How one couple got on the property ladder sooner
You are hoping to buy your first home. You have worked hard and managed to save 5% deposit and you are finally starting to make progress…then the goal posts move.
While you are saving, property prices keep climbing. The amount you need gets bigger and suddenly the finish line feels further away than when you started. That was exactly the situation facing one couple who recently came to Venro Finance.
They had stable PAYG employment, strong borrowing capacity and enough saved for a 5% deposit, plus stamp duty and purchase costs. They had also found a home that suited their lifestyle, work and future plans. On paper, they were in a strong position. The problem was the deposit.
At the time, they did not qualify for an LMI waiver and many traditional lending options wanted them to bring more cash to the table. So while they were doing all the right things, entering the market was becoming harder and harder. The obvious advice might have been to keep saving. But when the number you are chasing keeps going up, waiting is not always as simple, or as safe, as it sounds. So instead of focusing on why they could not buy yet, Steve started looking at what might make it possible now.
So, can you buy your first home with a 5% deposit?
The short answer is: sometimes.
A smaller deposit can mean fewer lending options and it may come with additional costs, including Lenders Mortgage Insurance (LMI). But that does not automatically mean buying a home is off the table. For this couple, Steve looked beyond the obvious lenders and found an option that could lend up to 99.5% of the property’s value, with the LMI premium added to the loan.
That meant their genuine 5% savings could potentially get them into the home they wanted without having to spend another year, or longer, trying to chase a much larger deposit. It was not the cheapest loan available. The interest rate was higher and there was LMI to pay. Steve made those trade-offs very clear from the beginning.
The question was not simply: “How do we avoid LMI?” it was – “What does waiting cost us, and is buying now worth that trade-off?”
For this couple, it was.
Buying a home with a small deposit is about more than the interest rate
This is where home loan decisions can be interesting. The lowest rate is important, but it is not always the only number worth looking at. If this couple had waited, they could have continued adding to their deposit but they also faced the possibility that the property market would keep moving while they saved and they’d never quite catch up. They had already found a home they wanted and waiting meant potentially losing that property and continuing to chase a savings target that could keep getting bigger.
Steve helped them look at the whole picture:
- The deposit they already had
- The upfront cost of LMI
- The higher initial interest rate
- Their ability to comfortably service the loan
- The property they wanted to secure
- The cost and opportunity of waiting
With all the numbers on the table, they could make an informed decision rather than assuming a 5% deposit automatically meant “not yet”.
How their 5% deposit home loan helped them buy sooner
With the finance strategy in place, the couple were able to move forward and purchase their home. Most importantly, they understood exactly what they were signing up for and why. Sometimes the first loan is not about finding the loan you want to keep forever. It is about finding a sensible way to take the next step, then reviewing your position when circumstances change.
And in this case, they changed fairly quickly.
The next opportunity came six months later
Fast forward six months, the property’s valuation had increased, so their equity hand grown, improving the couple’s loan-to-value ratio. This opened up options that had not been available when they first purchased, so Steve went back to work, this time refinancing.
This time, the couple were able to refinance to Westpac at below 90% LVR. Because one applicant was an Occupational Therapist, they were also able to access Westpac’s eligible professional LMI policy, meaning LMI could be waived on the refinance.
The result?
Their new interest rate was approximately 1.3% lower than their original loan, delivering an estimated interest saving of around $17,000 per year.
They could also apply for an LMI credit from the original transaction of up to 40% of the premium paid, subject to the lender’s requirements. A loan that had initially helped them get on the ladder had done its job and once their position improved, Steve could help them move onto something sharper.
What first home buyers can learn from this
A 5% deposit does not mean every lender will say yes. It also does not mean buying now will always be the right decision. The loan would cost more initially, LMI was part of the equation and there were no guarantees about what the market would do next.
But there was also risk in waiting.
They had found the right home, in the right location, at a time when property prices were continuing to move. Saving for longer might have meant watching the goal posts shift again and again. So, with Steve carefully walking them through the numbers, the pros, the cons and the possible outcomes, they made a calculated leap. They understood the compromises they were making at the start and, importantly, they had a plan to review the loan again when their position improved.
For this couple, that meant:
- Buying the home they wanted sooner
- Avoiding another long period of saving while the market kept moving
- Securing a property in a location that worked for their lives
- Taking action with a clear understanding of the risks and trade-offs
And the real wins:
- Refinancing six months later when their position improved
- Reducing their interest rate by around 1.3%
- Saving an estimated $17,000 a year in interest
What initially felt like a barrier became an opportunity. They had taken a carefully considered chance on getting into the market sooner, backed by advice, a clear strategy and a plan for what came next, and six months later, that decision has put them in a much stronger position.
Steve and the team at Venro Finance are outstanding! I have worked with a number of brokers on previous occasions and have found none as good as Steve. It became apparent soon after getting in touch with him that he was very considered, detailed and thorough in his approach which gave us confidence in working with him and the team. This was also evident right through to getting our loan approved. We will be using Steve at Venro Finance for all of our finance needs going forward and would highly recommend him to anyone looking for someone who is down to earth, very understanding, highly knowledgeable, detailed in his approach, and overall someone who cares about their clients. 5 stars from us!
Could buying sooner be an option for you?
If you have some of your deposit saved but the amount you seem to need keeps moving further away, it may be worth having a conversation before automatically deciding to wait. Steve has been helping people navigate home loans for a long time. He will tell you what is possible, what it is likely to cost and, just as importantly, when an option does not stack up.
Because sometimes getting onto the property ladder is not about having the perfect deposit. It is about knowing which opportunities are available to you right now.