What is a home loan deposit?
A loan deposit for a home is going to be your initial payment to the overall price of the home. Once this is paid it means that you own a small percentage of the house. When you have a stake within the home it will lower the lender’s chances of risk. Most lenders will require you to put down a deposit. Most lenders will ask you to deposit a 20% amount of the purchase price of the home. You might be able to pay a lower deposit, but you might then need to pay additional fees for the lender mortgage insurance.
You will need to have money saved for the transaction costs, stamp duty, and solicitor fees. If you don’t qualify for the concessions or exemptions, then you could be facing a huge amount of stamp duty. There are only home deposit calculators that work out roughly how much you will need to pay which can help to give you an idea of how much you will need all up. House builders in Melbourne as well as across Australia also help the client with this process by giving them sound suggestions that can benefit them.
Is having a bigger amount for a deposit better?
Having as much saved as you can for your home loan can help with advantages later. It shows that you can handle money without spending it, which is what the loan approvals people like to see. And secondly having a deposit over the 20% asking amount means you won’t need to pay the lender’s insurance. Having more savings means more you will have to borrow.
Who gets the deposit?
When you make a deposit on a home it goes to the vendor assigning the contract. Usually, 10% of the purchase price will be the part payment before anything is settled. When it comes to a settlement you will own the property and then start to pay the remainder of the purchasing amount owing. When you have signed the agreement, you become bound by the terms. Then it will be decided if the funds go to the vendor or if selling through an agent it will go into the trust account for the agent.
How do I pay?
There are many ways that you can pay your deposit such as:
- Personal cheques but this isn’t a common way used anymore
- Counter cheque this is needed from a branch if you are going to be home at auction
- Bank transfer is accepted by various bank vendors. There will be daily limits on your bank account, but you can talk this over with your bank and ask it to be lifted for the once-off payment.
Talk to the real estate or vendor on how they prefer to be paid. Most often they are happy to work with what is suited for you. There just needs to be enough time allowed to organize cheques or to move money from different accounts.
First home owners are given certain grants by the Victorian government if they fit certain criteria like the price of the property and location. A regional location for the house is preferred and in these regional locations, the house and land packages in Victoria are very in-demand.
What are deposit bonds?
If your deposit is coming from another investment or assets you might need to use what is called a deposit bond which gives an agreement to the vendor that you are going to make the full deposit payment upon settlement.
A deposit bond is not accepted by all vendors. Ensure you check this before bidding or buying.
Not all lenders and vendors will have the same requirements and sometimes personal changes can be made or organized between the parties.