Unfortunately, it's possible to lose your home loan deposit. But with some education and preparation, it can be avoided!
Keep reading to discover the common situations where you could lose your deposit and how you can protect yourself from an unfortunate financial situation.
Can I lose a house deposit?
When buying a house in Australia, the selling agent will ask for a deposit (usually 10% of the property price, though a smaller deposit can sometimes be negotiated) to show your intention to purchase the property.
This is usually paid after both buyer and seller have signed and exchanged contracts, but it depends on the method of sale (auction vs. private sale) and your state.
At this point, you'll enter a "cooling-off period", which allows you to cancel the sale, and you might still be able to get some or all of your deposit back.
The length of this period varies between states (it's usually 2-5 business days), and so does the amount of money you might be able to recover. Some states also don't have a standard cooling-off period, and you might have to add it as a condition in your contract.
Past this point, you'll likely lose all of your deposit if you decide to back out from the deal.
Looking for a no or low-deposit home loan?
If you're like the average Australian first home buyer, saving a 20% home loan deposit amount could take years. (And don't forget you have other upfront costs to consider, like stamp duty too!)
Unfortunately, the rising cost of living and high interest rates on credit cards and home loans aren't helping savers get ahead either.
Fortunately, OwnHome’s Deposit Boost can help you enter the property market sooner.
For a Low Deposit Premium of up to 2.2% of the purchase price (minimum $9,500), OwnHome provides a full 20% deposit, so you can get a traditional 80% loan-to-value ratio (LVR) and skip hefty Lenders Mortgage Insurance (LMI) costs.
Once you have secured pre-approval, an OwnHome Buyer's Agent is included when you pay your Low Deposit Premium upfront, to help you find a new home.
When can you lose your home deposit?
Here are some of the common circumstances where you might lose your house deposit:
- The buyer backs out of the purchase without a valid reason.
- The buyer fails to meet the conditions outlined in the contract, such as obtaining financing, completing a satisfactory home inspection, or making payment on time.
Can you get a deposit back on a home loan?
There are some particular circumstances where you might still be able to get your deposit back when you terminate the sale — even after the cooling-off period.
The key thing is to state these conditions for withdrawing from the sale without penalty in the contract before signing it.
These instances include:
- Failing to secure financing. You must add a "subject to finance" clause when you make your offer.
- The property failed the pest or building inspection.
To protect yourself, it's always important to thoroughly review and understand the terms of your property purchase before signing on the dotted line.
Keep in contact with your lender, mortgage broker, and conveyancer throughout the entire process to ensure everything goes smoothly.
