Is it possible to lose your home loan deposit?

Unfortunately, it's possible to lose your home loan deposit. But with some education and preparation, it can be avoided!
Dawn Teh
Written by
Dawn Teh
Ava Crawford
Reviewed by
Ava Crawford
Last updated
May 17, 2024
0 minute read
Table of contents
Australia couple pointing at house that they have put a deposit down on

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, your real estate agent will request a deposit (usually 20% of the property price) 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, low interest rates on savings accounts 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 just 2.2% of the purchase price upfront, OwnHome provides a full 20% deposit, so you can get a traditional 80% loan-to-value ratio (LVR) and skip heft Lenders Mortgage Insurance (LMI) costs. And depending on how much deposit you contribute, our Low Deposit Premium can fall to as low as 1.1%.

Once you have secured pre-approval, our team of dedicated Buyer’s Agents will help you find a new home in your ideal postcode for the right price.  

Can you afford mortgage repayments but not the deposit? Learn more about a deposit boost loan.
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When can you lose your home deposit?

Here are some of the common circumstances where you might lose your house deposit:

  1. The buyer backs out of the purchase without a valid reason.
  2. 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:

  1. Failing to secure financing. You must add a "subject to finance" clause when you make your offer.
  2. 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.

FAQs

Can you lose your deposit if financing falls through?

Yes, it's possible to lose your deposit if your financing falls through. But it can also depend on the conditions stated in your contract.

Many include a subject-to-finance clause in their offer to protect themselves from losing their deposit if they cannot secure financing.

Even if they follow the home loan application process accurately, lenders may still have to decline a borrower's application to comply with lending criteria to maintain their Australian Financial Services Licence (AFSL).

What is the first home loan deposit scheme?

The first home loan deposit scheme is now called The First Home Guarantee (FHBG) under the Home Guarantee Scheme — an initiative by the Australian government that helps Australians become homeowners.  

Under this scheme, eligible first-home buyers come up with 5% of their home loan deposit while the government guarantees the remaining 15%.  

As a side note, The First Home Owner Grant (FHOG) is another initiative set up by the government where a one-off amount is given to first-time home buyers. It won't apply if you're buying a second home or refinancing.

Learn more about first-home-buying schemes.

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Disclaimer
This article is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation, or needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS), or other offer documents before making an investment decision in relation to a financial product (including a decision about whether to acquire or continue to hold).
Prepared by OwnHome Services Pty Ltd ACN 664 492 059. This information does not take your personal objectives, circumstances or needs into account. Always read the disclosure documents for products and services before deciding on a product or service, and consider seeking independent legal, financial, taxation or other advice for your unique circumstances.
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