A first time home buyer in Perth and Canning Vale should look at the home loan deposit as insurance for the home loan broker. It reduces the mortgage broker’s risk if the buyer can demonstrate a financial stake in the purchase of a property.
This is why every home loan requires a deposit. The amount of the required deposit runs between 10% and 20% of the purchase price of the home (excluding transaction fees). We will explain when you should pay it, who it should be paid to and how it should be paid as we go along.
The Bigger the Deposit the Better
Anything above the required 20% deposit can only help the home buyer. It will prove to the lender that the buyer is disciplined financially. This can help you prove that you are good risk for the investment mortgage broker and increase your chances of getting the home loan.
And any deposit below 20% means that you may be asked to take out a Lenders Mortgage Insurance policy on the property. This can add to your transaction costs.
Remember, you will still have to pay the stamp duty on your home loan and adding the Lenders Mortgage Insurance on top of that can make your transaction costs prohibitive.
When Should I Pay the Home Loan Deposits?
If you are buying a home from a private homeowner, you will pay an initial deposit once you exchange signed contracts. If you are buying a home at an auction, you must sign the contract and have the deposit payment ready to be paid at the close of the auction.
Who Receives the Deposit?
Generally, upon signing a home purchase contract, a 10% deposit is made in good faith. When the settlement is made, you will actually own the property. At this point your lender will pay 80% of the purchase price and you will pay the remaining 10%.
If the seller is conducting the sale through a real estate agent, you should check with the seller to see who will be receiving the payment. You may be asked to pay the home loan deposit to the agent’s trust account.
How Will the Deposit to be Paid?
You should ask beforehand how the home seller, real estate agent or auction company will expect to be paid on the date the home loan deposit is due. It can mitigate any snags in the purchase process. Personal or counter cheques are still in common use on the day of payment. But electronic bank transfers are increasingly in popularity.
Be sure to get the name of the account as well as the account number if you are paying by bank transfer and get an emailed or printed receipt for any transfer you make.