Buying A House And The Importance Of A Deposit On Your Property

Very few people can buy a property ‘cash’ these days, leaving many first-time or repeat home buyers turning to financial lenders for assistance. Applying for a home loan doesn’t automatically mean you’ll be approved; however – there are certain requirements that need to be met before an applicant is deemed creditworthy.

Getting financially ready for a property purchase takes time and includes an assessment of your purchasing power. This entails:

• Determining your current credit score and, where applicable, doing what you need to do to improve it.
• Doing an affordability check to know what loan amount you can afford. This will give you a better idea of what budget and spending changes you’ll need to make to be able to pay off a future home loan.

Why do you need a deposit?

Most home loan providers offer 100% bonds; however, not everyone will qualify for one, so it’s wise not to count on this and to save for a deposit if possible. There are so many benefits to putting down a deposit that, even if you do qualify for a 100% bond, it makes good sense to put down as big a deposit as you can afford.

The standard loan term for a home is 20 years, and the recommended average deposit is approximately 10% of the property’s price, although any percentage is beneficial. Having a percentage of the purchase price to put down as a deposit will put you in a stronger position as a buyer. For the seller, it shows good intent to buy and demonstrates your commitment towards going through with buying the property, making it more likely that they will accept your offer to purchase.

For the financial lender, it reduces the risk of lending to you, and gives them confidence in your ability to meet your financial commitments. This is why having a deposit will improve your chances of having your bond application approved.

However, the biggest benefit of being able to put down a sizeable deposit is how it will benefit you financially in the long term. The more you can afford to put down as an upfront deposit, the smaller your home loan application will have to be, which will translate into a lower  interest rate and therefore lower monthly repayments. Saving towards a deposit just makes sense.

What next?

Now that you know about the importance of a deposit, you can use our Repayment Calculator to see  how a higher deposit amount could change the interest rate and monthly repayment amount you qualify for. Feel free to leave us a request to contact you, or phone one of our friendly consultants on 0860 2 4 6 8 10 to discuss your bond requirements at any time during your research process.