The down payment for a home purchase can vary based on factors like financial status and market conditions. Suppose house prices and/or interest rates have risen significantly during this period. In that case, you might need a larger down payment to secure an affordable mortgage with a manageable monthly payment.
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“Just a quick question regarding home deposits. If I sold my house now and didn’t repurchase for a good five years, would I still be able to purchase with a 20% deposit, or would I now need 40%?”
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The down payment size required to purchase a home can depend on various factors. While a 20% down payment is a standard guideline, it’s not a rigid rule. It’s often recommended because a 20% down payment typically allows you to avoid private mortgage insurance (PMI), which can add to your monthly mortgage costs. However, the actual down payment you’ll need when you purchase a new home after selling your current one in 5 years can vary.
Your financial situation at that time will be a crucial factor. When determining your eligibility and the required down payment, lenders consider your credit score, income, debt-to-income ratio, and other financial metrics. If your financial situation remains strong, you may still be eligible for a 20% down payment. If your financial circumstances change, you may need to adjust the down payment accordingly.
Market conditions also play a significant role. Over the 5-year gap, housing market conditions, including interest rates, may change. Suppose house prices and/or interest rates have risen significantly during this period. In that case, you might need a larger down payment to secure an affordable mortgage with a manageable monthly payment. Conversely, if house prices and rates remain low or stable, securing a mortgage with a smaller down payment could be more accessible.
For a precise answer tailored to your situation, it’s advisable to consult with a local mortgage lender or a financial advisor. They can assess your specific financial circumstances, consider the state of the housing market at the time of your purchase, and provide you with the most accurate and up-to-date information on down payment requirements. Mortgage guidelines can change so that personalised advice will give you the most detailed insights into your down payment needs.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The information in this post is only general in nature and is not personalised financial advice. Please contact us if you want financial advice.
