Deposit Questions

We purchased our land earlier this year with a 20% deposit. We are now in the process of saving for the house deposit. We want to have a 20% deposit for this also.

We were on track for this 20% deposit by the end of this year, however I have just put our savings back about 6 months due to purchasing a car so I can embark on a new career.

Based on worst case scenario, we will have the 20% depost saved by this time next year. We really wish to start building as soon as possible after this (i.e. Site start in August preferably)

So far everything is fine, husband and I are fine with the waiting, as we really want the 20% deposit to avoid LMI.

We spoke to our potential builder on the weekend (PD), they are currently booking site start dates in our area from Feb 2010 through to May 2010. So to secure an August start date next year we really need to move in the next 2-3 months, at this time we’ll only have about a 6% deposit saved (which is fine, because PD would require a 5% deposit to set everything in stone).

We have been told by a mortgage broker at the start of the year (broker wasn’t that great so I guess that’s what’s prompting this question) that we need to have the 20% deposit at contract signing stage to get approval from the bank, otherwise we have to cop LMI. So in other words, we have to wait until July next year before we can start the ball rolling with PD and then possibly have to wait another 6 months before we can have a site start.

However, I’m just wondering, can you sign contracts with the builder, get them valued based on a 80% lend (prior to having the 20% saved so as to lock in a site start date), and then as long as we have the funds together prior to building commencing we avoid LMI?

This is EXTREMELY long winded…I do apologise. Just thought I’d try to explain the situation as fully as possible.

I think that the broker sounds like he doesn't know what he's talking about (I hope).

We're in a similar situation and we have paid the deposit for both the land and house build from our own savings and we're using the FHOG to make up our 20% deposit.

Let me know how you go.

Sorry I can't answer your question about LMI but I just wanted to make sure that you are aware that PD will sting you at least $2000 per month, once you go 3 months past the contract signing date? Unless of course they have told you otherwise but get it in writing if they have. I can't see PD holding the price for you for more than 3 months, that's all.

Sorry I don't know the answer but just a reminder that the bank valuation may come in under the builder's price. A number of people on H1 have been stung.
Chris

Hi Hels, thanks for the heads up. We discussed this with PD and what seems to be the deal is, we pay the $1,000, go through the colour selections, tiles etc etc, then get to tender, and somewhere along the line it goes to admin and is marked for an August start date next year. We understand we will be protected somewhat from price increases, but as you stated, we would of course get anything like this in writing.

The way the sales person spoke, this was something that was relatively common, she was the one who bought up the option, as we had never considered that we could dictate a site start date so far in advance.



Chris, thanks for pointing this out. I don't think we will have the issue of the bank valuation coming under. I understand that others have had this issue, but based on what 'extras' we are adding, we believe we will come in on target. If we come in under, that is just fine, we will consider adjustments or just cop it. That's why we're working towards a 20% deposit. If things do come under, at least we have a bit of room to move.

I would hate to be doing a 90-95% lend and then come under, that would leave us very little room to move.