How Much Deposit Do I Need to Build a Home in Perth (WA)?

How Much Deposit Do I Need to Build a Home in Perth?

Most lenders in Australia require a 20% deposit. The absolute minimum deposit you will require is 5%.

There is no fixed minimum deposit amount. The deposit is a percentage of the overall loan amount and depends on the amount you are going to borrow which largely depends on the type of home you want to build and the location.

Let's say you want to build a $500,000 home, this means a 20% deposit is equal to $100,000, a 10% deposit would be $50,000 and a 5% deposit would be $25,000.

Understanding how much deposit you need to buy a home in Perth, Western Australia

Your deposit plays a significant role in determining the size of your home loan, which in turn affects your home loan repayments.

In this post, we'll explore different aspects of the deposit you need, upfront costs and expenses, and other factors that you should consider before purchasing your new home.

Knowing your maximum borrowing power

Knowing your maximum borrowing power is critical when determining your deposit requirements. 

Your borrowing power is influenced by several factors, including your income, expenses, credit history, and other debts. 

A mortgage broker can provide insights into your maximum borrowing power.

Calculating your price range

A crucial first step in determining your deposit requirements is to calculate your price range. By understanding how much you can afford to borrow, you'll have a clearer picture of how much deposit you'll need. 

You should factor in any savings, current debts, and other expenses that could affect your borrowing power. 

The first step is to consult a financial advisor or mortgage broker as they will assist you in calculating your borrowing capacity and potential loan repayments and the income required to meet those requirements.

There are a range of home building costs calculators freely available online. Just keep in mind that they are only ever going to give you a very rough estimate as building costs can vary vastly depending on the type of home you build.

In case you are interested, here's an article explaining how those building costs calculators work.

Larger home loan deposit = less to borrow

The more money you can save for your deposit, the less you'll need to borrow for your home loan. For example, if you put down a 20% deposit on a $500,000 property, you'll only need to borrow $400,000. 

By contrast, if you put down a 5% deposit, you'll need to borrow $475,000. 

Other upfront costs to consider

In addition to your deposit, there are several other upfront costs to consider when buying a home in Perth. These include:

Stamp duty

Stamp duty is a tax levied by the government, based on the value of your property. The amount of stamp duty payable varies by state and is based on the purchase price of your property. 

Here in WA you can simply use the stamp duty calculator provided by the Western Australian Government:

Legal costs

Legal costs associated with buying a property include charges for settlement agents and conveyancing fees. These fees can vary depending on the complexity of your transaction.

Mortgage establishment and registration fees

Lenders often charge fees to establish and register your mortgage. These fees can vary between lenders.

Lenders Mortgage Insurance (LMI)

Lenders Mortgage Insurance (LMI) is an insurance policy that protects your lender if you default on your home loan. LMI is generally required if your deposit is less than 20% of the property's value.

Title transfer fee

The cost of transferring the title of the property from the previous owner to you is another fee that you'll need to pay when buying a home.

Other factors that can affect your loan

Several factors can affect your loa, including your credit history, employment status, income, and existing debts. Also, if you are building your own home it will affect your loan significantly.

Your mortgage broker or lender can help you understand how these factors may impact your borrowing power and interest rate.

Support for first-time buyers

First-time buyers may be eligible for government grants or incentives that can assist with the costs of purchasing a home. 

These incentives may include grants for first-home buyers, stamp duty exemptions or concessions, and low-deposit home loans.

Let’s wrap it up

The amount of deposit you need to buy a home in Perth, Western Australia depends on a range of factors, including the type of home loans, your budget, loan repayment capacity, and upfront costs. 

By taking these things into account, you'll have a clearer understanding of how much deposit you'll need to save. 

Consulting with a mortgage broker or financial advisor can provide valuable guidance and help you navigate the complexities of the home-buying process. 

With careful planning, you can make your dream of owning a home a reality.

We are always here to help. So if you have any questions regarding your new home building ideas please don't hesitate to get in touch with one of our friendly new home sales consultants or give us a call on (08) 9240 8001.