Home loan success and saving for your deposit

Question:

How can consumers improve their chances of getting a home loan? Also, how much do you need to save for a deposit?

 

Answer:

Generally, the lower the borrower’s risk, the higher the chance of approval on the bond and the better rate concession will be offered. In calculating risk, the bank will include factors such as the loan-to-value ratio (the amount of deposit you are willing to put down), the size of the loan, as well as the repayment-to-income ratio (the ratio between the bond payment and the buyer’s income). 

The size of the bond that you apply for, your credit history and the value of the property you intend buying are some of the factors that affect the rate you will be offered. To improve your chances of getting a home loan, it is advisable that you shop around with multiple lenders.

According to the latest ooba statistics, 27.9% of applications in March 2013 that were declined by one lender were approved by another, indicating that it is important to approach multiple lenders to ensure a positive outcome on your home loan. The most efficient way to do this is by using the services of a bond originator.

Although it is possible to have your home loan application approved with no deposit, it is less likely given the more stringent lending criteria than was applied in the past. The average ooba home loan deposit was 13.4% of the purchase price in March 2013.  

Besides improving your chances of getting your home loan approved, a bigger deposit could result in a more favourable bond rate which will save you in interest over the term of the loan. As a home loan is paid back over a long period, generally between 20 and 25 years, even a small deduction in the interest rate on a bond, can save you thousands in interest payments over time.