Understanding the basics of purchasing with 10% deposit

A 10% deposit on a home in Baldivis means you can move forward without saving for years, and you'll pay Lenders Mortgage Insurance to bridge the gap between your deposit and the 20% threshold lenders prefer.

Saving 20% feels impossible when property values in suburbs like Baldivis are climbing alongside strong population growth. A 10% deposit strategy gets you into the market sooner, and the LMI premium you pay upfront is often recovered through capital growth within the first couple of years. The question most buyers ask is whether the insurance cost is worth the time saved, and in our experience the answer depends on how quickly prices are moving in the area you're targeting.

How Lenders Mortgage Insurance works with a 10% deposit

Lenders Mortgage Insurance is a one-time premium that protects the lender if you default on the loan. It's calculated based on your loan amount and loan-to-value ratio. At 10% deposit, your LVR is 90%, and the premium typically ranges from 1.5% to 3% of the loan amount depending on the lender and your financial profile. The premium can be paid upfront or added to your loan amount, and most buyers capitalise it into the loan to preserve cash for settlement costs and moving expenses.

Consider a buyer purchasing in Baldivis who has saved $50,000 and is looking at homes within the suburb's median price range. With a 10% deposit, the LMI premium might add $8,000 to $12,000 to the loan amount. That same buyer waiting to save 20% would need an additional $50,000, which at a savings rate of $1,500 per month would take close to three years. If property values increase by even 5% per year during that time, the cost of waiting exceeds the cost of the insurance.

Lenders assess LMI-backed loans under the same serviceability rules as any other home loan, including the 3 percentage point buffer above the product rate. Your borrowing capacity doesn't shrink because you're paying LMI, but the capitalised premium does increase your total loan amount, which means slightly higher repayments.

Baldivis buyers and the 10% deposit reality

Baldivis sits 47 kilometres south of Perth and has become one of the Peel region's most popular suburbs for young families and first home buyers. The suburb's proximity to employment hubs in Rockingham and Kwinana, combined with newer developments and access to schools, makes it a practical choice for buyers who want space without the full regional commute.

Buyers in Baldivis often ask whether a 10% deposit will limit their loan options or lock them into higher rates. The answer is no. Most lenders across the major banks and non-major institutions will lend at 90% LVR with LMI, and your home loan interest rate is determined by factors like your credit profile, employment stability, and the lender's pricing at the time, not by the presence of LMI itself. You'll have access to variable rate, fixed rate, and split loan structures, along with features like offset accounts and the ability to make additional repayments.

The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with just 5% deposit without paying LMI, but the scheme has property price caps and lender participation limits. In Western Australia, the cap is $850,000 in capital cities and regional centres. Baldivis falls within the Perth metropolitan boundary for the purpose of this scheme. If you're not eligible for the scheme or prefer to work with a lender outside the panel, a 10% deposit with LMI remains a solid alternative.

The upfront costs beyond your deposit

A 10% deposit is one part of your upfront cost picture, but it's not the only cash requirement. Settlement costs typically include conveyancing fees, building and pest inspections, loan establishment fees, and government charges. In Western Australia, first home buyers purchasing an established home may qualify for transfer duty concessions depending on the property value. For transactions from 21 March 2025, concessions apply up to $700,000 in the Perth Metropolitan and Peel regions.

If the LMI premium is capitalised into your loan, you may also pay stamp duty on that premium depending on jurisdiction. In Western Australia, stamp duty on LMI was abolished from 1 July 2019, so buyers in Baldivis are not required to pay duty on the premium itself. This reduces the immediate cash burden compared to other states where duty on LMI still applies.

Most lenders require evidence that your deposit comes from genuine savings, which generally means funds held in your account for at least three months. Gifts from immediate family members are usually acceptable, but the lender will ask for a statutory declaration confirming the funds are a gift and not a loan. If you're using equity from another property or selling an asset to fund the deposit, the lender will need documentation to verify the source.

Should you split your loan structure at 90% LVR

A split loan divides your total borrowing between a fixed portion and a variable portion, giving you rate certainty on part of the loan while maintaining flexibility on the rest. At 90% LVR, a split structure works the same way it does at any other ratio. You might fix 50% to 70% of your loan for two to four years and leave the remainder on a variable rate with an offset account attached.

The advantage of splitting is that you protect yourself from rate increases on the fixed portion while still retaining the ability to make extra repayments and access redraw or offset benefits on the variable portion. The downside is that if rates fall, you're locked into the higher fixed rate on that portion of the loan until the fixed term ends. In a rising rate environment, the certainty often outweighs the risk, particularly for buyers stretching their serviceability.

If you're planning to make regular additional repayments or expect lump sum income from bonuses or tax refunds, keeping a portion of your loan variable ensures those extra payments reduce your principal and your interest costs over time. Lenders typically allow unlimited extra repayments on the variable portion, while fixed portions are capped at $10,000 to $30,000 per year depending on the lender.

When 10% deposit makes sense and when it doesn't

A 10% deposit makes sense when the cost of waiting to save 20% exceeds the cost of LMI, when you have stable income and strong serviceability, and when the property or location you're targeting is experiencing consistent price growth. It makes less sense if you're borderline on serviceability, if the property is in an oversupplied market where prices are flat or falling, or if you're buying a non-standard property that may attract higher LMI premiums or lender restrictions.

In our experience, buyers who purchase with 10% deposit and make consistent additional repayments often reach 80% LVR within three to five years, at which point they can refinance to remove the LMI component from their loan amount and access better rates. Lenders don't refund LMI if you pay down your loan or refinance early, but the improved equity position gives you more options and stronger negotiating power with lenders.

If you're considering a 10% deposit and you're not sure whether your income and expenses will support a 90% LVR loan, a broker can run your numbers against multiple lenders before you apply. Different lenders assess living expenses differently, and some will accept rental history or savings patterns as evidence of your ability to service a mortgage even if your current rent is lower than your proposed repayments.

Call one of our team or book an appointment at a time that works for you. We'll walk through your situation, show you what's possible with a 10% deposit, and make sure you're moving forward with a structure that fits your goals and your cash flow.

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