Saving for a Deposit

You can go for a loan with less than a 20% deposit – it just means you will be up for Lenders Mortgage Insurance. For an IP this isn’t always a bad thing as LMI enables some people to get into the market sooner and also maximises tax deductions. Keep in mind you will also need additional funds for stamp duty, legals and other settlement costs.

Hi Liana

You certainly don’t need 20% deposit to purchase an investment property unless of course you are buying it inside your SMSF.

90-95% lvr is possible and even 105% subject to certain criteria.

A good investment property mortgage broker should be able to give you an honest assessment of your situation.

Cheers

Yours in Finance

Hi Liana

How much are you looking to spend?

General rule is that banks will lend up to 97% of the properties value.

However – that usually means a 93% or 94% loan with the Lenders Mortgage Insurance (LMI) added on top.

Some banks still do the old 95% + uncapped LMI up to 99% but they are becoming rare and not easy to get approved.

Cheers

Jamie

It’s a good point Corey. The costs go up substantially too.

Liana – how much are you looking to spend?

Your financing options of the top of my head:
1. Higher LVR loan – LMI works on an exponential like scale at high LVRs, so this will need to be considered.
2. Parental Guarantor if your parents have equity available that your willing to use. This way you could borrow 105% of the property.
3. Gifted funds (parents borrow their equity, gift it to you).
4. If your close and have strong servicing, personal loan the closing costs/down to 80%.
5. Lenders that goes to 85% no LMI.

I think establishing savings behavior is critical for you at the outset. Finance with less than 20% deposit is common place among first time investors and and first time buyers but these tools should be used as part of a strategy to get ahead. With rates at all time lows people who are disciplined now are the ones who will be successful as the market changes. My point is yes it can be done but yes do save and save hard. If you have excess invest it. Learn financial discipline now as it is a tremendously valuable skill to have.