Buy now or save for a larger deposit?

Any general questions you might have in regards to loans and finance.
Alica
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Joined: Tue Sep 24, 2019 6:40 pm

Buy now or save for a larger deposit?

Postby Alica » Tue Sep 24, 2019 6:43 pm

I am looking to buy a home in NSW valued at $700,000. I only have saved up $50,000 deposit. I am paying rent of $580 per week and can save $200 weekly. I don't want to lose the opportunity on the house, but I feel the deposit amount is quite low. What should I do? Buy now or save for a bigger deposit?

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Otto Dargan
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Re: Buy now or save for a larger deposit?

Postby Otto Dargan » Tue Sep 24, 2019 6:55 pm

Hi Alica,

Thank you for reaching out to us and welcome to the forums.

Using the buy now or save more calculator, even with a deposit of $50,000, you would be better off buying now than saving for later. You would be better off by approximately $479,225 if you buy now.

Please note that the calculator is basing the results on the average annual property growth in NSW over the past 25 years.

Since your deposit is quite low, you will have to pay Lenders Mortgage Insurance (LMI) premium of $24,375. To avoid paying LMI, you will need a deposit of at least $140,000 or 20% of the property value. Some of our lenders allow borrowers to add the LMI fees on top of your home loan.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a low deposit home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Alica
Posts: 3
Joined: Tue Sep 24, 2019 6:40 pm

Re: Buy now or save for a larger deposit?

Postby Alica » Tue Sep 24, 2019 7:15 pm

Thanks for the information. The calculator really did help. But the LMI amount is a bit high. Are there other ways I can reduce LMI or not pay it entirely?

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Otto Dargan
Mortgage Specialist
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Buy now or save for a larger deposit?

Postby Otto Dargan » Tue Sep 24, 2019 7:28 pm

Hi Alica,

The best way to waive LMI is to save a larger deposit. These deposits can be in the form of your own savings, or even gifted deposit from your parents, inheritance, tax refunds, First Home Owners Grant, etc.

Another way to avoid paying LMI is to have a guarantor on your home loan.

If saving a larger deposit is not an option, then there are ways to reduce LMI:
  • Some mortgage insurance companies offer up to 15% discount on their LMI premium if you're a first home buyer.
  • You can even capitalise the cost of the LMI, which means you add the cost of the LMI onto the principal of the loan. You'd still by paying LMI, but you would not have to pay it upfront.
Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Alica
Posts: 3
Joined: Tue Sep 24, 2019 6:40 pm

Re: Buy now or save for a larger deposit?

Postby Alica » Tue Sep 24, 2019 7:46 pm

Thanks. Besides the large LMI costs, what other expenses should I take note of before purchasing a home?

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Otto Dargan
Mortgage Specialist
Posts: 7728
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Buy now or save for a larger deposit?

Postby Otto Dargan » Tue Sep 24, 2019 8:14 pm

Hi Alica,

When you buy a property, you can expect to spend up to 5% of the contract price on fees, duties and charges. So for a purchase of $700,000, there may be up to $35,000 of costs involved to complete the purchase.

The main government costs associated with buying a home are:
  • Purchase stamp duty, which is a tax levied by your state government on all property purchases.
  • Mortgage stamp duty, though it has been abolished in most states.
  • Transfer fee, which is a fee for registering your name on the title of the property and removing the vendor's name.
  • Registration fees for registering your lender's mortgage title of your property.
  • There are other costs such as conveyancing fees, valuation fees, inspection fees etc.
If you’re a first home buyer, buying a new property or building a home, you may be eligible for additional concessions or grants. Please contact your state government office for confirmation.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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