Your deposit
Acceptable Sources of Deposit
For most, the deposit is from savings. This needs to be evidenced as being in your bank account for a minimum period of 3 months, unless this is form the sale of a previous home.
Proceeds of the sale of a home are considered a legitimate deposit, and usually you just need to shown the sale.
A gift of cash or equity from family is legitimate. If you have not saved 5%, then you gift will need to be 20% of the total project. If you have saved 5%, and additional 5% gift may be sufficient.
And in some instances, using a third party as guarantor can assist with your deposit.
Existing equity in a home or section are also acceptable as long as it is matured (it can’t be immediate inherent equity). Your Loan Value Ratio (LVR or percentage of borrowing) is based on the acquisition price or valuation, whichever is lower. Your deposit cannot be derived from equity resulting in an increased valuation, unless you have owned the asset (section) for more than 6 months, at which time any increased value may be used as deposit.
How much deposit do you need
Unlike other lenders, determining your deposit is based on your “Acquisition Price”. That means we add all the necessary reserves to ensured completion, then we deduct your cash of equity deposit to determine your Loan Value ratio.
Loan Value Ratio This is a technical term, but very important for your bank. Simply put, your loan amount divided by your purchase price is your Loan Value Ratio.
So if you purchase a $500,000 property, and you have a $50,000 deposit, your loan is $450,000. The Loan Value Ratio is 90% $450,000/$500,000.
What makes NewBuild unique is that your purchase includes your interest reserves, contingency reserves and owners care reserves, which allows you to include all those costs inside your loan. Your deposit will increase slightly, but your total cash outlay will be reduced dramatically.