When looking for professional home loan advice, it’s not uncommon for first time buyers to be misled – especially when it comes to the topic of saving for a deposit. With different lenders proposing varied terms as far as their depository expectations are concerned, it can be quite difficult for people to source reliable information relating to these policies.
The truth is that there is no one set percentage amount for how much a bank will require as a deposit. What can be said is that as different as these percentages may be; they will all possess the same similarities and functions. For example, a deposit will be considered non-refundable. Its sole responsibility is to provide a form of leverage to a lender.
In simple terms, a lender will want to see that their potential borrower is in a financial position where they can afford to pay a percentage of what they’d like to borrow, upfront. It’s safe to say that this amount will have a minimum – and in most instances, it will be between 10% and 25% of the total amount that needs to be borrowed.
How much can banks lend?
Well, this all depends on the type of bank and how much the applicant can afford to pay back. There have been instances where some lenders can offer as little as $20,000 toward the cost of a new home, just as much as there have been times where the same bank will lend several million. As long as the applicant can afford the deposit, as well as guarantee to be able to meet repayments, there shouldn’t be a problem.
So, imagine for a moment that you wish to borrow $350,000 from a bank. If they have a deposit term of 20% then you will be expected to be able to provide $70,000 upfront, with the bank being willing to offer the remaining $280,000. Interest will then be calculated and added on to the cost of repayments, which can take place each month, or even weekly, depending on the applicant’s requirements.