In the past few years, there has been an explosive increase in the number of people trying to buy a home. With interest rates at historic lows, it has never been easier to get a mortgage, but it has also never been harder to get approved if you have less than 20% of the property’s value as your deposit. So how do you get around this problem and get yourself into your dream home? The answer lies in getting what is called No Deposit Home Loan.
105% Guarantor Loan
Like a low deposit loan, a guarantor loan allows you to buy a home without providing your own deposit. But unlike a low deposit loan where you only borrow up to 80% of a property’s value, with guarantor loans, you can borrow up to 105% if you are buying an $800,000 home, instead of providing $200,000 in equity and paying $3,600 in monthly mortgage repayments (which is what is required for an 80% LVR home loan), with a 105% guarantor loan on an equivalent property you would pay around $3,350 per month. Such loans allow many more people access to homeownership through their family members or work colleagues who have equity in their homes.
Use Equity As Deposit
If you already have an investment property and have equity from that property, then you can use it as a deposit for your new home loan. For example, if you have $30,000 worth of equity from your investment property and are buying a new home for $200,000, then all you will need is a loan covering $170,000. Not only does it save you thousands in cash for a deposit, but it also gives you far greater purchasing power on a larger loan, which means bigger savings in interest repayments. Of course, there are credit criteria attached to using your existing investment property’s equity as your new home loan deposit, but No Deposit Home Loan experts can help with those steps too.
First Home Loan Deposit Scheme
If you are a first home buyer, one way to access your new house without having any deposit saved is via First Home Owner Grants. Available in many states of Australia, these government grants typically contribute $5,000 toward your new home purchase (however, in some cases, it can be up to $20,000). What happens is you put a 0% down payment on your house and pay a lower interest rate as long as you stay below certain income levels. Another way to access your home loan without a deposit is via No Deposit Home Loans. The No Deposit Home Loan provides you with 100% of the funds needed for purchasing or building a home with no cash required from buyers.
Gifted Deposit Home Loan
If you’re lucky enough to have a friend or family member who is willing to gift you with a deposit, then it might be worth approaching your lender about accepting it. Typically, home loans require at least 5% of a property’s purchase price as a deposit. However, some lenders will accept up to 10% of that amount in gifts from third parties. The rest of your mortgage loan needs to be fully paid for through an investment property (usually 40% – 50% of its value) and personal savings (around 30%), and income-generating investments (10%). In most cases, friends and family members can only contribute about $15,000-$20,000 due to restrictions on higher contributions by non-close relatives.