5% Deposit or 10% Deposit: Which Is Better for Home Buyers?

Question: 5% deposit or 10% deposite, which is better?

Answer: Deciding between a 5% or 10% deposit largely depends on your financial situation and how quickly you want to enter the property market. A 10% deposit means you’ll borrow less, potentially reducing your loan repayments and the amount of Lenders Mortgage Insurance (LMI) you might need to pay, as LMI is typically higher for lower deposits. However, a 5% deposit allows you to buy a home sooner, which can be a significant advantage in a rising property market.

Lenders generally view a larger deposit as less risky, which can sometimes open up more competitive interest rates or a wider range of loan products. With a 5% deposit, you’ll almost certainly pay LMI, which protects the lender, not you, if you default on your loan. Some lenders also have stricter eligibility criteria for 5% deposit loans, such as requiring a stronger credit history or a higher income-to-debt ratio.

At TwoFold Lending, we don’t just tell you the difference between a 5% and 10% deposit; we show you how it impacts your borrowing power, LMI costs, and repayment schedule across various lenders. We translate complex lender policies into plain English, so you understand the full financial implications and can make an informed decision before committing to an application.

Before deciding, consider your savings timeline, current rental costs, and any government grants or schemes you might be eligible for, such as the First Home Guarantee. A broker can compare how different deposit sizes affect your overall loan cost and repayment capacity with various lenders, helping you understand the real impact on your budget. Lender policy, rates, and eligibility can change.

For guidance tailored to your situation, speak with TwoFold Lending on 1300 100 019 or book an appointment.

Important: This answer is general information only and does not consider your objectives, financial situation or needs.