Do you know how much deposit you really need?

What deposit do you actually need to buy in Geelong?

Most lenders will accept a 5% deposit from first home buyers using the First Home Loan Deposit Scheme, while other buyers typically need at least 10% to qualify. A 20% deposit lets you avoid Lenders Mortgage Insurance entirely, which can save several thousand dollars upfront.

The question isn't just how much you hand over at settlement. Lenders look at where the money came from, how long you've held it, and whether it's genuinely yours. A buyer with $40,000 sitting in an account for six months will have more options than someone who just received a $50,000 gift last week, even though the second figure is higher.

Genuine savings and why lenders care about the source

Genuine savings refers to funds you've accumulated over at least three months in your own account. Most lenders require at least 5% of the purchase price to come from genuine savings, even if you're borrowing at a higher loan to value ratio. This proves you can manage money over time, not just that someone handed you a lump sum before you applied.

Consider a buyer in Belmont looking at a property requiring a 10% deposit. They have $30,000 from their parents and $15,000 saved over the past year through regular contributions. The lender will count the $15,000 as genuine savings and the gift as additional funds, but the genuine savings component is what opens the door to approval. Without it, some lenders won't proceed regardless of the total amount available.

Gifts from family are accepted by most lenders, but they need to be declared upfront with a signed letter confirming the money doesn't need to be repaid. Borrowed funds shown as savings will derail an application the moment the lender spots regular repayments starting after settlement.

How LMI changes the math on smaller deposits

Lenders Mortgage Insurance protects the lender if you default, and it's charged when your deposit is below 20%. The premium is calculated as a percentage of the loan amount and varies based on your loan to value ratio. At 10% deposit, LMI might add $8,000 to $15,000 to your upfront costs. At 5%, it can reach $20,000 or more depending on the loan size.

You can capitalise LMI into the loan rather than paying it at settlement, which means you're borrowing slightly more than the purchase price. This keeps your cash available for other costs like conveyancing, inspections, and moving, but you'll pay interest on that LMI amount for the life of the loan unless you refinance or pay it down early.

Some lenders offer lower LMI premiums than others, and a few will waive it entirely for certain professions or if you meet specific criteria. These variations aren't advertised on rate comparison sites, which is where a broker adds value by knowing which lender will treat your deposit structure most favourably.

What counts toward your deposit beyond cash savings

Equity in an existing property can replace or supplement cash. If you own a home in Geelong with $100,000 in available equity, you can use that as your deposit and borrow the full purchase price of the new property. The lender takes security over both properties, and you avoid needing to save separately.

First home buyers can also use the First Home Super Saver Scheme to withdraw voluntary superannuation contributions, up to $15,000 per year and $50,000 total. The funds need to have been contributed to super for at least 12 months, and you'll receive them minus 30% withholding tax, which you may get back when you lodge your tax return.

Some family members offer a guarantee instead of a gift, where they use equity in their own home to cover part of your deposit shortfall. The guarantor doesn't hand over cash, but they take on liability if you can't meet repayments. This arrangement lets you borrow with a smaller deposit while avoiding LMI in some cases, though not all lenders accept guarantees and the terms vary.

How deposit size affects your interest rate and loan features

A deposit of 20% or more typically unlocks better interest rates and more flexible loan features. Lenders reserve their lowest rates for borrowers with lower risk, and a higher deposit signals that risk is reduced. The difference might only be 0.10% to 0.20%, but over a 30-year loan that compounds to thousands of dollars.

Offset accounts are sometimes restricted or unavailable on loans with LMI, depending on the lender. The same applies to certain variable rate discounts or the ability to split your loan between fixed and variable portions. If you're buying with a 10% deposit, confirm which features are still available before you assume the loan will work the same way as one with 20% down.

In a scenario where a buyer in Newtown is comparing two options, one with a 15% deposit and standard variable rate versus another with 20% deposit and access to a linked offset, the second option might deliver lower effective interest despite the same advertised rate, simply because the offset reduces the balance on which interest is calculated.

Planning your deposit around Geelong's market conditions

Geelong's median house price has moved consistently over recent years, and buyers often find themselves deciding between entering the market sooner with a smaller deposit or waiting to build a larger one. The longer you save, the more you have for a deposit, but prices don't stand still while you wait.

If you're looking at suburbs like Highton or Waurn Ponds where demand is steady, a 10% deposit through a well-structured loan might get you into the market while you can still access properties within your range. Waiting another year to reach 20% might mean the same property type now sits outside your borrowing capacity, even with the extra deposit saved.

This doesn't mean rushing in underprepared. It means understanding the trade-off between LMI costs now and potential price increases later, then making a deliberate call based on your income stability and how long you plan to hold the property.

When a larger deposit makes sense and when it doesn't

If you're buying an investment property, a 20% deposit avoids LMI and keeps your loan structure cleaner for tax purposes. Investment loans already carry slightly higher rates than owner-occupied loans, so adding LMI on top increases your upfront cost and reduces the deposit available for your next purchase.

For first home buyers using government schemes, a 5% deposit might be the most sensible move if it means securing a property sooner and beginning to build equity. Paying LMI in that scenario is the cost of entry, and the equity you build over the following years will often outweigh the premium paid, especially if property values continue to rise.

There's no universal answer. A buyer with strong income stability and low other debts can service a loan with LMI without strain. Someone with irregular income or existing commitments might need the buffer that a larger deposit and lower loan amount provides, even if it means waiting longer to buy.

If you're weighing up your deposit options or want to know what different structures will cost in your situation, call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions