$80,000 is a lot of money. When you have rent, bills and groceries to pay for, it’s not easy to save that much. Some lenders understand this and let you borrow more than 80% of the property’s value to help you get into your own home faster. Some will lend you up to 95%. This means your deposit will be 5%, plus the associated purchase costs. So if the property you want is $400,000, 5% of that would be $20,000 deposit - a bit more doable.
Of course, a smaller deposit comes with greater risk. If interest rates rise or unexpected expenses pop up and you’re borrowing at maximum capacity, you could get caught short. Because there’s a greater risk, you’ll need to pay Lenders Mortgage Insurance (LMI) if your deposit is under 20%. LMI is paid to the bank’s insurer to cover the bank in the event you default on your home loan, as borrowings above a loan to value ratio of 80/20 are considered ‘higher risk’. You can pay your LMI as an upfront cost or, depending on how much LMI you have to pay, you can add it to your home loan.