Deposit question!

Any general questions you might have in regards to loans and finance.
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totoro
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Joined: Wed Jun 17, 2009 4:58 pm

Deposit question!

Postby totoro » Wed Jun 17, 2009 5:04 pm

Hi,

My girlfriend and I are buying/planning to buy a property.

Say for example:
asking price is 500k
deposit is 10% therefore, 50k

if the loan is approved at 95% and we have 5% deposit, for instance, will the bank make up the other 5% when deposit is due? What actually happens?

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Otto Dargan
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Re: Deposit question!

Postby Otto Dargan » Thu Jun 18, 2009 8:49 am

Generally you can negotiate with the vendor to have a 5% deposit instead of a 10% deposit. Or even less! Some states such as QLD commonly allow deposits as small as a few thousand dollars.

If the vendor refuses anything less than a 10% deposit then the standard practise would be to obtain a deposit bond.
Otto Dargan
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P | 1300 889 743
Home Loan Experts

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totoro
Posts: 48
Joined: Wed Jun 17, 2009 4:58 pm

Re: Deposit question!

Postby totoro » Fri Jun 19, 2009 5:14 pm

Sorry if this sounds dumb. What exactly is a deposit bond?
And what's the process?

Thanks.

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Deposit question!

Postby Otto Dargan » Tue Jun 23, 2009 9:42 am

A deposit bond is a guarantee from an insurance company that is given to the vendor instead of a cash deposit. If you didn't complete the purchase then the insurer will pay the vendor the 10% deposit and will sue you for the money!

You can use a deposit bond if you don't actually have a 10% deposit. The fee for a bond is around 1% to 1.5% of the deposit amount, so it would cost less than $750 for your situation.
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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