I want to borrow 95% of the purchase price of the property but the seller requires a 10% deposit. How do I pay the extra 5%?
When buying a property, the seller usually requires a 10% deposit upfront or soon after. So what happens when you are borrowing 95% and only have a 5% deposit? There are a couple of options. Firstly, you may be able to negotiate a smaller deposit with the seller. Secondly, you may be able to use a deposit bond for the balance. A deposit bond is basically a guarantee from the deposit bond provider to the seller that the balance of the deposit will be paid upon settlement. You will need to check with your real estate agent to ensure they are happy to accept a deposit bond in place of cash.
What is a deposit bond?
A deposit bond is basically an insurance policy that tells the seller that the insurance company will pay the 10% deposit in the event that the sale falls through prior to settlement. A fee is paid by the purchaser to the insurance company for this policy. It leaves your savings intact until settlement. It is useful in cases particularly where a person is borrowing 95% of the purchase price.