Deposit, Loans & Funding Position Explained: How the Numbers Actually Work When Buying a Home

When buying a home, most people focus on the purchase price — but that’s only one part of the equation.

To buy a property, you need to understand three key components:

1. Your deposit (funds to complete)

2. Your loan

3. Your funding position (how everything fits together)

This guide breaks each one down in plain English so you can see where your money goes, how much you actually need, and how lenders assess the deal.

What Is a Deposit?

A deposit is the up-front money you contribute toward buying a property.

It:

• Reduces how much you need to borrow

• Shows the lender you’re committed

• Is usually expressed as a percentage of the purchase price (often 5–20%)

• Covers not just part of the purchase price, but also costs involved in buying

This total contribution is often called your funds to complete.

What Can a Deposit Be Made Up Of?

Your deposit doesn’t have to come from one place. It can be built from:

Personal Savings

Regular, genuine savings built up over time in your bank account.

Gifts

Family contributions may be allowed, usually supported by a gift letter.

First Home Owner Grants

Government incentives that can reduce how much cash you need.

Guarantor Support

A family member uses equity in their property to reduce or remove the need for a cash deposit.

How Much Deposit Do You Actually Need?

This depends on:

• The lender

• The property type

• Whether you qualify for government schemes

Some buyers can purchase with as little as 5%, while others may need more. A larger deposit generally means:

• A smaller loan

• Lower repayments

• Reduced or avoided Lenders Mortgage Insurance (LMI)

What Is a Home Loan?

A home loan is money lent by a bank or lender that is:

• Repaid over time

• Charged interest

• Secured against the property

In most cases, lenders will allow a maximum loan of up to 95% of the property value or purchase price, depending on the scenario.

How Do Repayments Work?

Loan repayments can be:

• Weekly

• Fortnightly

• Monthly

And structured as:

• Principal and interest (repaying the loan balance)

• Interest only (repaying interest for a set period)

Interest rates may be:

• Fixed

• Variable

• A combination of both

How Do Lenders Decide Loan Size?

Your maximum loan size is based on:

• Income

• Living expenses

• Existing debts

• Interest rate buffers

Lenders use a serviceability assessment to determine whether you can afford the repayments — not just at today’s rate, but under tougher conditions as well.

Common Loan Features Explained

Offset Account

Links your savings to your loan to reduce interest charged.

Redraw Facility

Allows access to extra repayments you’ve already made.

Fees and Charges

May include:

• Setup fees

• Monthly fees

• Fixed rate break costs (if applicable)

Loan Types You Can Choose From

• Owner-Occupied Loans – for homes you live in

• Investment Loans – for rental properties

• Construction Loans – for building or major renovations

Each type has different rules, rates, and assessment criteria.

What Is a Funding Position?

Your funding position is the full financial breakdown of your purchase.

It shows:

• The purchase price

• Government fees and charges

• Loan costs

• Deposit required

• Final loan amount

• Your Loan to Value Ratio (LVR)

This is where everything comes together.

Common Costs Included in a Funding Position

These may include:

• Purchase price

• Stamp duty (may be reduced or waived under concessions)

• Transfer fee

• Mortgage registration fee

• Lender setup fee

• Conveyancing budget

• Lenders Mortgage Insurance (if applicable)

Your funds to complete is the cash you contribute, while the loan required is what the lender provides.

What Is Loan to Value Ratio (LVR)?

LVR is calculated as:

Loan amount ÷ Purchase price

It’s expressed as a percentage and is a key factor in:

• Interest rates

• LMI

• Lender approval criteria

Lower LVRs generally give you more options.

Why Understanding This Matters

When buyers understand their deposit, loan, and funding position:

• There are fewer surprises

• Offers are made with confidence

• Budgeting is clearer

• Decisions are better informed

This clarity is what turns approval into a smooth settlement.

Want Help Working Out Your Numbers?

Every buyer’s funding position is different.

A strategy call helps you:

• Understand what you can buy

• See how much cash you actually need

• Structure the loan correctly from day one

👉 Book a Strategy Call with Loan Theory and get clarity before making an offer.