In Melbourne, as of 2023, median house prices range from $809,489 to $1,037,923 for 2-bedroom to 4-bedroom houses. For those wondering, how much deposit do you need to buy a house in Melbourne, understanding deposit requirements is essential.
The minimum deposit typically required to buy a house in Melbourne is 10%, but it is advisable to aim for 20% to avoid additional costs like Lenders’ Mortgage Insurance (LMI). Borrowing more than 80% of the property value often necessitates such insurance.
This article covers the average deposit amounts, factors affecting these amounts, and strategies for managing and saving for a deposit in Melbourne’s current real estate market.
Average Deposit Requirements in Melbourne
The average deposit for a house in Melbourne typically ranges from 5% to 20% of the house price. With median house prices ranging from $809,489 to $1,037,923, buyers might need to save between $40,474 to $207,584.
Ideally, a 20% deposit is recommended to avoid Lenders Mortgage Insurance (LMI).
For instance, with a median house price of $933,500 in Melbourne as of September 2023, according to the Real Estate Institute of Victoria (REIV) reported by Urban Property Australia, A 20% deposit would be around $186,600.
Factors Influencing Deposit Amounts in Melbourne
Lender Policies and Buyer’s Credit History
Lenders’ requirements for a house deposit can significantly vary based on the buyer’s credit history and financial profile. A strong credit history typically results in more favorable terms, potentially reducing the deposit percentage required.
Buyers with lower credit scores may face higher deposit demands due to the increased risk perceived by lenders. Understanding one’s credit score and working to improve it can be a strategic step towards achieving better loan terms.
Property Type
The type of property being purchased in Melbourne significantly influences the deposit required. The general trend across different property types is as follows:
- Investment Properties: Typically, a minimum of a 20% deposit is required for investment properties to avoid Lenders Mortgage Insurance (LMI), although some lenders like loans.com.au might allow a 10% deposit, but with the inclusion of LMI.
- Residential Properties: For residential properties, the minimum deposit generally starts at 10%. However, aiming for a 20% deposit is advised to minimize the loan amount and avoid additional costs such as LMI.
- High-risk Properties: Some properties, such as those in remote locations or with unique features, may be classified as higher risk by lenders. In these cases, a higher deposit may be required, reflecting the increased risk associated with the loan.
These variations in deposit requirements are aligned with the lenders’ risk assessments and their policies for different types of properties. Understanding these requirements is crucial for buyers to plan their finances accordingly
Government Schemes and Incentives in Victoria
First-time homebuyers in Victoria have access to several government schemes that can assist in managing the deposit amount. The First Home Owner Grant, specifically for new builds, provides direct financial support.
First-time homebuyers in Victoria have access to several government schemes that can assist in managing the deposit amount.
“The First Home Owner Grant provides $10,000 for new homes valued up to $750,000. Additionally, there is a first-home buyer duty exemption or concession for properties valued up to $750,000.”
Tips for Saving and Managing the Deposit for a House
Saving for a house deposit in Melbourne’s market demands strategic financial planning. Determining a realistic savings target based on the average deposit range is crucial.
Prospective buyers are encouraged to utilize schemes like the First Home Super Saver Scheme, which allows up to $30,000 in savings towards a deposit.
“The Victorian Homebuyer Fund offers assistance with home affordability for first-time buyers. Establishing a consistent savings habit and considering low-risk investment options can also be beneficial in accumulating the necessary funds.”
Through disciplined saving and leveraging available resources, prospective buyers can move closer to securing their dream home in Melbourne.
Additionally, for those interested in exploring housing options, houses for sale in Melbourne provides a comprehensive list of current listings. Considering Melbourne’s living expenses is also important when planning to buy a house. For a detailed understanding of these costs, you can refer to Is it expensive to live in Melbourne?
Suggested reading: While you’re exploring housing options, don’t miss our comprehensive guide on How much is a house in Melbourne? to get a better understanding of the current market trends.
FAQs on ‘How Much Deposit Do You Need to Buy a House in Melbourne?’
Can I buy a house in Australia with a $10,000 deposit?
Purchasing a house with a $10,000 deposit in Australia is feasible if the property value is around $100,000. For more expensive properties, a $10,000 deposit might be insufficient unless you have a guarantor.
Is it possible to buy a house in Australia with a 5% deposit?
Yes, in Australia, the home guarantee scheme allows first-time buyers to purchase a residential property with a minimum 5% deposit. The government guarantees the remainder of the deposit up to 20%, saving the buyer from paying lenders mortgage insurance.
Who is eligible for the first home buyers grant in Victoria?
To be eligible for the first home buyers grant in Victoria, you must be 18 or older, an Australian citizen or permanent resident, an individual (not a company or trust), and neither you nor your spouse/partner should have previously owned residential property in Australia.
What is the Victorian Home Buying Grant?
The Victorian Homebuyer Fund requires participants to contribute at least 5% (or 3.5% for Aboriginal and Torres Strait Islander participants) of the purchase price towards the deposit. The Victorian Government then contributes financially in exchange for a share in the property.
