Sabtu, 19 Mei 2012

Putting together a Deposit

When it comes to the deposit, the benefit of shopping around is that it quickly becomes clear that lenders are very different in their policies and requirements and when you might not stand a chance with one, you could be a normal applicant in another. The deposit required by the banks varies in both amount and in the source they can originate from.

Regarding the source, the normal requirement now is to have some “Genuine Savings”, which is basically either money gradually saved up from your income or a lump sum of money that’s been residing in your account for at least three months. Outside of genuine savings, the common sources are the First Home Owners Grant, your own equity, tax refunds, sale of assets, or gifts from friends or family. Also at the moment in Queensland, the Building Boost can be used. Another common form of deposit is equity in a family member’s property, in a guarantor situation, either being refinanced or taken as a second mortgage, depending on the lender.

One often overlooked source of deposit is normally applicable only to those who are cash-flow rich, very motivated, and often credit impaired. There are some lenders who will take a personal loan as the deposit which can allow people to take quick action on a good property deal. But naturally, the borrower has to be able to service both the personal loan and the home loan for that to work, and the interest rate is higher than normal rates. This can work very well for investment deals because the interest from both loans will be tax deductible.
With regard to the amount of deposit needed, the vast majority of lenders will normally want 5% of the value and ALL of that must be genuine savings if it’s for a purchase, or 10% total deposit for refinances, with that amount usually coming from equity. There is also a lender at the moment accepting a mere 2% deposit, and only 1% of that needs to be genuine savings, which is understandably very popular. And lastly, if you’re renting, there are also lenders that will consider your rent paid as evidence that you can afford a loan and so waive the genuine savings requirement altogether, allowing for greater flexibility.

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