1. First Home Buyer Other
2. ›Deposits

Deposits, how much do you need?

Loan To Value Ratio

To find out how much you need for your deposit we need to look at Loan To Value Ratios (LVRs). The Loan To Value Ratio (LVR) is the loan amount divided by the value of the property. Let's say you want to buy a property with a purchase price of $200,000. If you have a deposit of $40,000, your LVR is 80% ($160k/$200k).

The critical LVR figure as far as Lenders are concerned is 80%. If you don't have 20% of the purchase price as a deposit, you will generally be required to pay for Lenders Mortgage Insurance (LMI) which is insurance that protects the lender against default.

Lenders Mortgage Insurance (LMI)

LMI provides protection to the lending institution in the event that you default on your Home Loan. Though LMI protects the Lender, it's paid for by the borrower. It's a one-off charge that gets included in your loan amount. By using LMI on a loan, Lenders can pass on the risk of a borrower defaulting to a Mortgage insurer, so they can offer the same loan amount with less of a deposit.

All brokers with The Lending Shop are members with MFAA - The Lending Shop is proudly operated by the Australian Loan Company Ltd.

Wholesale aggregator
of the year 2008

Finalist - Wholesale aggregator
of the year 2009