As we all know, saving money for a deposit can be quite difficult, especially when we are in a tough spot. Moreover, if you want to use that deposit in order to get a home loan and fulfill your dream, things are probably going to get more stressful for you in no time.
However, you can secure a loan with either a small deposit or no deposit at all, even if this sounds unlikely – and, in most cases, it probably is. That’s why we’ll show you how you can get a home loan with no deposit and make your Australian dream come true.
Buying a home with no deposit whatsoever means that you will have to rely on one of the following four more common methods.
1. Getting help from a guarantor and simply borrow the entire purchase price
2. Making use of the First Home Owners Grant
3. Have your family and friends gift you the deposit
4. Using equity in an existing property
If you’re parents own property with sufficient equity, lenders allow them to put their property up as security with your new purchase meaning you don’t need to pay any deposit out of your pocket. We can also have stamp duty and up to an extra $50,000 funded for renovations.
Better yet, your parents can choose to leave their mortgage with their exisiting lender and nothing comes out of their pocket either! Before rushing out there to discuss this option with your guarantor, there are a couple of things that you need to understand first.
For example, even though they can help you buy the home on the spot borrowing the entire purchase price, they also take on legal responsibility for you.
In short, if you don’t make your loan repayments, you’ll cause them some issues. Essentially, your guarantor will be covering your 20% deposit (to avoid you paying any Lenders Mortgage Insurance) and also stamp duty if applicable.
Should you ever run into issues making repayments on your loan, your guarantor will be responsible for the amount they are guaranteeing. In saying this, once you make repayments equivalent to the amount your guarantors are guaranteeing, they can be released from the loan entirely.
Here are other things that you should take into consideration when approaching a guarantor:
1. A guarantor must either be your parents, or a close relative and it works with the guarantor using the equity in their home as security for your home loan. The guarantor will have to use their property as security – however, the security’s value needs to be big enough that the total LVR is lower than 80%.
2. Basically, your guarantor must have enough equity in their property if they want to use it as security.
Obviously, relying on a guarantor comes with a lot of benefits for the borrower, especially for younger borrowers.
1. A guarantor allows you to get a home loan with no deposit whatsoever while also disregard Lenders Mortgage Insurance.
2. In quite some cases, homeowners and investors are eligible for lower interest as well.
3. Probably the main benefit of a guarantor loan is that you can borrow a value ratio of up to 105% – thus being able to cover conveyancing and stamp duty costs.
4. If you rely on a family or parental guarantee loan, you can avoid lenders mortgage insurance costs – which, as you may know, can be quite expensive. This is because the bank will be taking a second property from your family/parents as a means of securing your mortgage.
When it comes to lower interest, the additional security offered by your parents’/family’s property means that you will be seen as a lower risk by the bank. Unlike someone that is borrowing 95% of the property value, for example, the bank can see you as an ideal borrower if you have acceptable income, job history, and credit score.
Depending on the state you live in, you may be eligible for the First Home Owners Grant (FHOG). This means that you can access up to $10,000 for your new home. Naturally, the question is if you can use these funds as a deposit for your home loan.
The very short answer is that, yes, you can use the First Home Owners Grant as a deposit towards your loan . Whilst the grant may not be enough to cover your entire deposit, it is a great addition and easy way to access extra funds. Contact us to find out what grant your eligible for in your state!
Your parents or relatives can also provide you with a cash gift to empower or use as whole. However, keep in mind that there are some rules that you have to respect when relying on this way of deposit help as not all lenders allow this. We do however have access to lenders who accept this type of cash gift as a form of deposit.
Equity is the difference between the value of your property and the outstanding debt on it. So rather than saving up and using a cash deposit to buy another property, you can use your equity instead to cover the deposit. Contact our office and our mortgage and finance brokers will commence by ordering a complimentary valuation on your property, establishing the amount of equity available and also calculate your borrowing power to plan your next property purchase!
Even though it may seem easy to get a home loan without any deposit, keep in mind that the criteria implied by it are rather strict. In this respect, it is important that you pay attention to the following key lending requirements if you want to get your loan approved with no issues.
Good Credit – naturally, if you want to qualify for a no deposit home loan, you have to be responsible with your debt. You must have a good credit history or maybe reach out to the businesses that gave you the default and see if you can do anything to get it lifted. Lenders can be very strict about this particular requirement, as they are liable to lend responsibly.
Well-Maintained Repayment History – obviously, lenders will check if you have delayed any debt repayments. This includes credit cards, rents, and personal loans.
Stable Income Source – if you apply for a no deposit home loan, then you must have an ongoing and strong source of income that basically allows you to repay your debt on time.
Common Property Type and Location – keep in mind that a loan without a deposit will most likely have you buy a standard type of house. Moreover, lenders will also require you to purchase a property in the capital city, a town, or a major regional area.
As you can see, getting a home loan with no deposit at all is not that difficult. You may not have a lot of options for doing so, but the ones available for you are fast, safe, and reliable.
However, even with these options, you still have to pay attention to the requirements that come with them. You must also be careful about the situation that you put yourself – and possibly others – in.
In short, make sure that you are ready for such a responsibility and don’t choose the path of a no deposit home loan just because you want to buy a house faster. Be certain that you can repay your loan on time!
Also, if you need any help or information, you can always contact our office for refinancing home loan help. With years of experience in helping our clients find the best loan that they need, we can provide you with guidance through this process and help you pick the best loan possible. We’re happy to help you, no matter the questions you have or information you request!
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We meet for a consultation, obtain your supporting documents and proceed to structure and package your application for approval knowing exactly what the banks want to see. We also monitor your home loan post approval ensuring you’re home loan suits you and your financial position
We get paid a commission from our lenders as a result of introducing your business to them. Subsequently, our service is at no cost to you. Our commission does not affect your interest rate whatsoever, if anything, we’re in a position to get you a lower interest rate than the general public due to our relationships with our banks
With our many years experience in the industry, we’ve been exposed to both easy and complex loan scenarios. Each loan we process gets presented to over sixty financial institutions, ensuring we have explored all options possible and are able to provide a solution
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