How does OwnHome Deposit Boost work?

OwnHome Deposit Boost is basically getting a loan for your house deposit, so you can buy your home sooner than the traditional path of saving up a house deposit over several years. When using OwnHome Deposit Boost, you end up with two loans that cover 100% of the value of the property:

  1. A loan from OwnHome that covers 20% of the property's value (i.e., the deposit); and
  2. A normal home loan that covers the remaining 80% of the property's value.

This means that you have zero equity in the property when you first buy it as it's 100% funded by debt.

Is OwnHome legit?

They are an authorised representative of an organisation with an Australian Credit Licence and they have high-profile backers such as the Commonwealth Bank's venture fund, so you might consider them “legit” in that sense.

What are the advantages of using OwnHome Deposit Boost?

Compared to the traditional path of independently saving up a 20% house deposit, the advantages of using OwnHome Deposit Boost include:

  • Avoiding potential property price rises by buying years sooner. Property prices have risen at ~5% p.a. over the last 30 years, so buying even one year sooner could potentially mean saving $40k on an $800k property if prices continued to rise at the same rate. However, past performance is not a predictor of future performance.
  • Free inclusions, such as a buyer's agent and building & pest reports (up to 4). While this may feel like a big cost saving, consider whether you were really going to use a buyer’s agent. Research suggests that only 3% of residential property purchases in Australia are made through buyer's agents. This is a great example of how marketers use freebies to increase the perceived value of the overall package.
  • Support/handholding during the home buying process, which can be valuable for first home buyers who are feeling a bit overwhelmed by it all.

What are the disadvantages/risks of using OwnHome Deposit Boost?

Compared to the traditional path of independently saving up a 20% house deposit, the disadvantages/risks of using OwnHome Deposit Boost include:

  • Large initial fee of 2.2% of property price, which is around $10-20k upfront if you’re buying your first home for between $500k and $1m.
  • Higher interest rate on the deposit loan from OwnHome (roughly 8% p.a. more than standard home loan rate as at May 2024).
  • Potentially higher home loan interest rate because you only have access to a limited range of lenders with OwnHome, so there may be less competition.
  • Reduced borrowing power as the deposit loan repayments reduce cash flow available for your primary home loan (like any other loan).
  • Risk of negative equity if property prices fall because you have zero equity at the start.
  • Limited customer reviews available-to-date as OwnHome Deposit Boost product was only launched in the 2nd half of 2023.

What are the costs involved with using OwnHome Deposit Boost?

OwnHome charge clients in two key ways for their OwnHome Deposit Boost loan:

  1. Upfront fee of 2.2% of property price (e.g., ~$22k on a $1m house); and
  2. Interest on the Deposit Boost loan (20% of the property price), which is at a significantly higher interest rate than a normal home loan.

What interest rate is charged on the OwnHome Deposit Boost loan?

The OwnHome Deposit Boost loan has a variable rate roughly 8% p.a. higher than a typical home loan interest rate. As at May 2024, this puts the OwnHome Deposit Boost loan’s comparison rate at roughly 14% p.a..

Unfortunately, OwnHome doesn’t seem to explicitly mention the Deposit Boost loan’s interest rate anywhere on their website, but it can be reverse engineered based on the interest rates mentioned in OwnHome’s example. If the primary mortgage’s interest rate is 5.99% p.a. and the combined interest rate is 7.63% p.a., then the Deposit Boost loan’s interest rate must be around 14.2% p.a. (i.e., 80%*5.99% + 20%*14.2% = 7.63% combined). In other words, the Deposit Boost loan’s interest rate is roughly 8% p.a. higher than the standard home loan rate quoted in the same example.

Can I use any home loan lender with OwnHome?

No, "OwnHome customers can only choose from a small group of lenders for their main loan. The two Mr Bowe named were non-bank lenders Resimac and Homestar. None of the big four banks are lending to OwnHome customers, despite Commonwealth Bank’s x15ventures being among its investors" according to the AFR as at September 2023.

Does OwnHome have a minimum income threshold?

Yes, while OwnHome's website doesn't indicate a minimum income threshold, online comments suggest that OwnHome rejected applications where household income was less than $150k p.a. (Reddit, Google).

While the $150k p.a. threshold has not been confirmed, it seems believable as it would be tight covering deposit loan repayments, on top of home loan repayments and general living expenses, on less than $150k p.a. (around $9k per month after-tax).

