Where Can Your Deposit Come From?

By Loan Market

The criteria you need to meet to get approval for a home loan has changed a lot over the past couple of years.

One area where there has been a big change is with both the size and source of your home loan deposit. Younger borrowers in particular are finding the requirements for a home loan deposit tough and research shows many are unaware just what they are allowed to use to make up the amount needed.

Apart from your own genuine savings, depending on the lender, you may be able to make use of a combination of sources which could include monetary gifts or the equity in a family member's home, usually your parents.

A recent survey conducted by Loan Market shows that family equity is one area that is really growing as a deposit source to help borrowers meet the new requirements, which are often of 10% or more of the value of the property.

The most common form of family equity is a limited liability guarantor option, where a family member uses the equity in their property to cover the deposit costs. The guarantor can then be removed from the loan once the equity in the property reaches an acceptable level, usually 20%.

Although it is not currently an acceptable deposit source, Loan Market is also a firm advocate of regular rental repayments being recognised as genuine savings, a move that would assist many first home buyers to prove their ability to make home loan repayments.

If you are trying to put together a deposit for a home loan, it's a good idea to start a budget your mortgage broker can assist you to get started.