Smart ways to buy a house with a 10% deposit

Can I buy a house with a 10% deposit?

You can buy a house with a 10% deposit, and many buyers across Malvern East do exactly that. Most lenders will approve a home loan application with this level of deposit, though you'll need to pay Lenders Mortgage Insurance (LMI) and meet standard lending criteria around income, employment, and credit history.

For someone purchasing a property around the $1.2 million mark, which sits comfortably within Malvern East's current market range for established apartments and townhouses, a 10% deposit means having $120,000 saved. The remaining 90%, or $1.08 million, forms your loan amount.

What Lenders Mortgage Insurance actually costs

LMI is a one-off premium that protects the lender if you default on your home loan. When your loan to value ratio (LVR) sits above 80%, lenders require this insurance. The cost varies depending on your deposit size and loan amount, but on a $1.08 million loan with a 10% deposit, you're typically looking at an LMI premium somewhere between $30,000 and $45,000.

Consider a buyer purchasing a two-bedroom apartment near Central Park on Dandenong Road with a 10% deposit. If they choose to capitalise the LMI cost into their loan amount rather than paying it upfront, their total borrowing increases to around $1.11 million. This increases their monthly repayments but preserves their savings for other costs like conveyancing, building inspections, and initial furniture purchases. When you apply for a home loan with a smaller deposit, understanding this cost upfront shapes your entire budget.

How your income affects borrowing with 10% down

Your borrowing capacity becomes more important when you're starting with a smaller deposit. Lenders assess whether you can service the higher loan amount that comes with only putting down 10%. A household income of around $200,000 can typically support borrowing in the $1 million to $1.2 million range, depending on other debts and living expenses.

In our experience working with buyers in Malvern East, dual-income households often have stronger borrowing capacity, which matters when you're taking on a higher LVR. Lenders will examine your pay slips, tax returns, and any existing financial commitments like car loans or credit card limits. They'll also factor in your regular expenses and apply a buffer to interest rates when calculating home loan repayments, ensuring you can still meet payments if rates rise.

Variable rate versus fixed interest rate home loan options

You'll need to decide whether a variable interest rate, fixed interest rate, or split loan structure works for your situation. With a 10% deposit purchase, this decision affects both your immediate repayments and your flexibility over the coming years.

A variable rate gives you access to features like an offset account, which can reduce the interest you pay when you deposit your salary and savings into a linked account. For buyers who receive bonuses or have irregular income, this flexibility can shave years off your loan term. A fixed interest rate home loan provides certainty around repayments for a set period, typically between one and five years, protecting you from rate rises during that time.

Many buyers working with mortgage brokers in Malvern East choose a split loan, where part of the loan sits on a fixed rate and part remains variable. This approach provides some repayment certainty while maintaining access to features like offset accounts on the variable portion.

First home buyer advantages that reduce upfront costs

If you're a first home buyer, specific state and federal schemes can reduce or eliminate certain costs. The First Home Loan Deposit Scheme allows eligible buyers to purchase with as little as a 5% deposit without paying LMI, though places in this programme are limited and criteria around income and property price apply.

First home buyers purchasing in Malvern East may also qualify for stamp duty concessions or exemptions depending on the property price and their status. These concessions can save tens of thousands of dollars, which effectively increases what you can afford or builds a buffer in your savings for unexpected costs after settlement.

Building equity faster after you buy

Once you've purchased with a 10% deposit, building equity becomes your priority. Property value growth in areas like Malvern East, driven by proximity to Central Park, Caulfield Racecourse, and transport links along the Dandenong Road corridor, naturally increases your equity over time. You can accelerate this by making extra repayments when possible or using an offset account effectively.

As your equity increases and you move below an 80% LVR, you can refinance to remove LMI from your loan structure or negotiate a rate discount with your current lender. This improved position also strengthens your borrowing capacity if you later want to buy an investment property or upgrade to a larger home.

Working with lenders across different home loan products

Not all lenders offer identical terms for borrowers with a 10% deposit. Some apply interest rate discounts only once you reach 80% LVR, while others offer more favourable home loan packages from the start. Comparing rates across multiple lenders reveals these differences, and access to home loan options from banks and lenders across Australia becomes valuable rather than limiting yourself to one or two familiar names.

A mortgage broker can compare rates and features across dozens of lenders simultaneously, identifying which ones suit your income type, employment structure, and property choice. Securing home loan pre-approval before you start attending inspections gives you confidence around your budget and makes your offers more attractive to vendors. When you're ready to take this step, call one of our team or book an appointment at a time that works for you through our online booking system.

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