Understanding the Low Deposit Fee

The Low Deposit Fee (LDF) is a one-off amount payable by the borrower at settlement if their initial deposit (for purchases) or amount of equity in their security property (for refinances and top-ups) is less than 20% of the assessed market value of the property. That means, if the loan to value ratio (LVR) is greater than 80%, generally a LDF will be payable. 

Other lenders may require Lenders Mortgage Insurance (LMI) when lending above 80% LVR. Macquarie doesn’t offer LMI and instead uses the LDF in these lending scenarios.

The LDF contributes to us (the lender) recovering some of the potential losses that we (the lender) may encounter if your customer is unable to repay their loan.

The LDF for a given home loan application is primarily based on the loan amount and the LVR. Other factors such as the loan purpose, use of security and employment type can also impact the cost of the LDF for a given loan. Generally, a higher LVR and/or loan amount will result in a higher LDF being payable.

To calculate an estimate of the LDF, download the LDF Calculator. 

There are two options to pay the LDF:

• The fee can be deducted from the available loan funds and collected at loan settlement.
• The fee can be capitalised into the loan amount. This will increase the loan amount, which may impact servicing as repayments will also increase. Please note, this will also increase the total interest paid over the duration of the loan term.

Typically, the base loan amount will be the loan amount requested by you in the home loan application. The LDF will be added to this amount and increase the loan amount, if your customer has chosen to capitalise the fee. However, our team will contact you if there are any changes required to meet our servicing requirements

To confirm the LDF, once formal approval is provided and loan documents have been signed and returned, the final LDF is listed in Section 1.4 of the Loan Offer document. Alternatively, to estimate the LDF, you can download the LDF calculator.

Where applicable, the LDF will be initially calculated based on the loan amount at the original settlement for the vacant land.  

When your customer is at the point of construction, an internal refinance on the land is required, which will then include the construction loan application.

If the LVR on the loan remains >80% for the construction loan:

• we’ll calculate the total LDF payable based on the total LVR and loan amount, then
• we’ll deduct the original LDF already paid from the new LDF payable.

If the LVR on the loan is now <80% on the construction loan:

• no further LDF will be calculated, and
• the previous LDF charged on the vacant land application will not be refunded.

If your customer is unable to repay their loan and/or a default event occurs, and we (the lender) sustain a loss after the property is sold, then the LDF contributes to us (the lender) recovering some of the loss. We may seek to recover any loss or shortfall from your customer and/or their guarantors.

It’s important not to confuse the LDF with any Mortgage Protection Insurance. If your customer defaults on their loan, the LDF doesn’t provide your customer, the borrower, with any protection, whereas Mortgage Protein Insurance typically protects your customer from loss of income events.