THE POWER OF 20 DEPOSIT/EQUITY

Smartmortgages.co.nz Limited

Many First Home Buyers have asked me why they need to save up 20% deposit when others can get a mortgage approved with just 5% or 10% only.

Here’s why having a 20% deposit is a game-changer:


1️⃣ Easier Mortgage Approval ✅
Banks see a 20% deposit as lower risk, meaning:

Fewer restrictions on your application.
No need to prove 12+ months with your current employer (a requirement for First Home Loan with a 5% deposit).


2️⃣ No Lenders’ Mortgage Insurance (LMI) 💰

With a 5% deposit First Home Loan, you must pay 0.5% of your loan amount as LMI.
Example: Borrowing $800,000? You’ll pay $4,000 in LMI—omg, that's lots of money!!!


3️⃣ No Low Equity Margin (LEM) or Low Equity Premium (LEP) 🚀

Borrowing with less than 20% deposit means banks charge extra interest (LEM/LEP) ranging from 0.25% to 1.20% depending on the lender and your LVR.


4️⃣ Better Interest Rates & Cashback Rewards 🎉

You qualify for special discounted rates from banks.
Many lenders offer up to 1% cashback on your loan. This can help cover your legal cost, building inspect fee or get you a beautiful new piece of furniture.


5️⃣ Easier Refinancing for Better Deals 🔄

With 20% equity, switching to another lender for better rates or cashback is much easier.
Low-equity borrowers often struggle to refinance due to LEM/LEP fees. Now, you are "stuck" lol.

A 20% deposit isn’t just about securing a mortgage—it’s about getting the best deal, paying less interest, and keeping more money in your pocket! 💰🏡.


💬 What are your thoughts? Drop a comment below!


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