Buying a Property with a Limited Deposit: Is it Possible?

One of the most common hurdles property buyers in Australia come across is the deposit barrier. A deposit has been, for years, a big deterrent for buyers, from first home buyers to downsizers, particularly when it comes to buying off-the-plan.

If you’re looking to buy a property, one of the most important steps is getting your finances, and in particular your deposit sorted. Not surprisingly, these steps come with many questions, like ‘how much do I need for a deposit?’

Let’s start at the beginning. A deposit is the buyer’s initial contribution to the purchase price of a property. It doesn’t come from a lender, but from your savings or other personal sources.

Why Lenders Require a Deposit: Lowering Risk and Ensuring Commitment

Very few lenders will allow zero deposit financing as the risk to the lender is too high, so banks expect the home buyer to put some of their own money, in the form of a deposit, into the purchase of the property.

Finance is the way this way because banks view homeowners who have invested their own money in the property as less of a risk, as they’re less likely to default or stop paying off their home loan.

If the lender has to sell the property for any reason, then they’re not exposed for the entire value of the property, which can limit the potential losses if the property is sold for less than the remaining home loan balance.

The Significance of Saving for a Deposit: Building a Strong Financial Profile

Saving for a deposit requires discipline and budgeting, and this can set up buyers for successful homeownership. Lenders like to see this because it shows a reliable history, and that a pattern of saving money or making repayments isn’t an issue.

When the buyer has a financial stake in the property, it helps lower the risk to the lender and it provides more benefits to the buyer by way of less funds required to settle the loan. It also can mean they’re offered a more competitive interest rate due to the loan to value ratio (LVR) being lower.

How Much Deposit Do You Need? Exploring Minimum Requirements and Loan-to-Value Ratios

The lowest deposit most lenders will consider is 10% of the sale price, although many will require significantly more; more around the 20% mark.

To put this in perspective, if you were looking to buy a $600,000 property, a 10% deposit would mean your deposit would be $60,000, and a 20% deposit would mean your deposit would be a whopping $120,000. With off-the-plan you generally need to pay a 10% deposit to secure your property, and then you have time (usually at least a year) before the balance is due.

Overcoming the Deposit Hurdle: Introducing Coposit as a Solution

Don’t panic though, there is a solution to this hurdle! There is a fee-free platform that fast-tracks home ownership by helping you pay your deposit in weekly instalments as your property is being built rather than all in one go – and it’s called Coposit.

Like with any property purchase, buyers need to pay a deposit upon signing the contract for an off-the-plan property with the balance due upon settlement, whenever that might occur.

Instead of tying up your savings or available cash flow with a deposit, Coposit gives investors the option to hold onto their cash and instead buy with just a $10,000 deposit!

This allows you to secure a property with just $10,000 (or you can choose to pay more to reduce your weekly payments) in savings, paying off the rest in weekly instalments called ‘coposits.’

Take for instance 33 Manning in Milton, QLD, by developers Goldfields Group. They’re offering apartments priced from just $695,000, and weekly repayments over 92 weeks from just $647 per week. That’s unthinkable, right?

Or if you wanted even lower repayments, take a look at The Markets in Belconnen, ACT, by developers Canberra Property Holdings, who are offering one-bedroom apartments from $443,500, at a cost of only $155 per week over 79 weeks.*

If you’re eyeing an off-the-plan property, make sure it’s listed with Coposit, as this way you can say goodbye to waiting years saving up for a deposit and instead purchase sooner.

*The Markets Belconnen accepts 5% deposit to exchange.

There is more than just one way to buy property. If you’re ready to kick-off your search for your new home, download the Coposit app and start browsing from a range of projects where you can secure your home for as little as $10k upfront.