Why is there so much conflicting information about OwnHome?

OwnHome’s business model significantly changed in July 2023. OwnHome launched its current product (“OwnHome Deposit Boost”) in July 2023 and stopped offering its rent-to-buy scheme. This means that popular articles published in 2022 and early 2023 are all out-of-date now and are more likely to confuse than inform.

To help you make sense of it all, the following popular articles and posts contain out-of-date information as they were published before July 2023, so you're probably better off ignoring them:

What are the alternatives to using OwnHome?

There are many alternatives to using OwnHome. The right option for you will depend on a range of factors, including your property price growth expectations, income, savings, occupation, scheme elibility, and access to the bank of mum and dad. We’ve outlined the most common options in the table below and ranked them by how quickly someone could buy a home. To keep it simple, we’ve made a couple key assumptions:

  • Lenders Mortgage Insurance (LMI) would be added/capitalised to the home loan, rather than being paid upfront, as this is common practice in Australia
  • No stamp duty as there are often first home buyer concessions and it'd significantly complicate the analysis as it differs significantly by state/territory
  • First home priced at $800k (mid-range in Government's First Home Guarantee city price caps), so percentages can be converted into dollar amounts
  • It takes roughly 4-5 years to save a 20% house deposit as per Domain First Home Buyer Report 2024
Option Years until buy Upfront funds required LMI / low deposit premium1 Initial equity Interest rate difference2 Key restrictions
Buying with no deposit thanks to the Bank of Mum and Dad <1 year $0
(-)
$0
(-)
$0
(-)
No premium Willing and able parents
Buying with an unsecured personal loan as 5% deposit <1 year $0
(-)
$35k
(4.4%)
$0
(-)
+0.9% p.a.3 High income
Buying with an OwnHome Deposit Boost loan <1 year $18k
(2.2%)
$18k
(2.2%)
$0
(-)
+1.6% p.a.4 High income
Buying with a 5% deposit using Government’s First Home Guarantee 1-2 years $40k
(5%)
$0
(-)
$40k
(5%)
No premium Price caps, limited spots5
Buying with a 5% deposit and paying LMI 1-2 years $40k
(5%)
$35k
(4.4%)
$40k
(5%)
+0.5% p.a. N/A
Buying with a 5% deposit and getting LMI waived via a “professional loan” 1-2 years $40k
(5%)
$0
(-)
$40k
(5%)
+0.5% p.a. Specific occupations only
Buying with a 10% deposit and paying LMI 2-3 years $80k
(10%)
$18k
(2.2%)
$80k
(10%)
+0.3% p.a. N/A
Saving up a 15% house deposit independently and using lender that waives LMI for 85% LVR 3-4 years $120k
(15%)
$0
(-)
$120k
(15%)
+0.1% p.a. Specific lenders only
Saving up a 20% house deposit independently 4-5 years $160k
(20%)
$0
(-)
$160k
(20%)
No premium N/A

1 Rough LMI estimates based on Home Loan Experts LMI premium tables. Actual amounts will vary based on lender and state/territory (stamp duty). Converted from "% of loan" to "% of property price" using relevant loan-to-value ratio (LVR).

2 Interest rates compared to traditional 80% LVR home loan based on research by Mozo regarding average variable interest rates by home loan LVR tier.

3 Estimated combined interest rate 0.9% p.a. higher based on combination of 95% home loan at 0.5% p.a. above standard home loan interest rate due to high loan-to-value ratio (LVR) and 5% personal loan at 8% p.a. above standard home loan interest rate due to loan being unsecured. Money.com.au indicated that the average interest rate on unsecured personal loans was 13.87% p.a. in 2023 when the average home loan rate was around 6% p.a..

4 Estimated combined interest rate of 1.6% p.a. higher reverse engineered from OwnHome's example on their website - see interest rate section of this article for details.

5 There are limited spaces available and price caps apply when using the Government's Home Guarantee Scheme.

How can I save up my house deposit / upfront funds faster?

Our financial coaching program can help you shave years off your home buying timeline by aligning your spending with your priorities and putting your savings on auto-pilot. We would love to help you kickstart your house deposit savings, so you can buy sooner and avoid potential property price rises.

Book a free 15-minute call today, so we can discuss how financial coaching could help and answer any questions you may have.