Insane amount you now need for a deposit to buy a typical house
The amount first-home buyers need to save for a down payment on a house has increased dramatically in all major cities across Australia.
While down payments have increased by tens of thousands of dollars in some cities, a 20 per cent deposit on the average home in Sydney has increased by $125,424 over the past five years.
New data from Domain shows buyers now need to save $332,000, compared to $207,066 in June 2019.
Meanwhile, the amount needed for the average home in Melbourne has risen from $165,212 to $213,761.
Compare the Market chief economics officer David Koch warned that rising deposits could see young Australians priced out of the housing market.
“With home prices rising by tens of thousands of dollars in some parts of the country, many buyers are feeling like they’re behind the curve as they try to save that 20 percent down payment,” he said. Yeah.
Brisbane had the second highest recommended deposit increase of $81,498 to $195,293.
It was followed by Adelaide with $78,563 to $186,994, Perth with $64,313 to $170,000, Canberra with $58,143 to $208,286, Hobart with $41,039 to $137,211 and Darwin with $12,012 to $117,009.
The amount first home buyers need to save for a down payment on a home has increased dramatically in all major Australian cities
The average price of a house in Sydney rose to $1,662,448, compared to $1,068,805 in Melbourne and $976,464 in Brisbane.
While it is recommended that first-time home buyers make a 20 percent down payment, lenders will also accept down payments of less than 100 percent.
However, people who borrow money with a low down payment will have to pay mortgage insurance (LMI) to the lender.
LMI is a one-time, non-refundable fee that protects lenders in the event that someone cannot repay their loan.
Better still, the government’s First Home Guarantee allows the buyer to act as a guarantor, meaning the buyer can avoid LMI.
Some lenders also waive LMI for high-income customers such as doctors or lawyers, or offer an LMI of $1.
The average price of a house in Sydney rose to $1,662,448, compared to $1,068,805 in Melbourne and $976,464 in Brisbane
Koch urged buyers to consider the financial burden of an LMI, which can run into tens of thousands of dollars, before rushing to sign a contract.
‘But is LMI still a dirty word? If owning a home is part of your long-term plan and you are confident you can meet the repayments, you can still reap the benefits of equity if the value of the property increases enough before you decide to sell,’ he said.