What size deposit is required to apply for a mortgage?
“YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.”
The size of the mortgage deposit is influenced by factors such as your credit history, affordability, age, purchase price, and other considerations.
When applying for a mortgage as an owner-occupier, your mortgage deposit can be as low as 5% of the property value for first-time buyers with a good credit history. In other cases, your mortgage deposit can be as high as 35% of the property value if applicants have an adverse credit history or if you are buying a rental property. We need to understand your situation before determining the minimum-sized deposit that you will require.
Gifted deposit
A gifted deposit helps homebuyers purchase property without using their own savings. Instead, a small sum of money is provided by a relative of the buyer, while the remaining balance is funded through a mortgage.
A gifted equity deposit can help you purchase property by allowing you to use a discount on the property’s value as your deposit. A percentage of the property value will be classified as your deposit.
A gifted cash deposit is a transfer of funds from the person gifting the deposit to your bank account. Typically, lenders accept cash deposits that are gifted by family members.
Family members can gift a significantly larger deposit compared to deposits gifted by non-related individuals, vendors, or builders.
Vendor and builder deposits of 5% are typically accepted by lenders when the depositor is not a relative of the borrower.
Proof of deposit
The proof required to evidence your mortgage deposit depends on where the funds are coming from. For example, if personal savings are being used, most mortgage lenders require six months of bank statements to confirm the buildup of funds from your income.
If the deposit is a gifted deposit, whether as equity or cash, mortgage lenders would require a letter signed by the donor confirming:
– the funds are not repayable
– the amount being gifted
– the donor will not reside in the property
– the donor will hold no interest in the property upon completion.