The short answer
See how a $300,000 deposit impacts your loan, LMI, stamp duty, and LVR on a $1.5 million property purchase.
Upgrading to a $1.5 million home with a $300,000 deposit means paying stamp duty of about $82,000 and lenders mortgage insurance, because the deposit doesn’t reach 20% once stamp duty is included. In this breakdown the base loan is about $1.293 million, rising to roughly $1.318 million with LMI added, at an LVR of about 87.9%.
What does a $1.5 million purchase look like?
Here is a worked example for an upgrade to a property on Lincoln Avenue at about $1,500,000 with a $300,000 deposit. The numbers are approximate and for illustration only.
Item | Amount |
|---|---|
Purchase price | $1,500,000 |
Stamp duty (VIC, approx.) | ~$82,000 |
Lender, legal and adjustment buffers | ~$11,000 |
Deposit | $300,000 |
Base loan | ~$1,293,000 |
LMI (varies by lender) | ~$25,000 |
Total loan | ~$1,318,000 |
Loan-to-value ratio | ~87.9% |
Why is there LMI with a $300,000 deposit?
$300,000 is exactly 20% of $1.5 million, but stamp duty and costs come out of that money too. Once about $93,000 goes to duty and costs, only around $207,000 is left as a true deposit, which is under 20%. That pushes the loan above 80% of the property’s value and triggers LMI.
How could you avoid LMI here?
Add about $100,000 more to bring the loan back to 80%.
Use equity in an existing property as extra security.
Look for a professional LMI waiver if you work in an eligible occupation, such as medicine, law or accounting.
Use a family guarantee, where a parent’s property secures part of the loan.
Or decide the LMI cost is worth it to buy now. That is a reasonable choice if prices are rising faster than you can save.
What should you focus on in the numbers?
The total loan, after LMI is capitalised, is what you repay. Here that is about $1.318 million, not $1.293 million. On a loan this size, a 0.25% rate change shifts repayments by roughly $200 a month, so test your budget at higher rates before you commit.
A typical Melbourne scenario
The Kellys have $300,000 from the sale of their first home and their combined income comfortably supports a loan of about $1.3 million. Their broker compares two options: buy now with LMI of roughly $25,000 added to the loan, or wait a year and save another $100,000. With prices moving in their target suburb, they choose to buy now, capitalise the LMI, and plan to refinance once the loan drops below 80%.
Key takeaways
Stamp duty of about $82,000 on $1.5 million eats into your deposit.
A $300,000 deposit isn’t 20% once costs are included, so LMI applies.
LMI is usually added to the loan, so focus on the total loan amount.
Equity, a family guarantee or a professional waiver may remove LMI.
Compare with upgrading with a 20% deposit and buying without a 20% deposit, use our stamp duty calculator, or talk to our mortgage brokers about investment and home loans.
General information only. This article does not take into account your objectives, financial situation or needs, so consider whether it is appropriate for you and seek personal advice before acting. Elephant Financial Pty Ltd trading as Elephant Advisory is an authorised credit representative (ACR 487962) of Yellow Brick Road Aggregation Pty Ltd (formerly Vow Financial Pty Ltd) (ABN 66 138 789 161), Australian Credit Licence 390261.
Gav is the person you want in your corner when it comes to property finance. After years in banking and motor trade finance, he joined Elephant early and never looked back. He's passionate about combining property and finance to help clients achieve their goals through tailored financial structuring, and he's very serious about snacks at meetings.
