October 13, 2015
Your home loan deposit is viewed as ‘your contribution’ to the purchase price of the property you wish to buy. Your deposit is one of the biggest factors in determining the kind of loan you may be eligible for and the amount you can borrow to buy your home.
Why the size of your home loan deposit matters?
It gives the lender an idea of what you can afford to repay regularly
Regular savings deposited into an account over a period of several months, regular rental payments and investments all work together to give lenders an indication of your ability to maintain your home loan repayments. Lenders will look at these and your income sources (salary, investments, dividends) to assess how much money they’re willing to lend to you. Use our borrowing power calculator to get a rough estimate of how much you may be able to borrow.
It impacts the interest rate lenders may offer
The deposit you have available when you come to apply for your home loan can have an impact on the interest rate of the loan. The bigger your deposit, the more negotiating power and choice of lenders you may have. If you have a bigger deposit, you may even be able to secure a discounted interest rate from a lender.
It affects how ‘risky’ you are as a customer, and whether you need to pay Lenders Mortgage Insurance (LMI)
Lenders use a simple Loan to Value Ratio (LVR) calculation to assess how risky they consider offering you the home loan may be. The loan to value ratio looks at the amount you wish to borrow in relation to the value of the property you’re looking to purchase. The higher this ratio, the more risk for the lender. Generally, if you have an LVR of over 80% (as in you wish to borrow more than 80% of the property’s value) the lender will require you to pay an LMI premium. This insures the lender against any losses that may occur in the event you default on your loan. There are alternatives to paying LMI, such as have a family member act as a security guarantor for your loan.
You pay less interest over the life of your loan
The less money you borrow, the less you have to pay off in the future. This means over the course of the home loan, you’ll also be paying less interest. You stand to save a lot by having a sizeable home loan deposit.
Whether you’ve got no money put aside for your deposit, or you’ve been saving for years, Mortgage Choice Bundall can help you evaluate your options.
As your local home loan experts we are here to assist with all of your financial needs and goals. With the help of Antony Muir and his expert team we will provide you with professional financial and home loan guidance. Call Mortgage Choice Bundall today on 07 5504 5569 for an appointment and let us help you achieve your financial goals.
Late night appointments available Monday - Thursday.