Skyrocketing home prices have driven up the amount first-time buyers need to have saved for a down payment. The changing goal means some homebuyers need tens of thousands of dollars more than they did just a few years ago.

New data from Domain shows borrowers in Sydney are expected to need to save $125,424 more to get a mortgage on the average home than they did five years ago. The target of $207,066 needed in June 2019 has now risen to $332,000.

In Melbourne, the average down payment for a 20 percent down payment has increased by $48,549. For an average home in the city, it has risen from $165,212 to $213,761.

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According to David Koch, economic director of Compare the Market, many young buyers have been pushed out of the market due to the rapid price increases in the property market.

“With home prices rising by tens of thousands of dollars in some parts of the country, many buyers feel like they are falling behind in trying to save the 20 percent down payment,” Koch said.

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How much is a property deposit in Australia?

According to Domain, a 20 percent down payment for a house is that much more expensive today than it was five years ago.

• Sydney increased by USD 125,424 to USD 332,000

• Melbourne increased by USD 48,549 to USD 213,761

• Brisbane by $81,498 to $195,293

• Adelaide by USD 78,563 to USD 186,994

• The Canberra Hotel is a family-friendly hotel in Canberra, just a 10-minute walk from Canberra city centre. by USD 58,143 to USD 208,286

• Perth by USD 64,313 to USD 170,000

• Hobart by USD 41,039 to USD 137,211

• Darwin increased by USD 12,012 to USD 117,009

In Sydney, the median house price has now risen to $1,662,448. In Melbourne it is $1,068,805 and in Brisbane it is $976,464.

Is a 20 percent deposit always necessary?

Although 20 percent is the ideal amount you should save for a home down payment, it is not always necessary to save that amount.

The story continues

Some lenders will allow you to take out a home loan with a 5 or 10 percent deposit, but you will need to take out lender mortgage insurance (LMI), a one-off, non-refundable fee designed to protect the bank against the risk of you defaulting on your loan.

The Government’s First Home Guarantee scheme also allows eligible homebuyers to purchase a property with a deposit of just 5 per cent, with the Government guaranteeing up to 15 per cent, allowing the buyer to avoid LMI.

Some lenders may also waive LMI for customers in high-income occupations such as doctors or lawyers as they are considered less risky, while others may offer eligible buyers a $1 LMI.

Is it worth paying LMI?

Paying an LMI has various advantages and disadvantages.

Depending on the size of your loan and deposit, the LMI can be tens of thousands of dollars. Koch points out that the additional financial burden should not be taken lightly.

“But is LMI still a dirty word? If owning a home is part of your long-term plans and you are confident you can afford the repayments, you can still reap the benefits in the form of equity if the property value increases sufficiently before you decide to sell,” he said.

Sharona Ghaem from Western Sydney said she chose to buy her first property with a 12 per cent deposit and LMI payments because property prices were constantly rising.

The 25-year-old is “rentvesting,” meaning she rents out the property while continuing to live with her parents, and said she was happy she bought with a smaller down payment.

“This allowed us to enter the real estate market and start building equity sooner than we would have been able to without the lender’s mortgage insurance,” she said. Yahoo Finance.

LMI professionals

• Get to market faster

• Avoid possible property price increases

• Benefit sooner from property value increases

LMI Disadvantages

• Usually comes with a higher interest rate

• You get a larger loan

• Your loan repayments may be higher

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