No Deposit Home Loans

Do you dream of owning your own home—but finding it difficult to pay rent and save for the deposit?  With a strong employment history, a steady income, and good credit and banking history—or with the assistance of a guarantor—you may qualify for a low deposit or no deposit home loan.

Even if you do not qualify for a no deposit home loan, there are still options for low deposit home loans that will seem like a no deposit home loans—deposits can take many forms. However, shop around—the criteria for low deposit and no deposit home loans is stricter, and some lenders charge higher interest rates for low deposit and no deposit home loans than on loans with a 5% or more deposit.

Lenders consider several factors to determine the deposit requirement for a home loan:

The key to finding the home loan that best suits your needs is based on your deposit situation. A simple way of calculating the percentage you have available is to divide the amount you have on hand by the purchase price, and then multiply by 100. For example, you have $22,500 and want to buy a $450,000 home:

$22,500 / $450,000 = .05
.05 x 100 = 5%

Remember, the purchase amount includes ALL fees, such as legal and building inspections, and stamp duties.


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Factors that Affect Low Deposit or No Deposit Home Loans

Banking History

One factor that the majority of the general public is unaware of is that who you choose to hold your bank accounts, along with longevity with a bank, greatly affects your home loan deposit requirement. In some cases, holding a credit card with a bank for 1–6 months can reduce your deposit from 10% to 3%; which, based on a $450,000 purchase, is a difference of $31,500. In addition, you may be able to obtain a no deposit home loan by using equity for the 3%. To overcome this factor, we strongly suggest speaking with your mortgage broker at least 6 months prior to your purchase, as this will allow them to offer you more product options when it finally comes to purchasing. If you do not have 6 months, it is still worth speaking with your mortgage broker. No matter what your banking history you should still speak with your mortgage broker.

Savings History

If you have over 6 months of savings history, you will probably not have an issue. Savings history requirements vary between lenders and range from 1 day to 6 months. In addition, some lenders will have differing history requirements dependent on how much deposit you have available. For example, a 5% deposit may require 3 months, 3% may require 6 months, and 10% may not require a history. As these policies change regularly, we believe it is best to consult with your mortgage broker.

Credit History

If you have a clean credit history—No Defaults—you should not have an issue with obtaining a low deposit or no deposit home loan. If you do have minor issues, lenders will most likely require between 10%–15% deposit for your home loan.

Employment/Income History

If you have a steady income and a strong employment history, but little or no equity (low or no deposit for the home loan), there are a few options still available to obtain a low deposit home loan with little or no cash outlay. The key to finding the right no deposit home loan is finding the lender that best suits your needs and financial situation. With good cash flow, and limited liability, your mortgage broker can advise you on ways to obtain a no deposit home loan—you will just need to be able to afford the repayments, and have money available to cover all of the other purchase costs (legal fees, stamp duties, inspection fees, mortgage insurance, etc.).

Guarantors

Many people are now looking to friends and family as a means of obtaining a no deposit home loan. A family guarantee allows certain family members to use the equity in their home as additional security for a portion of your loan amount (normally parents guarantee children, although, in some cases, other people can assist). This means you may be able to buy a property sooner, avoid paying the premium for Lenders Mortgage Insurance and maximise the amount you can borrow.

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