How is deposit amount considered in mortgage repayment calculations

Discussion in 'Loans & Mortgage Brokers' started by Tipsta, 10th May, 2020.

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  1. Tipsta

    Tipsta Member

    Joined:
    12th Jun, 2018
    Posts:
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    Location:
    Brisbane
    Hi All,

    Bit of a fundamental question here, but one I am stuck on. For OO loan, how is the value of your deposit taken into account when determining loan repayments? I cannot seem to find the answer myself.

    The banks online calculators do not include deposit amount as an input, with the exception that some have options of "> 20%" or "<20%". However, these calculators match up with the excel PMT formula function, which also does not include a variable/input for deposit amount.

    Syntax
    PMT(rate, nper, pv, [fv], [type])

    The PMT function syntax has the following arguments:
    • Rate Required. The interest rate for the loan.

    • Nper Required. The total number of payments for the loan.

    • Pv Required. The present value, or the total amount that a series of future payments is worth now; also known as the principal.

    • Fv Optional. The future value, or a cash balance you want to attain after the last payment is made. If fv is omitted, it is assumed to be 0 (zero), that is, the future value of a loan is 0.

    • Type Optional. The number 0 (zero) or 1 and indicates when payments are due.
    Is 20% deposit just assumed by both the PMT and bank calculators? This doesnt seem right to me?

    Thanks in advance!
     
  2. Archaon

    Archaon Well-Known Member

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    Location:
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    (purchase price + stamp duty + legals + LMI) - (Deposit + additional funds) = total loan amount

    The repayment calculations would only be based on the total loan amount and not the purchase price I would assume.
     
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  3. Tipsta

    Tipsta Member

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    12th Jun, 2018
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    Brisbane
    Thanks @Archaon, appreciate the response. Thats what I thought originally, but confused myself. Thanks
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    The loan is the amount you borrow.
     
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  5. Lindsay_W

    Lindsay_W Well-Known Member

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    QLD
    If you're just working out a repayment amount those online calcs are OK - if you're trying to work out borrowing capacity they're useless.
     
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