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What is a low deposit home loan?



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Q: What is a low deposit home loan?

A: A low deposit home loan is a type of home loan that allows borrowers to purchase a property with a smaller deposit than what is typically required. In Australia, the standard deposit required to purchase a property is usually 20% of the property’s value. However, with a low deposit home loan, borrowers can borrow up to 95% of the property’s value, which means they only need to save a smaller deposit.

Low deposit home loans can be helpful for first-time buyers or those who are struggling to save for a larger deposit. These loans allow borrowers to enter the property market sooner, rather than waiting years to save a substantial deposit.

While low deposit home loans can be helpful for those who are struggling to save a larger deposit, they do come with some risks. Borrowers who borrow a larger percentage of the property’s value may end up paying more interest over the life of the loan, and they may also be required to pay Lenders Mortgage Insurance (LMI). LMI protects the lender if the borrower is unable to repay the loan and can add thousands of dollars to the cost of the loan.

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