I have a very small default ($395.00 and paid) after moving around a few rental properties. I have a $30,000 deposit and want to look at a property $520,000. My income is $122,000 pa and I have a 3 year old. Is it possible to borrow 95% and will the default be an issue, thanks?

Hi Jacinta,

Your situation is a little bit complex so I would suggest sitting down with a mortgage broker to go over it in detail and discuss the options available to you.

In saying that I can give you high level answers to your questions;

Default
Depending on who the default is with and how old it is there are a number of different lenders that may "ignore" the default. There are also a number of specialist lenders who will still lend to you with the default regardless. These specialist lenders offer a risk for rate product which essentially means the more riskier you are (based on their criteria) the higher the interest rate will be

Deposit
$30,000 is a great deposit, but I don't think it will be enough to purchase a house for $520,000. Whilst it is just over the 5% needed, you will also need to factor in the costs associated with purchasing a property plus bank fees. The costs we are talking about here are stamp duty (even as a first home buyer you will need to pay some stamp duty at that price), Settlement agent costs (approx $1500) Council rates and water rates (approx $2,000 depending on when you buy the property) and inspection fees (pest and building should be around $500). On the bank fee side you could be looking at application fees, settlement fees and valuation fees, all we would look to minimise. The largest bank fee you will be looking at would be Lenders Mortgage Insurance(LMI), some banks will lend up to 97% to 99% to cover the LMI but I still think you would need a little bit more as a deposit.

There are options such as family guarantees that will reduce the need for a deposit but again dependant on your circumstances.

Finally how long you have had the deposit for will also need to be considered for genuine savings.

Income
Based on the above information you should be in a position to borrow the required funds for a $520,000 purchase but things that you will need to consider;
Do you have any existing debts (personal loans, car loans, credit cards or store cards)? These will effect your borrowing capacity
Do you have a partner? Even if they are not going be to part of the purchase and loan banks will still take this into consideration when determining your living expenses.
How is your income derived? Is it all base wage or is there some overtime component, penalty rates or allowances? Most banks will treat these at 80% or less of their value. E.G if you earn $10,000 in overtime they will only add $8,000 to your income when working out your borrowing capacity.
What do you do for a living? Similar to above some lenders will allow 100% overtime and allowances for emergency service workers (nurse, police, firefighter or paramedics)

I hope some of this information helps and if you want to discuss your situation in detail please feel free to get in touch. I am located in Baldivis so pretty close to Mandurah

Good Luck

Nathan Osinski
Osinski Finance

Nathan nailed it.

As a general rule of thumb you will need min 5% depisit and 5% for cost based on purchase price.

Cheers.