How much deposit do I need?
Getting into the property market, especially for the first time, is an exciting ride.
Generally, banks will lend you money if they assess that you have a good chance of paying back the loan on a regular basis.
To work out how much they will lend you is pretty simple. The banks will have a look at your income, and generally this means that you have held a stable job for about 6 months or more.
The banks will also have a look at your credit history and check to see if you are good at paying your bills on time. Bills like your credit card, any personal loans or even your rent.
Your age, your earning ability and your current assets will also be considered. The banks will want to know how you are going with your car loan, or any other personal loans, and the will assess that against your age and your job prospects.
So how much will they lend me?
About ten years ago, property investors and home buyers could borrow 100% of the purchase price of the house – provided they could prove they could meet the repayments.
In today’s market, the banks are a little more conservative and they will still loan up to 95% of the purchase price.
However, I recommend that you go to the bank with a stronger position and aim for a 10-20% deposit.
The advantage of a bigger deposit means that you can prove to the bank that you are able to save, to manage your money and that you have more to loose. That is, you are prepared to put your own cash into your investment.
A strong deposit puts you in the negotiating seat with the banks and immediately improves your equity position.
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