Buying a house - the initial deposit

Hello Choice Community,

I’m planning to buy a house and I have saved the minimum 5 percent deposit plus the stamp duty plus the LMI (lenders mortgage insurance). I’m borrowing 95% including the LMI.

Is it possible for me to give 10% upfront to the vendor so that I have a better offer and pay a part of the stamp duty from the loan.

Lets say that I’m buying a house for 700,000 and I have 100,000 in savings.
Here are my expenses:

  • Stamp duty = 40,000
  • LMI = 25000
  • 5 percent deposit = 35,000

The bank is lending me 665,000 and 25,000 of that is for the LMI. So if I understood correctly the banking is really lending me 640,000 towards the house and they are keeping the 25,000 for them selves for the LMI.

So Is it possible for me to offer the vendor at least 70 percent as the deposit (which make the deposit 10%) and use 10,000 of the loan to pay off the the stamp duty.

The reason that I’m asking this is because I have not been successful with many of my offers so far because I have a low deposit.


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Hi @dds,

Thanks for the question, I’m in Sydney so I feel your pain when it comes to house prices and the deposit needed to get into the market. Unfortunately, we can’t give you personalised financial advice though, which it sounds could be a smart move at this point. You can access an advisor for on a one-off ‘fee for visit’, and to help you prepare we also have this guide to finding an financial adviser. It’s a big decision and some advice could save you a lot of trouble in the future!

Generally speaking, it is possible to pay off stamp duty with some loans. However, there’s more to it as a change to your strategy could really effect your long-term investment. Anyway, here’s some positive-looking news for buyers from the ABC on the housing market cooling off in 2017. Good luck with it!

My advice is Be patient, be prepared.
I am of the view that house prices in Australia are on every measure are a bubble, and as much as I am personally financially exposed to the price of property I feel that a correction and reversion to the ‘mean’ will occur and affordability will materially improve. When, who knows?
I won’t bet my money on the timing or the nature of the bubble deflation there are just too many factors affecting all this.

I have been of the view that house prices are out of touch with reality for a number of years but like every bubble in history the expansion energy & froth and the spruikers crying ‘this time it is different’ are at their maximum just before a correction.
To be philosophical housing prices in Australia are driven more by speculation than the provision of conveniently located shelter.
I call it the bigger idiot theory; that is many homes are talked up in value and sold on the premise that all I have to do is own it for a period and then sell at a profit to the next bigger idiot that comes along, the problem is that eventually you run out of bigger idiots, because the rising purchase price and attendant interest cost eventually become unbearable, or unemployment rises and/or the perfect storm is that interest rates materially rise together with falling employment.
Needles to say IMO we are far closer to the end of the property bubble than anytime in living memory and the people that will be really hurt are the ones who buy at the top and suffer as they have to service a mortgage for many years on a property worth a lot less than what they paid .
This effect of property bubble deflation can be seen in the mining towns across Australia, and although their employment sectors are concentrated and relatively small, the forces of rising unemployment has smashed the local property markets, just because the big cities are multi-industry doesn’t make them immune from rising unemployment it only delays the effect.

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Thanks for everyone’s responses

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You are welcome @dds. If you’re happy to share the info, I’m we’d benefit from hearing about the outcome you end up reaching. Best of luck :slight_smile:

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An article regarding the current property boom in Qld.

When I am driving around our area, I will see a new For Sale sign and a mere day or so later, it will have an Under Contract or Under Offer sticker on it.

It reminds me of the old joke of having to duck down in the boat to bait your hook so the fish don’t grab it out of your hands.

However, when I was speaking with real estate agents I have known for years the other week, one tried to claim that prices had not really recovered locally since the GFC and the other made out that it was a hard slog.

They reminded me of an insurance agent in FNQ some 50 years ago who was worth millions but who always drove an old VW so that his clients did not think that they were making him rich.

Looks like it won’t happen any time soon.