How much deposit do I need?

Your home loan deposit is one of the biggest factors in determining the kind of loan you may be eligible for and how much you can borrow to purchase your home. It’s great to aim for a minimum of 5%, although there are lenders who do offer up to 97% of the property value. Below is a simple flow chart depicting the common flow of funds for the purchase of your home.

Let’s assume a purchase price of $500,000 and a loan of 95% of the purchase value. Loan = $475,000.

The initial deposit on contract signing assume to be $1000 and upon finance approval within, let’s assume, 14 days you need to pay the balance of deposit of $19,000 to the agent. Thus, the total deposit to be paid is $20,000.


Steps

1. Initial deposit paid to agent $1,000.

2. Upon finance approval, balance of deposit to be paid to agent is $19,000.

3. On settlement day, bank pays vendor $475,000.

4. Buyer pays the difference of $5,000 on settlement to his/her solicitor who transfers it to the vendor, totalling a sale price of $500,000.

 

who-pays-who

 

The vendor receives the sale price less the commission charged by the agent. The agent’s commission is taken from the deposit funds paid to the agent’s trust account. Please note that this is a simplified model of a real life situation. The bank normally takes out government stamp duties and search fees and will also deduct its own fees, if any, from the proceeds of the loan at settlement. Your solicitor or legal representative will confer with the bank’s solicitors prior to settlement to finalise the funds needed at settlement. Then you will be informed by your solicitor as to the exact amount required for settlement.

We gladly assist all our clients through this process and will happily engage with your solicitor, the agent and yourself as part of our valued service proposition to ensure your purchase goes smoothly.  At Multi-Choice our mortgage brokers commit to helping with every part of the process. Our aim is to make the whole process hassle free and worry free for all our clients. We make it simple!

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