Confused again - borrowing power and deposits

[OceanPrincess]

The 25k comes off the price of the house... you should look at it this way... your borrowing power factors in your deposit, the bank are only loaning you 225k. So the mortgage total is 225k, plus your 25k, so you can put in an offer of 250k.

Wait that's not very understandable... let me see if I can explain a bit better... I'm not a financal person even though I work for a bank lol... I work in IT...

So you go to the bank, you say "We want to buy a house, how much can we borrow?" then they will ask how much of a deposit you have saved up. That factors into their calculations and then you get "pre-approval" for a purchase price of whatever. Working on your figures, you say you have 25K, the bank says "Ok, you are pre-approved for a 250k purchase".

So they have done all their calculations based on your income etc and on your deposit and given you pre-approval for a particular amount. So you can buy a house up to 250k.

Depending on how you buy, you generally need to leave a 10% deposit with the vendor when you put an offer in and it is accepted. Then when you settle on the house (when the sale goes through and you get the keys and the bulk of the money is exchanged), you pay the rest of the amount owing and end up with a 225k (or a bit more with stamp duty etc) mortgage.

Does that make sense?

I've just bought a second house... we have decided to keep the first, but we had to refinance our existing mortgage, access the equity in this house to use as a deposit for the second house... my head was spinning!

This is why we got a mortgage broker! They do it all for you