough assessment of your financial position, including your deposit, income, expenses, and credit history. This process typically takes a few days and is valid for three to six months, depending on the lender.

Choosing the Right Home Loan Structure

Your deposit size and financial goals will influence which home loan structure suits you. Options include:

Variable Rate Home Loans: These offer flexibility with interest rates that move with the market. They often include features like offset accounts and unlimited extra repayments.

Fixed Rate Home Loans: Lock in your interest rate for a set period, providing certainty for budgeting. Use a fixed rate expiry calculator to plan ahead.

Split Loan: Divide your loan between fixed and variable portions, balancing security and flexibility.

Each structure has distinct home loan benefits depending on your circumstances, risk tolerance, and market outlook.

The Role of a Mortgage Broker

Navigating deposit requirements and home loan options can be complex. AXTON Finance specialises in helping Hawthorn clients access home loan options from banks and lenders across Australia. Our team can assist you with:

• Assessing your deposit and borrowing capacity
• Comparing current home loan rates across multiple lenders
• Structuring your loan to maximise tax benefits and minimise costs
• Managing your home loan application from start to finish
• Identifying the lowest rates available for your circumstances

Whether you're seeking an owner occupied home loan, investment property financing, or refinancing an existing loan, professional guidance ensures you make informed decisions that support your long-term financial stability.

Understanding deposit requirements is fundamental to achieving successful home ownership. By knowing how much you need to save, where those funds should come from, and how your deposit affects your loan options, you'll be well-positioned to secure a home loan that aligns with your financial goals.

Call one of our team or book an appointment at a time that works for you to discuss your deposit situation and explore the home loan products available for your circumstances.