This is a great time to buy an investment property in Perth, Western Australia, as confidence returns and banks increase their lending. Many people are asking us how much deposit or equity they need to buy a property. So here we’ll give you the answer!
Mortgage insurance
To answer this question, you need to decide whether you want to pay mortgage insurance on your loan. If you don’t have enough of a deposit, you have to pay this insurance.
Basically, banks need to insure their risk of borrowers not being able to pay their mortgage. The higher the percentage of the purchase price you borrow, the higher the risk for the bank.
If you borrow more than 80% of a property’s purchase price, you have to pay mortgage insurance. For example, if you have a 10% deposit and need to borrow 90% of a $500,000 purchase, you have to pay $8000 to $10,000 in mortgage insurance. (Even with this cost, the total borrowing must be less than 90%.)
This insurance amount gets added to the total loan and you pay it off with the mortgage.
To avoid mortgage insurance, most borrowers try to borrow no more than 80% of the purchase price – and that would be our advice too.
Knowing your numbers
So you need a 20% deposit (plus enough for stamp duty) to purchase an investment property in Perth. Here are the numbers:
| Loan amount (20-year term) | Repayments 3% interest |
Repayments 4% interest |
Stamp duty (WA) |
| 300,000 | 1,663 | 1,817 | 9,247 |
| 400,000 | 2,218 | 2,423 | 13,447 |
| 500,000 | 2,772 | 3,029 | 18,217 |
| 600,000 | 3,327 | 3,635 | 22,987 |
Want to know more?
If you have any queries or would like more advice on purchasing an investment property, contact Alan Bourke or anyone from Bourkes on (08) 9474 2000.
