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Home Loan Deposit

Mon, 2008-04-07 12:00 — wes@ability
Deposit for a home purchase can be made up of three different stages.
  • The total available deposit available to contribute toward the purchase.
  • The holding deposit usually payable when an offer is accepted but prior to the contracts of sale being signed and exchanged.
  • The 5 or 10 percent deposit usually payable following exchange of contracts for sale.
When there is only a limited deposit available a 5 or 10 percent deposit requirement can usually be avoided by obtaining a deposit bond or deposit guarantee. Total available deposit is the total amount of funds available to contribute including any holding deposit and deposit paid on exchange. From the total available deposit and the property puchace price including all other costs your finance broker will calculate the loan to value ratio which is often referred to as LVR. If you would like to calculate the LVR yourself is is quiet easy by following this formula.
  • Add the full property purchase price and all other costs.
  • Take your total available deposit away from the above figure. This is your required loan size.
  • Divide the required loan size by the property purchase price.
  • Multiply the result by 100.
  • e.g. $150,000 purchase price minus $20,000 deposit = $130,000 required loan size. $130,000 loan size divided by $150,000 purchase price = 0.867 multiplied by 100 = 86.7 which is the loan to value ratio as a percentage of this example.
LVR or loan to value ratio will determine the loan types which may be available. An LVR of 80 percent or less is almost always exempt of the requirement for lenders mortgage insurance. Mortgage insurance, paid by the borrower, is usually required when the loan to value ratio exceeds 80 percent. Care needs to be taken when mortgage insurance is payable on a loan. More information regarding mortgage insurance is next.


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