Deposit Required

All home loans, but especially bad credit home loans have a deposit requirement. While the deposit necessary will depend on the extend of your bad credit, LVR required, as well as your income and postcode, applicants will need to have access the a deposit between 10% and 25% in most cases.

LVR stands for Loan to Value Ratio. To work out the LVR on your home loan you divide the loan amount by the property value.

Deposit funds do not necessarily need to come from savings. Lenders are happy to accept gifted deposit or equity in another property in lieu of a deposit.

Lets assume that your home is worth $450,000 with a current mortgage of $250,000. If you want to purchase an investment property for $350,000, you may be able to borrow 100% of the purchase price, providing you have sufficient income to qualify for the additional loan.

You can take the required 20% deposit from the equity in your home. This will bring up your home loan to $ 320,000 ($250,000 plus $70,000 for deposit on the new purchase) and a new investment loan of $280,000.

Your home loan then sits at 71% LVR and the investment loan at 80%.

If you are looking to make a purchase under a low doc application, in conjunction with some bad credit history, the lender may require a larger deposit than you would need to provide with a full doc application.