When it comes to buying a house, the deposit is just the beginning. Legal fees, stamp duty, bank and insurance charges, not to mention moving costs, can all add up to tens of thousands of extra dollars on the average home purchase.
Why do lenders talk about a 20-percent deposit?
Twenty-percent is the magical deposit amount where banks will lend to you without adding on an extra margin, called Lender’s Mortgage Insurance (LMI) to reduce their risk. Canstar explains, “Lender’s Mortgage Insurance is a condition of home loan borrowing where your mortgage lender may require you to make a one-off payment to protect them (the lender) against the event where you (the borrower) might fail to make your home loan repayments.” To avoid having LMI added to your repayments, you need at least a 20 percent deposit which, depending on the property and location, could be a hefty six-figure sum.